Revenue: $997M v $991M est. (+22% YoY, +21% Constant Currency)

EBITDA: $168M (+54% YoY), 16.9% Margin v 13.3% A Year Ago

GAAP Profit: $235M v $20M in Q2 2025

EPS: $0.06 v $0.02 est.

Selected Key Metrics

• On-Demand GMV: $6,463M (+21% YoY, +22% CC)

• Group MTUs: 54M (On-Demand MTU +17% YoY)

• On-Demand GMV per MTU: +3% YoY

• Gross Loan Portfolio: $2,297M (+197% YoY, roughly doubled ex-Superbank)

• Loans Disbursed: $1.2B (+72% YoY)

• Customer Deposits: $2.5B

• Operating Profit: $19M (+$12M YoY)

• Adjusted Free Cash Flow: $73M (-39% YoY)

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What stands out most from these numbers is probably the GAAP profit of $235M v $20M last year. However, it must be said that this is largely an accounting abnormality and not a 10x in earnings growth.

The $235M profit includes a one-time $307M non-cash gain from re-measuring its stake in Superbank that it has just consolidated into their portfolio, a $66M favourable tax movement from recognising deferred tax assets, and partially offset by a $183M fair value loss on financial assets and liabilities (this is largely the convertible-note derivative).

If we strip these out, the underlying result is a $19M operating profit, which is a +$12M gain YoY. Therefore, the key is to watch the operating profit of the business at least in the short to medium term as management expects “a degree of variability tied to fair value measurements” to keep distorting the profit line in H2.

Adj. EBITDA is where we can see true operating leverage in the business, with it growing +54% YoY, over double the revenue rate. This also represents 18 straight Q’s of Adj. EBITDA growth with expanding margins to boot.

Grab also raised FY 2026 guidance to $4.10B-$4.15B in revenue and $720M-$740M in Adj. EBITDA, reflecting the strength of their underlying business alongside the consolidation of Superbank and the acquisition of Stash.

The board also authorised an additional $750M in share repurchases, bringing cumulative authorisation to $1.75B since 2024.

In this piece, I will break down the earnings in full, highlight key points on management commentary during the call and discuss my personal thoughts in the last section.

Table of Contents

1. Deliveries & Mobility

2. GFin, Financial Services

3. Key Call Commentary

4. Positives & Negatives

5. Conclusion

1. Deliveries & Mobility

Deliveries

Deliveries remains the largest segment by GMV and Revenue.

Revenue grew 21% YoY (19% CC) to $531M, driven by GMV expansion and continued momentum in advertising. GMV grew 22% YoY (24% CC). Adj. EBITDA margin also grew from 1.8% to 2.3%, tracking closer towards management’s long-term target of 4+% margins.

I think the increase in margins is particularly impressive as they continue to pour growth into the lower-margin grocery business.

Advertising continues to be a strong driver in deliveries. Quarterly active advertisers on the self-serve platform grew 21% YoY and average spend per advertiser grew 24% YoY.

Mobility

Mobility was certainly hit by the fuel crisis in Q2. Revenue grew just 12% YoY, a clear deceleration from 19% in Q1. GMV grew 18% YoY to $2,214M, but transactions grew 28% YoY.

This also means that part of the reduction in revenue is due to average ticket falling, which has been part of Grab’s affordability plan since last year. Through the fuel spike, it is likely that Grab has leaned more into saver products and driver incentives to keep both sides of the marketplace intact.

As I’ve said, and continue to say, supply is the limiting factor for Grab, not demand. These factors led to net take rate compression with mobility take rate coming in at 15.0% vs 15.8% a year ago.

Fortunately, Grab’s efforts to keep drivers on the road have paid off, with monthly active driver-partners hitting an all-time high, up 19% YoY, and driver earnings rising 4% YoY, funded partly by $7M of direct fuel-support spend.

2. GFin, Financial Services

Q2 was a particularly strong quarter for GFin, when we look at the headline numbers. However, some of it was inflated by the consolidation of Superbank.

On 20th May 2026, Grab announced that their combined direct and indirect shareholding in Superbank will increase to over 50% from 37% prior, due to the transfer of Singtel Alpha Investments Pte. Ltd.'s shareholding in Superbank to GXS Bank Pte. Ltd.

As a result, Superbank’s numbers was consolidated into the GFin segment for the first time this quarter. Grab’s Gross Loan Portfolio increased by 197% to $2.318B this quarter, but management shared that organic lending growth ex-Superbank was closer to 100%. Those are still excellent numbers.

It is good to see that numbers are growing more aggressively and faster than its previous pace, which I have spent the last few quarters arguing for. I believe at Grab’s scale, it should be growing its loan portfolio at ~100%, especially as it has the cash to support it.

Management also shared that the Fin Services segment will be profitable in the 2nd half of 2026, as promised almost 4 years ago.

Superbank

Management revealed more numbers on Superbank this quarter. Superbank now serves 7.4M customers with daily transactions above 1 million. It was profitable for the full year in 2025, posting a pre-tax ROE of 5.7% and a cost-to-income ratio of 55% this quarter. Management expects this to fall below 50% by year-end. Over 60% of Superbank users also use Grab and OVO, which shows the ecosystem flywheel appears to be working as expected.

Stash

In Q1, Grab announced that it would be acquiring Stash for US$425 million for a 50.1% initial equity stake, with the remaining 49.9% bought at fair market value over three years.

This initial acquisition is expected to be completed in Q3 2026, and would add an AI-powered wealth platform with $5.5B in AUM. Grab shared that its AUM is growing at 22% YoY, with over 1M active subscribers.

This moves Grab’s GFin beyond lending into wealth, which I believe is the logical next step for a deposit base of $2.5B.

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3. Key Call Commentary

Grab again hosted a live earnings video call with their IR head, Ken Lek, taking charge of summarising questions and reading them out. On the call were the usual trio of CEO Anthony Tan, CFO Peter Oey and COO Alex Hungate.

Here are some of the key quotes that I thought were useful for investors.

On AI Efficiency for the Business

On Uber’s CEO Dara Exiting The Board & Potential Competition

As I highlighted when the news first broke, this is nothing more than a necessary step-down to ensure compliance to regulations. It is not a fracturing of the Grab-Uber relationship and I do not expect it to change. Uber still remains the largest single shareholder in Grab.

On GrabMart’s Growth

As I discussed in the $65B quick-commerce opportunity piece, I believe Mart is a massive opportunity for Grab. It is great to see that Grab expects deliveries margins to continue growing despite the focus on groceries and the expanding contribution to overall GMV.

On Indonesia’s Commission Caps and Potential for Spillover

This addresses the precedent-and-spillover worry that I flagged last quarter, at least for now. I believe this is something that has to be continually watched in the next few quarters.

On Outlook for Fuel Prices & Mobility Margins

On the AV Rollout in Southeast Asia

4. Positives & Negatives

Positives:

1. Deliveries expanded margin despite grocery growth

Deliveries segment EBITDA reached 2.3% of GMV, up 45bps from 1.8%, on 24% constant-currency GMV growth. The subtle point behind this is that GrabMart, the lowest-margin segment, grew at 1.7 times the rate of food deliveries and therefore diluted the segment mix. This means the underlying food delivery margin expanded by more than just 45 bps.

Advertising is the key lever of this margin expansion. Active advertisers grew 21% and spend per advertiser grew 24%, so advertising revenue grew roughly 50% YoY, and advertising is close to pure incremental margin. I wrote a piece on GrabAds a year ago, which I highlighted as Grab’s 4th pillar. I would highly recommend reading the piece to understand the potential of this segment:

2. Management is prioritising Financial Services

GFin' revenues grew 59%, loans disbursed grew 72% to an all-time high $1.2B, while the segment loss narrowed to negative $15M from negative $26M. Management reiterated H2 2026 segment profitability and projected the loan book to exceed $3B by year-end.

What is so key about Grab’s Fin Services business is their funding model. Grab acquires borrowers at near-zero marginal cost through the existing super-app that they own. They then underwrite on proprietary transaction and behavioural data, and fund the loans with $2.5B of low-cost DigiBank deposits. This is the exact playbook that Nubank and Sea’s Monee have employed to great success.

It is a structural edge over standalone FinTech lenders who fund through wholesale markets. Encouragingly, Superbank itself is already profitable and Stash, their newest acquisition is too.

3. Capital Allocation has stepped up tremendously in the past year

One of the key negatives I highlighted last year was Grab’s massive $6B net cash position, which I thought demonstrated poor capital allocation.

In the past year, they have made several large acquisitions and investments, as well as share buybacks. I think these are very positive signs.

For instance, Grab has acquired FoodPanda Taiwan for $600M, Stash for $425M (initial 50%, which means total of ~$850M), invested in Infermove, Momenta, WeRide, Vay Technology, May Mobility etc. They have also authorised another $750M buyback following the completion of $400M of their $500M share buyback plan. Most of the deals will close in H2 2026 which should bring net cash down to ~$3B.

It is also good to see that Grab’s management views the current stock price to be depressed and attractive levels to repurchase shares. I continue to believe that there is a severe dislocation between the stock price and fundamentals of the business.

Negatives:

1. Overall incentives are on an upward trajectory

On-Demand incentives reached 10.9% of On-Demand GMV, up 72bps YoY. Since incentives are contra-revenue, this increase is mechanically dragging the take-rate down even though unit contribution might be healthy. Hence, part of the take-rate decline is an accounting side-effect.

That said, overall incentives increasing is still not good for the business. In Deliveries, Grab is still out-earning the rising incentives. However, in the Mobility segment this quarter, segment margin is contracting. This is partially due to multiple factors such as Indonesia’s commission caps, the oil crisis etc. However, it is still key to watch whether this continues in future.

2. Revenues have not accelerated

Despite GFin becoming a larger portion of overall revenues, it is notable that Grab’s revenues have not accelerated in the past 8 quarters or so. Personally, I find that disappointing as Grab’s rivals have weakened considerably in the past few years.

Gojek is a declining force in Indonesia, their largest market, while FoodPanda and Deliveroo have gradually exited the region. Much of the growth appears to be coming inorganically now too, through acquisitions. I would like to see more organic growth from the core business.

5. Conclusion

Overall, I thought this was a strong quarter for the business amidst the oil price headwinds. We saw a narrow beat in the top-line, no doubt due to uncertainty in the region.

In March, Grab invested heavily in on-demand driver incentives to spur supply amidst the peak of the oil crisis. Since then, monthly active drivers have scaled to an all-time high. This is extremely bullish news for the business, as supply remains the main limiting factor for growth.

Since then, driver incentives have declined which is a good sign considering the still-elevated oil prices.

My position in the stock remains unchanged for now. I have not added to the stock recently as I want to see a genuine acceleration in revenues. The thesis remains on schedule as operating leverage is driven across the business. I remain hopeful that the Fin Services business can accelerate and garner larger market share in the region.

Grab is still one of my core holdings, and I believe the stock price is dislocated from the business. We are now moving into the 2nd year of full profitability, and I believe the stock will eventually follow the earnings trajectory.

Thanks for reading! If you enjoyed this piece, please give it a like and consider subscribing to a tier of your choice.

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As a reminder, paid subscribers typically receive 6-8 articles a month covering:

• Earnings Reviews (Grab, Sea Limited, dLocal, Mercado Libre and more)

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Disclaimer: The content presented in this thesis is for informational and academic purposes only and does not constitute financial advice. The analysis and opinions expressed are based on research and should not be interpreted as a recommendation to buy, sell, or hold any security. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Portfolio: -0.94%
S&P 500: -0.82%
NASDAQ: -4.15%

July was the second red month in a row for the indexes. It was a very mixed month for the market, with a few Big Tech names performing strongly: MSFT +24.58%, AMZN +13.95%, AAPL +6.76%.

The pain was largely in the AI trade, especially memory names that saw a pretty sudden and large pullback, with the reason for the speed of the pullback explained in the last couple of days, Leopold Aschenbrenner’s margin calls and subsequent forced selling. This was not the only forced selling, as Koreans also saw massive liquidations, with sources revealing that 1.2 million retail accounts hit margin calls, erasing over $2T in market value from the KOSPI since its June peak.

In my view, there were 3 drivers for these mixed results:

1. The AI CAPEX trade was confusing

In the past year, the rising tide lifted all boats, with every company in the AI stack benefitting from increasing CAPEX, largely fuelled by the hyperscalers. This month was a good tell that things have changed.

Frankly, from my point of view, it was very confusing. If we rank the hyperscalers by their cloud growth numbers during earnings this Q, we get GCP at 82%, Azure at 43% and AWS at 36.7%. However, when we rank them by share price reaction, we get the exact opposite.

The reason was also not CAPEX discipline, as I intuitively thought. Amazon raised full-year CAPEX from roughly $200B to $220B and reported TTM free cash flow of negative $7.6B, yet the stock went up 13%. Google raised its guide by $15B at the midpoint with free cash flow at negative $5.9B and went down 7%.

2. Moonshot AI released Kimi K3 on 17 July

Moonshot AI unveiled Kimi K3 at the World Artificial Intelligence Conference in Shanghai on 17 July and within hours the market treated it as a second DeepSeek moment.

Kimi K3 is an open-weight Chinese model, similar to DeepSeek. The results of the release was especially surprising, with the model benchmarking within a few points of the frontier, trailing only Claude Fable 5 and GPT-5.6 Sol, and doing it under export controls, which implied the American compute advantage was worth less than the CAPEX assumed. This meant the terminal value of the Western infrastructure buildout had to be marked down structurally.

However, when we look deeper, it is much less worrying for the infrastructure players. Kimi K3 is 2.8 trillion parameters, the largest open model ever released, up from roughly one trillion for K2, and it is priced at $3 and $15 per million tokens, identical to Claude Sonnet 5 and 3-4x what the previous Kimi cost.

4 days after the launch, Moonshot paused new subscriptions because its own GPU capacity had run out. It turned out that Kimi K3 was much bigger, more expensive and compute-constrained than what the market initially thought.

3. Forced Selling

In my view, this was the most important reason for the magnitude of the sell-off this month. Leopold Aschenbrenner's Situational Awareness ran roughly $225M into as much as $45B in under two years and was up 439% net YTD going into July.

His fund was long AI infrastructure and short software at nearly 4x leverage. In July both legs went the wrong way, with many infrastructure names falling 40-50% while software names rallied. This led to a complete wipeout of capital for the portfolio. Hilariously, Citadel, the very market maker that shifted its outlook on 28th July to predict a surprise Federal Reserve interest rate hike, bought his entire book. Of course, the rate hike didn’t happen, but it was enough to force Leopold to sell out.

This, coupled with the leverage single-stock ETFs that have been discussed about a lot in the Korean market, led to cascading liquidations.

Portfolio Performance (Since Inception)

(Portfolio Inception Date: 27th October 2023)

Portfolio: +207.68%

S&P 500: +79.77% (Outperformance: +127.91%)

NASDAQ: +103.43% (Outperformance: +104.25%)

Portfolio Performance (YTD)

Portfolio: +3.52%

S&P 500: +8.65% (Underperformance: -5.13%)

NASDAQ: +11.43% (Underperformance: -7.91%)

Personal Thoughts on the Market & Performance

Read more

It is difficult to understand how a business with fewer than 1,000 employees can make $5.48B in revenue, grow 70% year-on-year, and convert 65% of revenue into net income. In many ways, it is a 1 of 1 business.

It has seen an incredible 91.5% drawdown in 2022, followed by an even more astounding 80x return from those lows within 4 years.

Diving deeper into the history of the business makes it stand out even more as an anomaly, and I think there is not a more misunderstood business in the large-cap space.

In this piece, I hope to bust the myth of AppLovin and determine if this is a truly generational business, or a deservedly overlooked one.

Table of Contents

1. Introduction

2. Company History

3. Business Model & Products

4. Moats & Differentiation

5. Competitive Landscape

6. Financials

7. The Short Thesis & SEC Investigation

8. Ownership & Management

9. Valuation

10. Bull and Bear Case

11. GabGrowth Quality Score

12. Concluding Thoughts

1. Introduction

To understand how AppLovin makes money, we must first understand the concept of performance advertising.

If we break it down to first principles, it is simply the business of getting a specific person to take a specific, measurable action. For instance, installing an app, buying a product, or subscribing to a service, and charging the advertiser based on how well that action is delivered.

It is the unglamorous, yet deeply lucrative core of digital advertising, distinct from brand advertising (where you pay to be seen and hope it works). In performance advertising, the advertiser can measure return on ad spend (ROAS) to the dollar and will keep feeding budget into any channel where a dollar in, reliably returns more than a dollar out.

For roughly 15 years, this has been a duopoly. Meta and Google capture the majority of global performance advertising dollars because they own both halves of the equation:

• The inventory (billions of logged-in users and the attention they spend)

• The data (who those users are, what they search, what they buy, what they linger on)

The closed loop between owning the audience and owning the outcome data is what makes their ad machines so hard to beat. Everyone else, also known as the "open internet" and the independent ad-tech sector, has fought over the remainder, usually at thin margins, frequently going bankrupt.

Meta and Google tapped into that durable profit pool for years, leaving it effectively closed to new entrants.

AppLovin is the first credible attempt in years to pry open a third position in that profit pool and it arrived from a strange direction, mobile games.

Games turned out to be the perfect training ground for a performance-advertising AI, because a game generates an enormous, continuous stream of measurable user actions (installs, sessions, in-app purchases), and the advertisers (game studios) are ruthless ROAS optimisers who will move budget instantly when the math improves.

AppLovin built an AI engine, AXON, that learned, inside that environment, to predict which user would convert and how much to bid for the impression, in real time, across billions of auctions.

Once that engine was demonstrably better than the alternatives at selling mobile games, the obvious question was, is this technology transferrable to other non-gaming sectors? For instance, would AXON be able to sell running shoes, supplements, software subscriptions, and streaming services?

Management estimates the non-gaming opportunity is five to ten times the size of the gaming market that AppLovin currently dominates. At the end of June 2026, AppLovin has opened its self-serve advertising platform and a dedicated e-commerce product to general availability.

This product launch will determine where the stock goes over the next decade, and will be a large part of what we will discuss below.

2. Company History

Before we get any further, it is important to understand the journey of AppLovin as knowing the full origin story gives a much better context of the business it is today.

Founding (2012-2014)

AppLovin was founded in 2012 by Adam Foroughi, John Krystynak, and Andrew Karam.

Adam, born in 1980 to a family that emigrated from Iran around the Iran-Iraq war, studied economics at UC Berkeley. Prior to AppLovin, he had already run 2 successful advertising businesses focused on performance advertising.

AppLovin was built to solve a problem that began brewing from 2008, the year the App Store was launched by Apple. By 2012, there were hundreds of thousands of games in the App Store competing for attention from consumers.

The problem facing every mobile developer was the same: how do you get users to install your app when no one knows it exists?

The mobile advertising market was new, developers had difficulty attracting users and building a steady income, and the market was split into many parts without easy access to good marketing and monetisation tools. There were ad networks, but they were fragmented, opaque, and often ineffective. A gaming studio in San Francisco had to deal with ten different networks, each with separate dashboards, separate contracts, and no unified way to know which one was actually working.

AppLovin's earliest product was straightforward. It was a performance advertising network connecting two parties:

• Advertisers (mobile app developers, particularly game studios) who wanted new users for their apps.

• Publishers (other mobile app developers) who had users already inside their apps and could show ads to those users.

The company most commonly charged on a cost-per-install (CPI) basis for each successful conversion. Publishers connect to ad networks like AppLovin to find the best bids for their inventory. Whenever the network successfully places an ad with a publisher, it pays the publisher on a cost-per-thousand-impressions (CPM) basis and keeps a portion of the proceeds for facilitating the transaction.

This was the entire original business model, which was effectively a brokerage where AppLovin matched supply (publisher ad inventory) with demand (advertiser budgets) and took a spread.

Impressively, AppLovin took almost no outside money at the start (around $4M in seed funding from Streamlined Ventures, the Webb Investment Network and others) and was profitable early. Adam took founder's equity and no meaningful cash salary for the better part of a decade. This shaped a culture of capital discipline that still defines the company.

Early Growth & First Pivot (2014-2018)

The company scaled as an ad network during the surge in iOS and Android app install campaigns. AppLovin was ranked #10 on the 2016 Deloitte Fast 500 North America list.

In September 2016, AppLovin agreed to be acquired by Chinese private equity firm Orient Hontai Capital for $1.42B. The acquisition was subsequently abandoned after opposition from CFIUS, and was converted instead into a debt investment. In 2018, AppLovin sold a 9.98% minority stake to KKR, raised debt, and restructured to preserve US-aligned governance and founder control.

The CFIUS block turned out to be a crucial decision. It forced the company to stay independent, retain founder control, and find its own path to scale rather than becoming a Chinese-owned ad network, which would have severely constrained its data access and US market positioning.

In July 2018, AppLovin launched Lion Studios, which works with mobile developers to publish and promote their games. However, the real purpose was to feed AppLovin’s advertising engine. Owning games gave AppLovin full-funnel, first-party data on how users behave after they install, which was the exact signal its ad models needed to predict and price conversions.

In September 2018, AppLovin acquired MAX, an eight-person in-app header bidding startup founded less than a year earlier by Jim Payne, the same Jim Payne who had co-founded MoPub and sold it to Twitter in 2013. (More on this later)

This acquisition solved a structural problem that was plaguing the business. As a pure ad network, AppLovin could help buyers acquire users but couldn't actually help developers sell their inventory well.

The industry standard at the time was the "waterfall" model, where publishers offered each impression to ad networks sequentially, in a pre-set order ranked on historical eCPMs and fill rates. If network A passed, the impression went to B, then C. The process was queue-based, slow, and systematically underpriced inventory, because rankings reflected stale historical averages rather than what any bidder would actually pay for that specific impression.

MAX replaced the waterfall with in-app real-time bidding where every impression is auctioned to all demand sources simultaneously and clears at the highest bid. Developers immediately earned more per impression, while advertisers still came out ahead as long as they bid below expected return. MAX was the first move toward owning both sides of the transaction. AppLovin would now sit between publisher inventory and advertiser demand, capturing bid-stream data from both directions, and it transformed AppLovin from a platform that only served buyers into one serving both advertisers and publishers.

Acquisitions and Vertical Integration (2018-2022)

Also in 2018, private-equity firm KKR made a minority investment that valued AppLovin around $2B. That capital funded a sustained acquisition spree across both sides of the business. The logic was to build a closed-loop stack where AppLovin owned supply, demand, measurement, and first-party behavioural data simultaneously.

On the supply/demand side, AppLovin built out its ad infrastructure by acquiring the MAX in-app bidding/mediation platform as we discussed, and acquiring mobile-attribution firm Adjust, and then purchasing MoPub from Twitter for $1.05B.

Adjust, acquired for roughly $1B in 2021 alongside the IPO, solved the measurement problem. Attribution (the process of identifying which ads, clicks, and marketing channels lead to a sale or action) in mobile advertising was a black box where an ad passes through impression, click, install, usage, and payment, with data scattered across systems advertisers can't see.

Advertisers could measure outcomes cleanly on Meta but not on independent networks, capping how much budget AppLovin could win. Adjust let advertisers break down what each dollar produced, turning AppLovin into a platform that could take accountability for results, which was the foundation of its LTV-based optimisation pitch.

MoPub can be best understood as a massive ad marketplace that aggregated ad space from numerous apps (45,000 to be exact), selling it to advertisers, taking a cut in the process. This acquisition solved the scale problem that had limited AppLovin (as their data was focused only on gaming). MoPub aggregated inventory across tens of thousands of non-gaming apps, (news, utilities, lifestyle) reaching roughly 700M daily active users, expanding both AppLovin's inventory and its audience diversity beyond gamers, and injecting a continuous stream of bid data into the platform.

On the content side, it bought game studios such as Machine Zone, PeopleFun, and Belka Games to generate first-party demand and, critically, the proprietary data that would train the ad engine. This combination meant AXON could train on more diverse outcome data than any competitor.

On April 15, 2021, AppLovin went public on Nasdaq at a valuation of approximately $28B, pricing at $80 per share.

However, Apple's App Tracking Transparency (the post-IDFA privacy regime) was released about a week after AppLovin went public, which gutted the signal that mobile advertisers relied on. To add to that, the SPAC/growth bubble burst in 2022, resulting in AppLovin stock that was burning cash at the point to lose over 90% of its value.

In the midst of that in August 2022, AppLovin made an offer to buy Unity Technologies for $17.54B in stock. Unity's board rejected the offer and committed to completing its acquisition of ironSource. Had the Unity deal gone through, AppLovin would have owned the dominant game engine and the dominant mobile ad network simultaneously, an extraordinary chokehold on the mobile gaming economy. Its failure left both companies weaker heading into 2022.

Adam Foroughi’s Bet on Himself (2022-2024)

AppLovin’s stock price fell to as low as $9 in 2022. Around that period, Adam went to the board and proposed that his entire compensation for the next 4 years be paid out as a performance-stock-unit (PSU) grant, only if the stock recovered massively. The first hurdle was ~120% stock price appreciation, and the final hurdle requiring over 380% appreciation with a limited time window and no cash bonuses.

The recovery was arguably driven by a single product. In mid-2023, AppLovin shipped AXON 2.0, a rebuilt machine-learning engine for the ad business. The improvement in ROAS was large enough that advertisers shifted incremental budget almost immediately. Revenue and margins inflected, and the stock began a rebound that has now exceeded thousands of percentage points off the 2023 base.

Pivot To Pure Ad Company (2024-2026)

The management team soon realised that the underlying algorithm behind AXON 2.0 was the asset. Therefore, it doubled down on their crown jewel. Here is the timeline of events that unfolded:

• Feb 2024: KKR sold down part of its stake in a secondary offering as the stock recovered.

• Late 2024: AppLovin raised debt (senior notes) to fund buybacks rather than dilute.

• May 7, 2025: Announced the sale of its entire mobile gaming business. All ten studios, including franchises like Wordscapes, Project Makeover, Hexa Sort, Cooking Madness, West Game, and Clockmaker were sold to Tripledot Studios.

  • AppLovin received roughly $400M in cash plus equity equal to about 20% of Tripledot (reported total value around $800M). Overnight, AppLovin stopped being a games company and focused on software.

• Sept 22, 2025: Added to the S&P 500.

• April 2, 2026: Adam Foroughi stepped down as Chairperson (remaining CEO), separating the chair and CEO roles.

Selling the games was a difficult decision at the time, but ultimately the right call. The studios were profitable and produced useful data, but they were lower-margin and capital-intensive. More importantly, they put AppLovin in direct competition with its own advertising customers.

In June 2026, AppLovin fully opened its AI-powered AppLovin Ads platform to the public, removing prior referral restrictions to scale access for e-commerce and non-gaming performance advertisers globally. This is a pivotal moment for the business, and it remains to be seen how this will impact the business from a financial standpoint.

3. Business Model and Products

AppLovin has gone through several iterations of its business model, as we have discussed. Today, the concept of their business model is pretty simple.

It runs an AI engine that matches advertisers to users, and takes a cut of the ad spend that it directs. This is essentially the oldest business model in advertising and what makes it possible, is AXON.

AXON is a real-time machine-learning system built around reinforcement learning. For every available ad impression, it predicts the probability that a given user will take the action the advertiser cares about (install, purchase, subscribe) and bids accordingly.

AXON’s scale is the key here:

• Processes on the order of 2 million ad auctions per second

• Draws behavioural signal from over 1 billion devices

• Trained on trillions of daily in-app events from AppLovin’s former portfolio of games

Crucially, AXON does not primarily rely on the demographic or social-graph targeting that defined the old ad world. Instead, it is a behavioural prediction engine that learns, impression by impression, what kind of user-context-creative combination produces a conversion, and it updates continuously.

Every install, purchase or even a “non-click/tap” is a training signal that sharpens the next prediction. This is the same closed-loop dynamic that made Meta and Google's ad machines unbeatable, but AppLovin built a version that operates across the open mobile ecosystem.

The commercial output of all this is ROAS.

Ultimately, what advertisers truly care about is that a marginal dollar spent through AppLovin returns more than the same dollar spent elsewhere. When AXON 2.0 launched, measured ROAS jumped enough that advertisers reallocated budgets, and because the model improves with more spend (more spend → more data → better predictions → higher ROAS → more spend), the advantage compounds on itself. That self-reinforcing loop is the crux to this economic engine.

AppLovin’s Full Stack System

Of course, AXON is not the only part of the puzzle. AppLovin’s acquisitions over the years have built a full stack pipe that few competitors can match:

• AppDiscovery: This is the demand side where advertisers buy user acquisition.

• MAX: The supply and mediation side, an in-app bidding platform that auctions publisher inventory.

• Adjust: The measurement layer that attributes outcomes back to ad spend.

• AXON: The decisioning brain that sits on top of the 3 above.

Owning demand, supply, measurement, and decisioning together means AppLovin sees more of the signal end-to-end and can optimise across the whole chain compared to other competitors who have to stitch together 3rd party tools.

The Advertiser Expansion

This is a huge part of the thesis for AppLovin. Historically, AppLovin's advertisers were almost entirely mobile-game developers buying installs. It is a large market, but relatively capped. The story moving forward is AXON catering its services to everyone else, outside of just the gaming market.

• E-commerce:

  • The target market here would be direct-to-consumer and online brands that intend to acquire customers. AppLovin ran this as a referral-only, white-glove pilot through 2024-2025.

  • Management has repeatedly said early e-commerce ROAS is comparable to Meta's Audience Network, which if true at scale, is massively bullish.

  • Self-serve:

    • At the end of June 2026, AppLovin launched its AXON Ads Manager self-serve platform plus a dedicated e-commerce platform to general availability.

    • Previously it was hand-held onboarding, which holds back the growth in usage. This is perhaps the most important near-term catalyst.

• Onboarding bottleneck:

  • Roughly 57% of qualified e-commerce leads that have been vetted and want to advertise on AppLovin today. This means that the other 43% is still hesitant and is lost revenue sitting on the table.

  • The friction is largely creative where e-commerce brands without big creative teams struggle to produce enough ad variations.

  • AppLovin is piloting GenAI creative tools with 100+ advertisers specifically to break this bottleneck.

• CTV and Streaming:

  • Through the 2022 acquisition of Wurl, AppLovin sells into connected-TV inventory, a growth vector management has flagged alongside the core. It is still small today but as it is not gaming-related inventory, it could be a great diversifying option.

• Lead generation & new verticals

  • A forthcoming lead-gen campaign type is designed to push AppLovin beyond mid-market e-commerce into high-value verticals like automotive, insurance and subscriptions, meaningfully broadening the addressable advertiser base beyond Shopify sellers.

• First-party inventory

  • AppLovin has signalled it is exploring its own social/owned-inventory surface. This is still early and speculative, but it would extend the model beyond renting other people’s inventory.

Monetisation Rate, Potential Hidden Optionality

AppLovin today monetises only about 1.3% of the impressions it serves. The other ~98.7% generate no revenue at all.

This is not a model quality issue, but rather a demand diversity problem. At the moment, the majority of ads AppLovin has to show are for other mobile games, which results in the engine quickly running out of relevant things to serve. Most users are perfectly happy with the game they are already playing and have no interest in installing another, so the vast majority of impressions get a repetitive, low-intent ad.

As the advertiser base broadens beyond gaming, AXON now has something relevant to show on inventory it already controls, a personalised product on almost every impression, while reserving scarce gaming ads for the high-intent moments where they already convert. Lifting the monetised share of impressions from 1.3% toward even 3% would roughly double the revenue capacity of the existing publisher base with no new supply added at all. Adam himself has mentioned previously that he believes 5% is a realistic target that they eventually hope to get to.

The e-commerce opportunity is therefore not a linear opportunity, but a massive, perhaps exponential opportunity for the business.

Huge Margins

AppLovin’s incredible margins are because it is essentially a software business, not a media business. AppLovin doesn't own most of the inventory and doesn't employ armies of salespeople.

AXON is the sales pitch and each incremental dollar of ad spend it processes costs almost nothing to serve. The easiest way to explain AppLovin, is that it is a tollbooth on performance advertising, where an AI sets the toll, and the road is being widened from just mobile games to all of digital commerce.

4. Moats & Differentiation

This is the most important section in the piece because everything else, from margins to growth and valuation, is downstream of whether the business moat is durable.

1. Data and Feedback flywheel

This is probably the most important part of AppLovin. As more ad spend flows through AXON, more conversion outcomes are observed, enabling the model to get more accurate. ROAS then improves and advertisers route even more spend, starting the next cycle.

It is self-reinforcing and, crucially, has increasing returns to scale. The marginal data point is most valuable to the player who already has the most data because they can place it in the richest context.

AXON serves over $10 billion in annual media spend and learns from trillions of in-app events across 1B+ devices at 2M auctions/second. This is structurally the same strength that makes Meta and Google's ad machines impregnable.

What makes a moat important or durable of course, is that a competitor must not be able to buy their way in.

In this case, I believe this holds true. Data scale economies have a cold start problem where a new entrant has no data, which means a poor model with weak ROAS. This means they can’t attract the spend that would generate the data. Essentially, a chicken and egg problem.

2. Control of Supply via MAX

In my view, this is the most defensible moat that AppLovin owns. AppLovin’s in-app bidding and mediation platform, MAX, controls an estimated 60-80% of the mobile ad-mediation market.

Firstly, what is mediation? It refers to the layer that decides which ad network gets to fill each impression in an app. Owning the dominant mediation platform means AppLovin sits at the chokepoint between the world's app publishers and every ad network bidding for their inventory, including its competitors.

This provides AppLovin with two advantages, (1) privileged, low-cost access to an enormous, exclusive stream of supply and bid-level data that trains AXON, (2) a structural toll position over rivals who must bid through AppLovin’s channel to reach that inventory.

Why is this sticky? Because MAX is integrated into the publisher's app at the SDK level (literally compiled into the app's code). Therefore, ripping it out and replacing it requires engineering work, re-integration, QA, and re-tuning of monetisation across every app in a portfolio. Publishers are unlikely to do so, especially when MAX is also delivering them top-tier fill rates and yield.

There is also a second, more subtle advantage that AppLovin possesses because of MAX. As MAX runs the auction, AppLovin observes every bid (who bid, how much, who won, who lost, on which inventory, at what price). A pure demand-side competitor, such as Meta's Audience Network, sees only its own bids and its own outcomes. That is a structural information asymmetry no bidder can replicate, and it means that when a rival like Meta bids more aggressively inside MAX, it is not purely zero-sum.

The auction pie grows, publishers earn more and recycle it into user acquisition on AppLovin. AppLovin also collects a ~5% fee on impressions won by outside demand bidding through MAX, and each competitive bid becomes training signal that makes AXON smarter.

3. Vertical integration that closes the loop

AppLovin owns every layer of the chain: AppDiscovery (demand), MAX (supply/mediation), Adjust (attribution/measurement), and AXON (the decisioning brain) sitting on top.

Each of these layers feed the others in a way competitors who own only one layer structurally cannot match.

Adjust's attribution data continuously sharpens MAX's bidding, MoPub's acquired traffic became training samples for AXON, MAX's supply gives AXON the inventory to act on.

Owning the whole pipe enables AppLovin to see end-to-end signals from impression → click → install → in-app purchase, with no data lost at the seams where most ad-tech stitches third-party tools together.

There is also a counter-positioning angle here. The Trade Desk built its brand on being a transparent, non-principal DSP that doesn't own inventory nor take hidden margin. That positioning makes it very hard for TTD to copy AppLovin's closed, principal, take-the-spread model without betraying its own value proposition and cannibalising its agency relationships.

Incumbents are often trapped by their existing model. AppLovin's full-stack, principal approach is something the open-internet players can't easily mirror. I believe the key lesson here that the industry is learning from AppLovin is that owning the infrastructure beats owning the inventory, and infrastructure of this completeness would take a rival many years and many billions to assemble.

5. Competitive Landscape

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Circle stock $CRCL fell 17% on the day and now trades around $66, a market cap of roughly $15.7 billion. Circle is down 20% YTD and over 70% from all-time highs.

Two months ago, I published my Circle deep dive and said I would get interested below $80. We are now well below $80, but the fundamental picture has also changed. In this post, I will discuss what has changed and my plans moving forward.

What Open USD Actually Is

OUSD is run by an independent company led by Zach Abrams, co-founder of Bridge (the stablecoin firm Stripe acquired for $1.1 billion). The design has three defining features:

1. Partners can mint and redeem at zero cost with no volume caps.

2. Nearly all interest earned on reserves flows back to partners after a management fee.

3. Governance sits with an independent board of partner companies rather than any single firm.

It launches natively on Solana later in 2026. Coinbase has confirmed OUSD will also be launching on Base, and Stripe says it will make OUSD the default stablecoin for businesses on its platform.

How This Affects Circle

I think this has several wide-ranging impacts on Circle, if successful. We will debate the likelihood of success later, but let’s assume for argument sake that this is successful.

1. Coinbase re-negotiation

Coinbase and Circle have a revenue-sharing agreement which expires next month, and Coinbase now negotiates as a founding member of the rival consortium.

Circle currently keeps roughly 40 cents of every gross revenue dollar. I find it hard to see this going higher post-August. I believe the renewal will happen, and odds are that terms are unchanged. However, there is now a likelihood that Circle gets worse terms, and the probability of Circle getting a better deal than the one they have now is most likely zero.

2. Neutrality moat

In my view, and as I discussed in the deep dive, I believe Circle’s strongest moat is market neutrality. It is seen as the most credible stablecoin, and one that competitors could build on without conflict.

The consortium structure replicates neutrality through shared governance. For instance, we have Visa and Mastercard, clear rivals, both co-owning one coin. If OUSD gains traction, it would be a legitimate contender.

3. Enterprise and payment flows

One huge advantage for OUSD is that it has all the tools to build massive volume. Stripe making OUSD the default for platform businesses attacks precisely the segment Circle identified as its next growth leg: B2B payments, merchant settlement, CPN corridors.

If OUSD becomes the settlement asset inside Stripe, Shopify and the card networks, we could see an explosion in volume. At the same time, Circle's payments expansion story could get boxed into crypto-native and emerging market channels.

4. The re-pricing of distribution

OUSD’s model is a direct counter-position to USDC. Circle’s model treats distribution as a cost to be negotiated bilaterally while OUSD's model makes distribution the shareholder where nearly all reserve yield goes to partners by design.

Every future Circle partnership negotiation would therefore happen against that benchmark. For instance, Binance, wallets, neobanks would compare what a consortium would pay them and use it as a benchmark. This damages Circle even if OUSD never launches, and is therefore the most immediate and permanent impact.

OUSD is not a done deal, nor a guarantee

This is not the first time that a consortium has come together to build shared money rails.

In June 2019, Facebook unveiled a stablecoin (Libra) backed by a Geneva-based association of 28 founding members including Visa, Mastercard, Stripe, PayPal and eBay. The pitch was nearly identical to OUSD's, with shared governance, no single owner, a neutral digital dollar for the internet. Within five months, PayPal, Visa, Mastercard, Stripe and eBay all walked out under regulatory pressure.

Three of the companies that abandoned Libra at the first sign of regulatory heat (Visa, Mastercard and Stripe) are now founding partners of Open USD.

The second precedent is a working project. The Global Dollar Network (USDG), launched in late 2024 by Paxos with Kraken, Robinhood, Galaxy and Anchorage is a functional OUSD blueprint. It is a consortium coin that shares nearly all reserve yield with distribution partners. It has everything OUSD promises, including yield sharing, real exchange distribution and a fully licensed issuer, which is more than OUSD currently has.

18 months in, USDG has gathered roughly $3 billion against USDC's $74 billion. Yield sharing alone evidently does not create demand.

We can also go further back beyond stablecoins. In 2012, the merchant consortium behind CurrentC, assembled Walmart, Target, Best Buy and dozens of other retailers to build a shared payments network and kill card interchange. The incentive to cooperate was obvious and enormous.

However, the product never got out of pilot, because every member had its own priorities and they didn’t deploy their best engineers to work on it. Apple Pay emerged and took the market. I believe the issue is with consortiums. They are excellent at announcing partnerships, signing memoranda, but poor at actually getting stuff done.

Apart from this, I believe there are also a few other reasons Open USD is unlikely to gain traction:

1. The incentives are questionable

OUSD's incentive architecture is funded by reserve yield, and reserve yield requires float. The partners incentivised to push OUSD (Stripe, Shopify, the card networks) are payments companies whose flows generate velocity, which produces volumes but almost no balances. There are of course banks too, such as BNY, DBS, Standard Chartered, U.S. Bank, BBVA. However, they are structurally disincentivised from moving them, because every dollar of client deposits converted into OUSD leaves the bank's balance sheet.

It therefore trades a 3%+ net interest margin franchise for a diluted share of ~4% reserve yield, and cannibalises the deposit base that banks ultimately care most about. I believe banks are in the consortium because they want the optionality. However, it will not be a priority.

2. No named issuer, custodian or reserve detail

As it stands, there are no disclosures on which regulated entity issues OUSD, in which jurisdictions, or under whose supervision. There are tons of requirements that will be required to launch a stablecoin and these are questions that remain unanswered today.

The launch of OUSD is the easy part, what comes next is probably the toughest.

3. Membership is a free option, not a commitment

The most impressive part, where there are 140+ partners for OUSD, I believe also reveals the weakest point. There are no capital commitments, exclusivity or minimum volumes disclosed.

For Visa and Mastercard, membership is cheap insurance against disintermediation. Coinbase earns billions from USDC economics and joined anyway, proving membership is compatible with betting on the incumbent. I think this dis-incentivises partners from wanting this to succeed.

4. Committee products lose to owned products

As we discussed earlier, we’ve seen many cases of ideas like this that have surfaced and disappeared. CurrentC had Walmart, Target etc, but never gained traction. OUSD's competition is Circle, which shipped CCTP, CPN, Gateway and Arc in under three years, and Tether, which is one of the most impressive businesses in the world, garnering the most dollars per employee of any company in the world.

5. Float is the largest unsolved issue

USDC's ~$74 billion and Tether's ~$190 billion sit in exchange trading collateral, DeFi positions, emerging market dollar savings and crypto-native treasuries, and OUSD has no distribution edge in any of them. The marginal holder in Buenos Aires or Lagos holds USDT because everyone around them does. Offshore trading collateral is Tether's fortress, where no consortium member operates. It will be tough to disrupt the incumbents.

Where does this leave Circle?

Near term, I believe Circle should be fine. USDC adoption will continue growing steadily. I think OUSD is a 2027/2028 and beyond issue where the specific worry is with terminal value, and specifically a terminal margin problem.

Even in scenarios where OUSD underwhelms, the multiple the market assigns to a "winner-take-most" reserve income stream has to come down when the winners' biggest customers have publicly organised an alternative.

While CRCL now trades at $66 which was an attractive entry point based on my deep dive, the facts have indeed changed. All the assumptions used in the valuation model therefore also have to change.

Personally, I am watching 3 things:

1. The terms of the Coinbase renewal in August.

2. Whether/when OUSD names its issuing entity and licensing structure.

3. RLDC margin trajectory in the quarters ahead.

I hope this was helpful!

-Gab

S&P 500: -1.28%
NASDAQ: -0.26%

June was the first red month for the indexes since March. As we can see from the image above, it was largely led by a drawdown across the large-cap space, with MAG7 in particular leading the way. However, it was a mixed month, with many more advancers than decliners. For instance, the financials and healthcare space saw massive gains this month as capital rotated from technology.

Personally, I believe it is a very positive sign for the markets. After an incredible 3 month period of “up-only” action, a little breather and rotation is ideal. In May, the index was led by semis and tech with the MAG7 was up strongly, AAPL up 15%, TSLA up 14%, MSFT up 10%, with the real strength in the AI/Semi/Compute trade (AMD +45%, MU +87%, DELL +101%, QCOM +39%).

Interestingly, the memory players who have led the rally continued to do so this month with countless banks increasing their price targets as the market continues to price in a massive inflection in profitability for these businesses.

In my view, there were 3 main drivers:

1. Doubts around continued heavy CAPEX, worries about model progress due to Fable being blocked by the US government, and Chinese models catching up and outperforming on a cost-efficiency basis.

2. Conflict with Iran flared again, with fresh tension around the Strait of Hormuz keeping a risk premium in oil and a lid on sentiment, before easing into the final weekend as talks were floated.

3. There was certainly some quarter-end rebalancing happening with pensions and sovereign wealth funds mechanically trimming the names that had run hardest.

For the year, the indices remain comfortably positive even after the June wobble, with the Nasdaq still leading on the back of the first-half AI run.

The key here, is that this remains an earnings-driven advance, not a multiple-only one. These are the types of rallies that tend to lead much higher for longer.

Portfolio Performance (Since Inception)

(Portfolio Inception Date: 27th October 2023)

Portfolio: +211.32%

S&P 500: +79.84% (Outperformance: +131.48%)

NASDAQ: +109.04% (Outperformance: +102.28%)

Portfolio Performance (YTD)

Portfolio: +4.74%

S&P 500: +8.69% (Underperformance: -3.95%)

NASDAQ: +11.43% (Underperformance: -6.69%)

Personal Thoughts on the Market & Performance

It was a very mixed month for the market. I was publicly cautious, as I shared with subscribers in the lead up to the first Fed meeting by Kevin Warsh. We did get a drawdown in the early part of the month with uncertainty going into it.

However, as predicted, Kevin Warsh led the Federal Open Market Committee (FOMC) to leave benchmark interest rates unchanged in a range of 3.5% to 3.75%. Despite pressures to lower rates, the committee noted that elevated inflation necessitated a steady hand, with some officials projecting a rate hike later in the year.

My personal view is that rates are likely to stay at this range for a long time, and it would be unwise to consider rate hikes. I am leaning towards 1 rate cut around the end of the year as the Iran war fades and prices stabilise. It is not talked about much that oil is currently trading at just $72, down about 35% in just 2 months from $111 in early May.

I believe this has also led to the general uptick in emerging market stocks as markets breathe a sigh of relief that the war is coming to an end. As we discussed in the last portfolio review, many emerging markets, especially in Southeast Asia are huge oil importers, which is of course a major input for many of their products and services.

I am slightly concerned about the market as the index on a YTD basis has been driven by a narrow set of names: MU (+304%), AMD (+171%), INTC (+278%), MRVL (+250%), SNDK (+857%), DELL (242%).

The MAG7 has generally been a mixed bag with MSFT performing poorly at -23% YTD and GOOGL the best performer at +14%. This is especially surprising as the MAG7, hyperscalers in particular have their hands in every corner of AI.

I read a very interesting piece just yesterday that I am still trying to think through more carefully. Generally, I do agree with many points and I will share it here:

I might publish a longer-form article to discuss my thoughts on who I believe will be the long-term beneficiaries of AI.

I remain optimistic for the rest of the year, but with caution on certain pockets of market. For instance, memory. While I understand that there is a massive bottleneck which will enable them to earn excess profits in the short to medium term, here is my belief:

In the past few quarters, Micron’s gross margins have grown from ~40% to 86% in the latest quarter. They have gone from an unprofitable business to a wildly profitable one which will the 3rd most profitable US company next year, only behind Nvidia and Google, within just 1 year.

This is not exactly new, Micron and memory at large is a cyclical business, we saw that in 2010. It is even clearer when we look at operating margins.

To bet that Micron will continue to earn these supernormal profits is to assume that the hyperscalers, who are footing the bill, and the broader AI industry that depends on HBM will do nothing for the next 5 years to solve this bottleneck. I am highly doubtful.

We have already seen hyperscalers take a hit as their ROIC drops massively over CAPEX concerns. If ROIC continues to be weak, would we see hyperscalers continually pouring in money to memory? Would they continue to fund this bottleneck?

To this point, we have also seen two very interesting things happen last week. Apple raised prices on multiple products (iPad, Macbook etc) due to rising memory costs. Microsoft also did the same with the Xbox. Now the interesting part is that these are not their core products, especially in the case of the Xbox. So why would they do this, and publicise it at such a time? I believe it is to let it be known to consumers and thereby the government that these bottlenecks will have a huge impact down the value chain.

We saw further evidence as Apple was reportedly lobbying the government to buy DRAM from CXMT that is currently blacklisted. They might not necessarily be successful in their efforts, but it shows they are clearly attempting to do something about it, and not sitting idly by and paying increased prices.

Price gouging is never a sustainable tactic, especially when memory players will be relying on hyperscalers for years to come. It is clear that the relationship between both parties are not the best, and I would not bet that these high memory prices continue for the next couple of years.

July

July has been one of the strongest seasonal months.

Under Trump, July has been positive (5 for 5), and up 2.9% on average.

I am cautiously optimistic for this month and have plans to add to multiple positions with the cash in hand, I will detail those positions below.

Portfolio Allocation

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I’m covering a football club (soccer, if you’re from the U.S.), more specifically, Manchester United Football Club, a storied English football club and global sports brand. The club claims to have a global following of over 1.1 billion people, which would equate to about 13% of the population.

The club is publicly traded and listed on the New York Stock Exchange as MANU, with an estimated market capitalisation of $3.86B.

This deep dive will provide a comprehensive investment analysis of Manchester United. We will cover the company’s history, business model, competitive positioning, financial performance, management and governance, valuation and more.

P.S. I am a fan of Manchester United Football Club (yes unfortunately, as you will come to see if you aren’t familiar with the happenings in the past decade), but rest assured, this will be an unbiased deep dive.

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Table of Contents

1. Company/Club History

2. Business Model

   1. Commercial

   2. Matchday

   3. Broadcasting

3. Competitive Positioning and Moat

4. Financials

5. Ownership and Management

6. Valuation

7. Bull and Bear Case

8. Concluding Thoughts (What I'm personally doing)

1. Company/Club History

Early Beginnings (1878-1902)

Manchester United, commonly known as United (and how I will refer to it for the rest of this article), traces its origins back to 1878 when it was founded as Newton Heath L&YR Football Club by workers from the Carriage and Wagon department of the Lancashire and Yorkshire Railway depot in Newton Heath.

In its early years, the team played matches against other railway departments and companies. Their first recorded game took place on 20 November 1880, when they donned the railway company’s green and gold colours, losing 6-0 to Bolton Wanderers’ reserve side.

By 1888, Newton Heath became one of the founding members of The Combination, a regional football league. After the league folded a year later, the club joined the newly established Football Alliance, which lasted three seasons before merging with The Football League. This merger placed Newton Heath in the First Division for the 1892-93 season, by which time it had separated from the railway company and dropped “LYR” from its name. Two seasons later, the club was relegated to the Second Division.

Renaming and the first 40 years (1902-1945)

Shortly after in 1902, with debts of £2,670 (equivalent to £370,000 today), the club was served with a winding-up order. The captain of the team at the time, Harry Stafford, found four local businessman who were each willing to invest £500 in return for a direct interest in running the club. As part of the deal, they changed the name of the club, and on 24 April 1902, Manchester United was officially born.

Manchester United saw relative early success, finishing 2nd in the Second Division and being promoted to the First Division in 1906, and subsequently winning the First Division in 1908.

In 1910, it moved to the iconic Old Trafford stadium where a rich tradition was to be built by legendary managers like Sir Matt Busby and Sir Alex Ferguson.

In this period, United saw some success but was not considered a leading club in the country. That was to change in 1945 when United appointed Matt Busby to be the manager of the football club.

The Busby Years (1945-1969)

In October 1945, World War II had just ended, and football was set to resume. United hired Matt Busby, who interestingly was a player for 2 of United’s biggest rivals: Manchester City and Liverpool.

Busby demanded an unprecedented level of control over team selection, player transfers and training sessions. That control led to a team built in his image, where they finished 2nd in the league in 1947/48/49, and an FA Cup (the most prestigious cup competition in England) victory in 1948.

In 1952, the club won the First Division league title for the first time in 41 years, and then back to back titles in 1956 and 1957. The squad was incredibly young and was full of potential, with an average age of 22, fondly nicknamed “the Busby Babes” by the media, a testament to Busby’s faith in his young players.

In 1957, Manchester United became the first English team to compete in the European Cup, despite objections from The Football League, who had denied Chelsea the same opportunity the previous season.

1958 was to be a season that every United fan would never forget. On the way home from a European Cup quarter-final victory against the Serbian champions, Red Star Belgrade, the aircraft carrying the Manchester United players, staff, officials and journalists, crashed while attempting to take off after refuelling in Munich, Germany.

This was known as the Munich Air Disaster, which claimed 23 lives, including those of eight players and injured several more, some of which were never able to play football again.

Matt Busby was spared, but seriously injured and left with a depleted squad. However, he was determined to rebuild the team through the 1960s. He signed a few experienced players like Denis Law and Paddy Crerand, who combined with the next generation of youth players like George Best, helped them to win the FA Cup in 1963.

United won the league title again in 1965 and 1967, and finally became the first English club to win the European Cup, beating Benfica 4-1 in the final. Matt Busby had finally delivered the trophy 10 years after the fatal Munich crash. He resigned as manager the year later and was replaced by the reserve team coach.

Mediocrity (1969-1986)

After Matt Busby’s resignation, United went through a flurry of managers (even persuading Busby to come back temporarily). However, they never performed quite as well and were even relegated to the second division for a season.

They had moments of brilliance, from winning the FA Cup in 1977, 1983 and 1985, but the period was relatively mediocre by Manchester United’s high standards.

Fans were desperate for a league title again after going through nearly 20 years of not winning it. That was about to come from the appointment of the next legendary manager in charge of the club.

The Fergie Years (1986-2013)

With United desperate to go back to winning ways, they hired Alex Ferguson who arrived from Aberdeen, having won the European Cup Winners’ Cup against Spanish giants Real Madrid. He also broke the duopoly in Scotland of Celtic and Rangers and was highly regarded.

Ferguson’s career at United started on a mediocre note with a 2nd place finish in his 2nd year sandwiched by two 11th place finishes. He was on the verge of being sacked before his job was saved by victory over Crystal Palace in the 1990 FA Cup final. The following season, Manchester United won their first UEFA Cup Winners’ Cup title.

Ferguson was a strict disciplinarian and took charge of all aspects of the club. He built the club in his image and famously fielded many academy prospects, balancing the team out with some experienced players. The likes of David Beckham, Ryan Giggs, Paul Scholes, Gary and Phil Neville came through in the early 1990s.

In 1992, the Premier League was founded, replacing the old English Division, where United won their first league title since Sir Matt Busby left in 1967. A year later, they won a 2nd title alongside the FA Cup to complete the first “Double” in United’s history.

In 1999, United became the first team to win the Premier League, FA Cup and Champions League in the same season, nicknamed “The Treble” and Ferguson received a knighthood that summer for his services.

At the turn of the year, United continued to dominate, with Ferguson constantly refreshing his team, bringing in fresh young talent to bolster the squad. In 2003, Ferguson purchased a young Cristiano Ronaldo from Sporting Lisbon in Portugal. He would go on to have one of the most amazing careers of any footballer in history (he is still playing now!).

A pivotal change occurred in 2005, when American businessman Malcolm Glazer acquired control in a £790 million leveraged buyout. The takeover loaded the club with debt and was met with intense fan opposition. The Glazer family’s ownership period saw continued on-pitch success in the late 2000s, but also rising debt and fan unrest over financial management. In 2012, Manchester United made a return to public markets with an IPO on the New York Stock Exchange, raising ~$100 million.

The IPO was partly aimed at paying down debt (which stood at over £420 million in 2012).

In 2013, after 26 years at the club, Ferguson made the decision to retire at age 71.

During his 26 years at Manchester United, Ferguson won 38 trophies, including 13 Premier League titles, 5 FA Cups and 2 Champions League titles.

Ferguson has written several books, including 3 autobiographies, with his latest book “Leading” co-written with Sequoia chairperson Michael Moritz, a billionaire Venture Capitalist that I’m sure most investors are aware of.

Post-Fergie Years (2013 - Now)

Since Ferguson’s retirement, United have again gone through a whole host of managers, each attempting to bring the club back to its glory days.

Great managers have come and gone: Jose Mourinho, Louis van Gaal, Erik ten Hag. All of whom had success away from the club but failed to achieve the league title with the club.

The drop-off in football success can be summed up in the picture above. However, the club has remained a commercial powerhouse. In November 2022, they announced a strategic review that opened the door to a potential sale of the club. This culminated in February 2024 with British billionaire Sir Jim Ratcliffe (founder of INEOS) acquiring a 25% minority stake for ~$1.25 billion.

The deal, valuing the club’s equity around $5 billion, included Ratcliffe investing an additional $300 million into club facilities and taking charge of football operations. The Glazers remain majority owners, but Ratcliffe’s investment marks the first significant ownership change in nearly two decades.

Since Ratcliffe’s entry into the cap table and him taking charge of football operations, not all has been smooth sailing. United have had 3 managers, with Erik Ten Hag first sacked in September 2025. Ruben Amorim, who had much success in the Portuguese League, was appointed but ultimately sacked too in January this year. Michael Carrick, an ex-player of Manchester United took the reins on a temporary basis. Since taking over at United, he has managed 17 games, won 11, drawn 3 and lost 2. This is a 70.6% win-rate, which is an incredible feat. The club rewarded him with a 2 year contract at the end of the season.

2. Business Model

Manchester United has three revenue streams. In FY2025, total revenue hit a record £666.5M ($858M).

This was split into 3 segments: Commercial (50%), Matchday (24%) and Broadcasting (26%).

Commercial is sticky and brand-driven, which tends to grow regardless of how the club does from year to year. That said, of course this trends upwards at a quicker trajectory when the team is more successful, thereby attracting more fans and sponsors.

Matchday is structurally capped at Old Trafford’s 74,879 capacity, which has not changed since 2006. That said, this is affected by the number of games played in each season, which varies depending on how well the club does the previous season, as well as in the current season’s tournaments. For instance, the team did poorly this season, exiting the FA Cup and League Cup early on, resulting in a total of just 40 games played this season, a record low in 111 years. This will weigh on Matchday revenue.

Broadcasting is performance-linked and typically collapses if the club misses out on the Champions League (the most prestigious club competition in Europe).

Revenue Trajectory

Revenue has steadily grown in the past 5 years despite the team finishing outside of the top 4 places (which would have granted Champions League) multiple times. This is generally due to the Commercial moat in action where losses in Broadcasting and Matchday have been supported by the brands and sponsors associated with the club.

2a. Commercial

This is Manchester United’s genuine competitive advantage. At £333M, commercial revenue is larger than the total annual revenue of most Premier League clubs. It is also the segment most visibly detached from on-pitch performance. (e.g., it grew 10% in FY 2025 despite the team having its worst season ever in the Premier League era)

The commercial revenue bucket can be segmented into 3 sub-categories: sponsorships, retail/merchandising/licensing, and hospitality.

Sponsorships: Kit Deal

In terms of sponsorships, the main money maker is typically the kit deal, where most clubs sign with a major sports brand such as Adidas or Nike. In July 2023, Manchester United signed a 10-year extension with Adidas valued at a minimum of £900M, or roughly £90M/year, which was one of the largest kit deals in sport.

There is a notable clause in here where the club pays Adidas a £10M penalty for every season in which it fails to qualify for Champions League football. This is a direct financial cost of on-pitch underperformance, and it has already been triggered for FY2026.

Sponsorships: Shirt Sponsor

The second highest revenue generator is typically the front of shirt sponsor. In 2024, Qualcomm's Snapdragon brand replaced TeamViewer as the front-of-shirt sponsor in what was described as the largest shirt sponsorship deal in world football, £60M per year. For context, Liverpool's shirt deal with Standard Chartered runs at approximately £50M/year. Arsenal's Emirates deal is around £40M/year. United are currently pricing their shirt at a 20-50% premium to direct peers, a reflection of genuine brand demand and the depth of the global fanbase.

Sponsorships: Training Kit Sponsor + Regional/Global Partners

There are of course, many other types of sponsorships. United have 70+ active commercial partnerships spanning 20+ countries. There is also a regional deal structure which allows lower-tier sponsors to pay for rights in specific markets (Indonesia, China, India, US) without paying global rates, widening the commercial funnel.

They also recently announced a new training kit sponsor: Betway for a reported £20M annually, which stands as one of the most highly valued single-partner training kit deals in global football.

Retail & Licensing

A critical but under-appreciated element of the commercial segment is that United brought their e-commerce operation in-house in FY2025, ending a third-party arrangement. This shift is expected to add a material uplift to retail margins in FY2026 and beyond where the club now captures the full economics of online kit sales, replica merchandise, and apparel, rather than sharing margin with a third party.

2b. Matchday

Matchday revenue is the money United makes from Old Trafford. This includes tickets, season tickets, hospitality, executive boxes, food and beverage, parking, programmes, museum revenue, memberships, domestic cup gate receipts and other events hosted at the stadium.

This part of the business is purely physical and capacity-constrained. Unlike commercial revenue, which can scale globally, Matchday revenue depends on how many home games United play, how large the stadium is, and how much the club can charge per fan.

As a result, this business is driven by four main things: the number of home games, the size of Old Trafford, attendance levels, and ticket/hospitality pricing. United usually starts with 19 Premier League home games, then adds more if the team progresses in domestic cups or European competitions.

In my view, this is a strong, but under-optimised revenue stream. Old Trafford demand is clearly there. United has averaged over 99% attendance for Premier League home matches for every season since 1997/98. This is extremely rare.

However, Old Trafford is ageing and the stadium that was built in 1910 and extensively redeveloped through the 1990s under Ferguson now requires substantial maintenance investment just to remain operational. Multiple sections have required structural attention, and the Matchday experience has fallen behind newer grounds like Tottenham Hotspur Stadium and the rebuilt Anfield.

For comparison, the club generates approximately £2,100 of Matchday revenue per seat per season while Tottenham's stadium generates approximately £2,600 per seat. This does not seem like a massive difference, but (1) it adds up across tens of thousands of seats across multiple seasons, (2) United is a much bigger club than Tottenham and should realistically be making 2x or more per seat.

The New Stadium Plan

In March 2025, United announced plans for a new 100,000-seat stadium adjacent to the current Old Trafford site that is estimated to cost about £2B. It is positioned as the centrepiece of a broader Old Trafford regeneration project covering 370 acres of Greater Manchester. Moving from 74,879 to 100,000 seats is a ~33% capacity increase. At United's current Matchday yield of roughly £2,140/seat/season, that alone adds ~£53M annually.

On 23rd June 2026, United announced that they had acquired a 25-acre site sufficient for their new stadium that is located just 350m away from Old Trafford.

2c. Broadcasting

Broadcasting revenue is the money United receives from media rights. This includes distributions from the Premier League, UEFA competitions and other broadcast-related content such as MUTV. Unlike Commercial revenue, this is less directly controlled by United because Premier League and UEFA media rights are negotiated collectively, not individually by the club.

This revenue stream is highly sensitive to on-pitch performance. The better United performs in the Premier League, the better its league distributions. More importantly, qualifying for the Champions League creates additional UEFA broadcasting and prize money. Missing out on Europe, or playing in the Europa League instead of the Champions League hurts revenue.

Premier League Distributions

All 20 Premier League clubs receive a baseline equal share of roughly £60-70M annually from the current domestic and international rights cycle. United receive additional "merit payments" based on final league position, and additional "facility fees" based on the number of times their matches are selected for live broadcast, which historically is the highest of any club due to their global audience numbers.

Champions League Sensitivity

This is where the on-pitch failure costs real money. Champions League participation generates a floor of approximately £30-40M from UEFA distributions for a group-stage participant, with material upside (£100M+) for deep runs to the knockout stages.

In FY2026, United have no UEFA competition, which creates a £30-40M direct revenue hole. On top of the direct UEFA money, the Adidas penalty clause costs a further £10M. There are also some indirect impacts such as negotiating better rates with commercial partners when UCL football is on the table, and some sponsor clauses explicitly provide uplift for Champions League participation.

Broadcasting is a powerful but volatile revenue stream. United benefits from being in the Premier League, the most valuable football league in the world, but this part of the business is still tied closely to football performance.

Overall

The key point is that Manchester United’s business model is unusually brand-heavy.

Most football clubs are heavily dependent on broadcasting and sporting success. United is different because Commercial revenue alone is half the business. That means the club’s value is not purely tied to whether it wins this season. Its real asset is the Manchester United brand, with the history, the fanbase, the shirt, the stadium, and the global attention that comes with it.

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3. Competitive Positioning and Moat

Competitive Positioning

Most of these clubs are privately held and never transact publicly, which makes valuation a guessing game. The most widely cited independent attempt to appraise these clubs is CNBC’s annual Soccer Team Valuations. Their methodology blends revenue multiples (anchored to comparable sports franchise transactions in the NFL, NBA, and European football), brand premiums derived from commercial data, stadium asset values, and forward revenue projections.

Despite limited success in the past decade and a half, United remains one of the most valuable football clubs in the world. The two runaway leaders remain the Spanish giants (with Cristiano Ronaldo and Lionel Messi being the face of their success in the past 2 decades).

Within English Football, Man City and Liverpool provide the clearest competition, with City having won five of the last seven Premier League titles and Liverpool being the 2nd most popular English club in the world and most successful English club in terms of trophies won.

This excellent chart from gives the clearest view of how poorly United have done in comparison to rivals. In 2016, just 10 years ago, they were by far and away the largest revenue generating club in English football. Since 2019, they have only grown revenues by 6% compared to Man City and Arsenal who have grown at 34% and 55% respectively.

Moat

United’s largest moat is in its commercial strength which is rooted in history and geography. I believe there are 3 key factors that explain why there are very few European clubs that have built a comparable commercial machine.

Firstly, the history of the club. United was the first ever English club to appear in a European competition, and also the first to win the European Cup (equivalent to the Champions League today, the grandest club competition in the world). The circumstances around it are what makes it truly special. The Munich Air Disaster, as discussed earlier, was a watershed moment in the history of the club. A group of extremely talented young footballers lost their lives, a few of whom were tipped to be future superstars. In a single moment, United lost not only a team, but possibly a dynasty.

Sir Matt Busby, the manager, survived, recovered and rebuilt the club. Bobby Charlton, who also survived the crash, became the emotional bridge between the lost Busby Babes and the new United team. Ten years later, in 1968, Manchester United won the European Cup with Busby as manager and Charlton as captain. Munich became central to United’s identity and gave the club a deeper mythology around it.

During the Ferguson-era of 1993 and 2013, United won 12 Premier League titles and two Champions Leagues in an era when the Premier League was simultaneously becoming the world's most-watched domestic football league. United were the face of that export, building fanbases across Asia, North America and Africa, during a period when no other club at their level consistently.

It is also very notable that United have had several players who have extremely strong marketability and have been the face of football for years at their peak. This is an extremely underrated factor, many fans support a club because of the player they follow, not the other way around. For instance, United have had George Best, David Beckham, Wayne Rooney and Cristiano Ronaldo play for the club. These are some of the greatest and most popular players of all time.

Secondly, English-language content advantage. As a UK club whose matches are broadcast in English, United benefit disproportionately in the world's largest football markets outside Europe (India, Southeast Asia, the US) where English-language content has structural advantages in media licensing and fan engagement. The clearest example is the gulf in revenues between the English league and other top European leagues. 9 of the top 20 revenue-generating clubs in the world are English clubs, showing the dominance of the league. The EPL makes up ~40% of the top 5 European leagues revenues combined.

Thirdly, sponsorships and partnerships. United pioneered the commercial model of selling tiered regional rights where a sponsor in Indonesia gets to claim it is the "Official Financial Partner of Manchester United in Southeast Asia" and pays accordingly, without displacing global sponsors. This multiplicative structure generates revenue from the same asset simultaneously across dozens of markets. No club has replicated it at scale. Of course, this is all possible because of the history and brand of the club. Sponsors are paying for access to a massive global fanbase.

4. Financials

Overview

United’s financial year begins on 1st July and ends on 30th June, mirroring the English and European football league schedule.

Total revenue grew very marginally from FY2024 to FY2025, with increases in Commercial and Matchday revenue negated by a drop in Broadcasting revenue. However, net losses narrowed massively from £113M to £33M, with a £52M wage bill reduction and a £16M reduction in exceptional items being the key drivers.

FY2026 will likely see a slowdown in Matchday and Broadcasting revenue due to the team’s failures in the league and various cup competitions in the 2025-2026 season. However, I do expect FY2027 to be much stronger, due to the team’s recent 3rd place finish in the league, which will mean Champions League next season. As we have discussed previously, this will mean higher Commercial, Matchday and Broadcasting revenue.

From a quick look, Adjusted EBITDA of £182.8M sounds healthy (~27.4% EBITDA margin). However, the club still lost £33M after tax. Why was that?

Something to note about football clubs is that one of the largest cost items from a P&L perspective is player amortisation. This is because players are capitalised as intangible assets and amortised based on contract length. For instance, Manchester United buys a player for £50M on a five-year contract. They would amortise the player at £10M/year. The £196.4M in amortisation does not represent cash going out the door this year, but the accounting spread of prior-year(s) transfer fees. This explains the huge discrepancy between the P&L loss (£33M) and the free cash flow loss (£281M).

The other huge item on the list is of course net interest expense. This is the price of the Glazer LBO which we will discuss in detail later.

Revenues

There are 3 key observations from this table.

Commercial compounds regardless of results, from £232M in FY2021 to £333M in FY2025, a 43% increase over four years and a CAGR of ~9.5%. As we have discussed, there are multiple drivers here such as the Snapdragon shirt deal (£60M/yr, record in world football), the Adidas extension (up to £90M/yr), and the in-house e-commerce transition.

Matchday has recovered strongly post-COVID, but is now hitting a structural ceiling. Old Trafford's 74,879 capacity is essentially full every home game. Without the new stadium, meaningful Matchday growth from here is difficult. FY2026 will probably be slightly lower due to fewer home matches (out of FA Cup, League Cup early and no European football).

Broadcasting is the most volatile factor, as we have already discussed. These fluctuate wildly according to United’s competitive success. FY2025 and FY2026 are very weak years due to the lack of Champions League participation, but we should see it at £220M+ in FY2027. This £50M+ swing is the single largest lever in the P&L.

Costs

The wage bill is the single most important cost in the club, making up ~47% of revenues in FY2025, which makes sense considering they are also one of the key revenue drivers. The £52M reduction in the wage bill from FY2024 to FY2025 is the most consequential thing INEOS has done since buying a stake in the business and running football operations.

Notably, this bill has come down massively by £52M through a combination of high-earner exits, reduced squad-size bonuses without UCL participation and job cuts across staff roles. The FY2026 wage bill should fall further too.

Other operating expenses did increase by £21M to a club record for this category. This bucket includes everything from Matchday operations, marketing, facilities maintenance, IT, legal, and administrative overhead. The increase is partly attributable to the Carrington Training Centre upgrade (one-time), partly to increased commercial activity (higher revenue comes with higher delivery cost), and partly to the transition costs of bringing e-commerce in-house.

Cash Flow

Operating cash flow in FY2025 was £72.7M. This is real cash generated from running the football business (ticket sales, sponsor payments, broadcast distributions, less wages and operating costs paid). This was a decline from the previous year largely driven by higher working capital requirements as the commercial operation scales.

Player transfer spending consumed £230M due to the signings of Leny Yoro, Manuel Ugarte, Matthijs de Ligt, Joshua Zirkzee, Patrick Dorgu and Noussair Mazraoui. While this appears to be a highly discretionary line item, it is far from it. To remain competitive enough to qualify for the Champions League, to satisfy PSR requirements by moving underperforming assets, and to satisfy fan and commercial partner expectations, the club must continuously invest in the squad.

Debt Schedule

The Glazer LBO resulted in huge debt loads placed on the club, which has plagued its finances for decades now. With the INEOS takeover, Manchester United has completed a major refinancing of its primary debt instrument.

Just last week, United announced a refinancing of the $425M in senior notes at 3.79% into $550M at 5.36%, moving the repayment date from June 2027 to June 2031. This buys the club four more years before it needs to deal with this, and time for UCL revenue to accumulate and for a potential ownership change to simplify the capital structure.

However, this does increase the net interest payments on the debt by $6.7M a year. This is small in isolation, but highlights the key problem, the mounting debt figure that will mean every refinance increases the overall debt and yearly payments accrued.

The next figure to worry about is the $225M term loan due in Aug 2029 at floating rates. If SOFR remains elevated (current est. ~4.5%), the all-in rate is approximately 6.5-7.5%, costing £12-16M/year. This will need addressing before 2029.

FY2026 Trajectory

For the nine months ended March 31, 2026, Manchester United has reported:

United also revised FY EBITDA guidance from £180-200M at Q2 to £200-210M, which represents a meaningful step up from FY2025's £182.8M despite lower revenue.

The business at an operational level is clearly getting better. FY2026 will likely see operational improvement start to flow through, but the debt burden will also be most acute given the recent refinancing activity. That said, I do think FY2027 will start to look much better for the business.

The Core Issue

When reading the financials in aggregate, one thing is clear. The business is being undermined by two structural costs that the operating business alone cannot overcome.

Firstly, player amortisation exceeds EBITDA. This means that even in a year of record commercial revenue and significantly reduced wages, the accounting spread of prior transfer decisions consumes the entire operating cash surplus and more.

This is not unique to Manchester United, all major football clubs with active transfer markets face elevated amortisation. However, most successful clubs either generate sufficient EBITDA to absorb it (Liverpool, Manchester City, Real Madrid), or have owners with the balance sheet to absorb recurring losses (PSG, Manchester City) without structural damage. United sits in an uncomfortable middle ground where they have too large a commercial business to be restructured and are too leveraged to absorb the recurring losses painlessly.

Secondly, the £40M annual interest bill on financial debt (post-refinancing) is a permanent fixture as long as the current ownership structure persists. The debt was incurred in 2005 to allow Malcolm Glazer to buy the club. Of the ~£790 million used to buy the club, over £600 million was borrowed from parties such as JPMorgan and hedge funds. As of March 2026, the club still has ~£692m in net debt.

I believe there are two ways to resolve this structural mess. First, a Glazer exit to a well-capitalised buyer who retires the LBO debt with fresh equity, eliminating the £40M interest cost and potentially freeing capital for the stadium. Second, an extended period of Champions League participation generating £80-100M of additional annual revenue that allows the club to self-fund debt reduction over a decade. The optimistic case would be the latter, but the more realistic one would be the former.

5. Ownership & Management

This is perhaps the most important section in this deep dive. Every financial problem at Manchester United traces back to a single decision made in 2004 by an American real estate developer named Malcolm Glazer. Understanding that decision and its 21-year aftermath is the only way to correctly price MANU equity.

Today, Manchester United is controlled by the Glazer family, namely Joel, Avram, Bryan, Edward, Kevin and Darcie, all children of Malcolm who passed away in 2014.

The Leveraged Buyout

In May 2005, Malcolm Glazer completed a hostile takeover of Manchester United for £790M, the largest acquisition in the history of football at the time. Critically, Glazer did not use his own money to fund it. He took out loans totalling approximately £550M, secured against the assets and future cash flows of the club itself.

In other words, the club was made to pay for its own acquisition. This is known as a leveraged buyout (LBO), a structure that is extremely common in private equity, but deeply controversial when applied to a sports club with a fanbase that views itself as a community asset rather than a financial vehicle.

The immediate consequences of this were visible in the annual accounts from 2005 onwards, with interest payments of £50-70M per year, every year, regardless of how the team performed. By June 2026, the club has paid over £1 billion in interest on debt taken on to fund its own purchase. The Glazers have extracted approximately £200M in dividends from the club over the same period.

In essence, they have paid a couple hundred million pounds for an asset now valued at £5B+. The return profile has been incredible them, not so much for the club, fans and other shareholders.

Dual-Class Share Structure

When Manchester United listed on the NYSE in 2012, the Glazers engineered a dual-class share structure that gave them supernormal voting rights of 10 votes for Class B shares versus 1 vote for Class A shares.

As a result, the Glazer family holds approximately 48.9% of economic interest but commands 67.9% of total voting power. No resolution can pass over Glazer objection and today, a public investor buying into MANU Class A shares is effectively purchasing a minority economic interest in a company where they have zero governance input.

June 2026: The Glazers Study an Exit

On June 3, 2026, Bloomberg reported that multiple members of the Glazer family are studying whether to sell part or all of their stake. The family has faced 21 years of fan protests, supporter trusts riots, and green-and-gold campaigns.

No decision has been made with reports stating that the family remains divided. Any transaction would need to navigate the B-share structure and would almost certainly require a premium to the public market price to incentivise all parties. A full sale of the Glazer stake would likely be marketed as a strategic asset sale rather than a market transaction, targeting sovereign wealth funds, US sports owners, or Middle Eastern consortia.

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INEOS, Sir Jim Ratcliffe Purchases A Stake

In February 2024, Sir Jim Ratcliffe, founder of INEOS, the British petrochemicals empire, completed the purchase of a 27.7% stake in Manchester United for approximately $1.65B (£1.3B), implying a club valuation of around £5.9B. On top of the £1.3B purchase price, he made a £158M capital injection in February 2024 and in December 2024 he had injected a further £79M, bringing his total shareholding to 28.94%.

The transaction gave INEOS two seats on the Manchester United PLC board and explicit control of all sporting operations, the academy, the first team, transfers, and managerial appointments.

The first 30 months of INEOS control have been characterised by aggressive cost-cutting and structural reform. They eliminated over 250 jobs across the organisation in 2024 and followed up with a second round in 2025, eliminating another ~200 jobs. This was estimated to save the club about £20M annually.

INEOS have also overhauled the structure of the footballing side of things. Sir Jim Ratcliffe and INEOS director of sport Sir Dave Brailsford completely replaced the executive and sporting structure with Omar Berrada was brought in from Manchester City to serve as CEO. Dan Ashworth was poached from Newcastle after United agreed to pay over £10M. He was tasked to oversee all footballing operations, including player recruitment and the academy while Jason Wilcox was hired as the technical director. Ashworth was subsequently sacked just 5 months after officially joining the club which left supporters confused.

The INEOS Problem

The issue is that Ratcliffe's intervention, while operationally credible, is financially constrained in a way that was not fully priced in at the time of his purchase.

INEOS Group Holdings is a privately-held petrochemicals company carrying approximately £18 billion in gross debt. In 2025, S&P downgraded INEOS's credit rating to B+, deep into junk territory, citing margin compression from Chinese overcapacity in the polyethylene market and deteriorating interest coverage ratios. Ratcliffe has subsequently been forced to pursue asset sales across the INEOS empire, including partial divestitures in the cycling and sailing divisions.

The consequence for Manchester United is structural. INEOS cannot credibly be the source of large equity injections into the club on a recurring basis. The £79M top-up in December 2024 may represent the ceiling of what INEOS can comfortably deploy into a sports asset while managing a distressed industrial balance sheet.

United's own net debt sits at approximately £1.29B, the highest since the original Glazer LBO. The club has in effect reached its own debt ceiling. Future investment in the stadium, the squad, or working capital likely requires either new equity from a third party or a Glazer sale that brings in a better-capitalised owner.

6. Valuation

For clarity, I will use all values below in USD as MANU stock trades on the NYSE.

MANU trades at ~$3.9B market cap. However, due to the debt on its balance sheet, the enterprise value is closer to ~$4.8B.

Revenue in FY26E will total ~$872M and guidance is for ~$273M in Adj. EBITDA. Essentially, United trades at 5.5x EV/Revenue and 17.6x EV/EBITDA.

Firstly, I would put more weight on EV/Revenue than EV/EBITDA, because EBITDA as we discussed previously is not clean economic profit. In the nine months to March 2026, United reported £187.5m adjusted EBITDA, but also had £161.1m amortisation, £55.7m net finance costs, £257.9m payments for intangible assets, and £29.2m interest paid. In football, “intangible assets” largely means player registrations. Therefore, EBITDA can look strong while cash keeps being recycled into transfers, wages, interest and infrastructure.

Of course, in valuation, what truly matters is the future. Much of United’s intrinsic value is dependent on how the club does in the next 1, 5 and 10 years.

Let’s look through some key catalysts for the club that could lead to a huge increase in revenue over the foreseeable future.

1. Stadium Rebuild

Between FY2016 and FY2019, United’s Matchday revenue remained relatively stagnant. FY2020 and FY2021 was a write-off due to the COVID pandemic while FY2023 saw a huge boost in revenues.

This was a direct impact of the 2022/2023 season being a strong year for United in all 3 competitions it participated in. They went far in the Europa League, won the League Cup and reached the final of the FA Cup. This meant 7 more home games and stronger demand for hospitality.

FY2024 highlighted a different thing. FY2024 actually saw 8 less home games compared to FY2023, but despite that revenue stayed flat. This was attributed to pricing/hospitality as United increased ticket prices by 5% for the first time in 11 years.

FY2025 also saw a bump due to 5 more home games compared to the previous year, a deep Europa League run, and more hospitality spend.

What’s clear is that there are 3 key variables today in how much Matchday revenue brings in: pricing, hospitality and competitive success.

However, there is a 4th variable that is worth discussing: the Stadium rebuild. The best analogy to this is the Real Madrid example.

Real Madrid is the most successful team in the world and their stadium, the Bernabéu, prior to FY2024 seated ~81,000 people, making it a very similar sized stadium to Old Trafford. Interestingly, their Matchday revenue was very similar to Old Trafford, remaining relatively stagnant from FY2016 to FY2023, excl. the COVID pandemic.

Real Madrid’s Matchday revenue jumped from €122M in FY2023 to €248M in FY2024, up roughly €126M, or +103%. Naturally, most would assume this meant the seat capacity doubled to allow for this. However, in actuality, it is estimated that seat capacity increased by only 2.5-3%. The uplift in revenue came from increased monetisation of those seats through Personal Seat Licences and new VIP seats. It must be noted that the renovation did not come cheap however, with figures suggesting that the stadium project investment cost as much as €1.347B.

A stadium rebuild could therefore increase Matchday revenues materially for United. Previously, we discussed how moving from 74,879 to 100,000 seats is a ~33% capacity increase, and at United's current Matchday yield of roughly £2,140/seat/season, that alone adds ~£53M annually.

A new-build stadium with a materially better hospitality mix, more premium sections, better suites, improved F&B infrastructure, could realistically lift per-seat yield by 20-30%, producing total incremental Matchday revenue of £50-110M per year above the current £160M base.

2. Return to Champions League Football

This is the most immediate revenue driver for the business. In FY2025, United’s broadcasting revenue fell £48.9m, or 22%, to £172.9m, mainly because the men’s team played in the Europa League instead of the Champions League and finished 15th in the Premier League versus 8th the year before.

By May 2026, United had secured Champions League qualification again, and Reuters reported that the club raised FY2026 revenue guidance to £655m–£665m, partly helped by a third-place Premier League finish.

The recent 2025-2026 season is the lowest number of home games United have played in decades due to them bowing out at the first round of both domestic cup competitions and not qualifying for Europe. A return to European football would guarantee at least four more home games, and potentially many more if they were to make a deep run in all competitions. The theoretical maximum number of home games for an English top-flight team in a season is 35. If United can get to 29-30 home games next season, it could boost Matchday revenue by about £40M from FY2026 to FY2027 considering the average revenue per home match is ~£5.3M.

Of course, competitive success also leads to more lucrative sponsorships, partnerships and broadcasting revenue.

a. Sponsorship Revenue

Most sponsor clauses are private so it is harder to determine the exact number for this. However, there is one disclosed clause that is significant. United’s Adidas extension includes a £10M deduction for each year of non-Champions League participation from 2025/26 onwards. The Adidas deal can also increase by up to £4.4M per year based on performance in league, domestic and continental competitions.

United’s FY2025 sponsorship revenue was £188.4m, so even a 10% uplift from better sponsor pricing, bonuses and renewals would equate to ~£18M.

b. Broadcasting Revenue

UEFA’s current Champions League distribution is much richer than Europa League. The UCL league phase alone gives each club €18.62m just for qualifying, plus €2.1m per win, €700k per draw, league ranking bonuses, value-pillar money, and knockout bonuses.

Just being in the Champions League is probably a £55m-£75m broadcasting/UEFA uplift versus no Europe for United while going deep can make it £100m+.

Putting the Revenue Bridge Together

I think the more interesting question to ask is “What can revenue look like if the club is run properly and returns to consistent Champions League football?”

Starting from FY2026E revenue of roughly £660M:

• A normalised Champions League uplift could add £55M-£75M

• A deeper European run and more home games could push that to £100M+

• A stadium rebuild or major redevelopment could add £50M-£110M in annual Matchday revenue over time.

• Commercial repricing from better performance, better sponsorship demand and a stronger global product could add £30M-£50M.

• So, over the medium term, it is not hard to see a path where United goes from ~£660M revenue today to £850M-£950M revenue.

• In USD, that is roughly $1.1B-$1.25B of annual revenue.

I believe that is the core bull case. Today, United trades at around $4.8B EV on $872M revenue, or 5.5x EV/Revenue. But if revenue can get to $1.15B over time, then today’s EV is only ~4.2x forward medium-term revenue.

The Multiple

The other important point is that football clubs are not normal businesses. They are typically trophy assets, and there are only a handful of these truly global football clubs. Manchester United is certainly one of them.

I believe this means that it is almost impossible to value them purely on EBITDA or free cash flow. A normal industrial company that burns cash on transfers, wages and interest would deserve a lower multiple. However, a scarce global sports asset with irreplaceable brand equity, global distribution and billionaire-owner demand can trade at a premium to what near-term financials imply.

Of course, that doesn’t mean price does not matter at all. But it means United should probably be valued closer to a scarce sports franchise than a normal consumer business. If United can reach $1.1B-$1.25B of revenue, then applying a 5.5x-7.0x EV/Revenue multiple gives an enterprise value of roughly $6.1B-$8.8B.

After subtracting net debt, the equity value could be roughly $5.2B-$7.9B.

Compared to the current market cap of ~$3.9B, that implies around 30%-100% upside.

Bull Case

The bull case is that United becomes a structurally larger business and that revenue moves toward $1.2B+. This would require a stadium rebuild, the club to become consistent Champions League participants again, which would drive more commercial and broadcasting success, as well as spending more frugally in the transfer market, relying on home-grown talent like they used to.

In that scenario, United could be worth $8B-$10B enterprise value over time.

Bear Case

The bear case is equally simple. United remains inconsistent on the pitch, Champions League qualification is not sustained, the stadium project becomes expensive, delayed or poorly financed and transfer spending continues to absorb most of the cash flow. Interest costs remain high and the debt keeps climbing.

My View

At the current valuation, I would not say United is cheap based on present financials alone. It requires quite a few assumptions that I’m not sure the recent history of United would suggest it is capable of.

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7. Bull and Bear Case

Bull Case

1. United is a scarce trophy asset and should be accorded a premium valuation

Manchester United should not be valued like a normal football operating company. It is one of the very few listed ways to own exposure to a global sports trophy asset. These assets are rare, emotionally owned, supply-constrained and usually transact at values that look expensive on normal earnings metrics. There are only a handful of football clubs with Manchester United’s global relevance, history, fanbase, brand recognition and commercial reach.

At the latest quoted price, United trades at about $4.8B in EV. Forbes values Manchester United at $7.2B as of May 2026. Forbes states that their methodology is based on historical club transactions and the future economics of each league and team.

I think the scarcity point is extremely interesting as sports assets are increasingly being bought by billionaires, sovereign wealth-linked investors, private equity and strategic investors who are not necessarily underwriting the asset on near-term free cash flow. Instead, they are valuing the asset based on scarcity, global distribution, brand permanence and optionality. I think that could command a premium.

2. Ratcliffe’s transaction provides a valuation anchor

Valuation is a subjective matter, but the price at which an asset was actually transacted is certainly objective. Sir Jim Ratcliffe agreed to acquire 25% of the Class B shares, and pay the Glazer family and Class A shareholders $33.00 per share. The deal also included a further $300m investment intended for future investment into Old Trafford.

That is about a 50% premium from current prices. Of course, it doesn’t automatically mean MANU is worth $33 today, because Ratcliffe received strategic influence that ordinary Class A shareholders do not have. However, it is an interesting anchor. It is also arguable that the club’s value has gone up since.

3. INEOS gives the club a credible football-operations reset

For over a decade now since Ferguson’s retirement, United has been a laughing stock to many for how inefficient its football operations were. They have shuffled through 6 full-time managers since Ferguson retired, excluding 5 interim managers. Transfer spending has been extremely poor, with zero wage discipline.

INEOS has hired experienced football people to run the operations and it appears to be paying off. The 4 summer signings last season: Matheus Cunha, Bryan Mbeumo, Benjamin Sesko and Senne Lammens have been a huge success for the club and key to the 3rd place finish.

INEOS will not fix everything, but it is that the probability of better football decision-making is higher than under the previous structure. If United can improve recruitment, reduce wasted wages, build a more coherent squad and stop paying for repeated managerial resets, the operating leverage will be very meaningful.

As we discussed, much of it comes down to competitive success on the pitch. Better football leads to higher league placement, European qualification, more home matches, stronger sponsorship conversations, more merchandise sales and better global engagement.

4. Champions League return has immediate financial impact

United’s 3rd place finish in the Premier League led to the company also raised FY2026 revenue guidance to £655-665m and adjusted EBITDA guidance to £200-210m.

This matters because United’s revenue is very sensitive to Champions League participation. Europe affects broadcasting revenue, matchday revenue, sponsorship visibility, player attractiveness and brand momentum. A Champions League season usually means more high-value home fixtures, more global TV visibility and better commercial activation opportunities.

5. The cost cuts appear to be paying off

In the past decade, United was a high-revenue but poorly run asset. The club had enormous commercial power, but too much of that power leaked away through wages, transfer mistakes, manager pay-offs, bloated headcount and inefficient operations. The 450 job cuts, cancelled ambassadorial contracts and other cost-saving initiatives have started to pay off.

For the nine months to March 2026, United generated £37.7m of operating profit, versus a £3.2m operating loss in the prior-year period. Adjusted EBITDA increased 29.0% to £187.5m. Management specifically pointed to operating cost and headcount reduction programmes, alongside improved Premier League performance.

6. The new stadium is a massive call option

A new stadium could transform the economics of the entire club. Approximately 33% more seats, more premium hospitality, more sponsorship inventory, better food and beverage, improved retail, more non-football events, possible naming rights, and a much better fan experience.

The Real Madrid comparison is extremely useful and shows a 100% uplift is possible. Real Madrid’s own 2024/25 accounts also said the first full cycle without construction restrictions saw recurring stadium capacity and commercial operations fully operating, and that excluding personal seat licence revenue, recurring capacity and stadium commercial operations were 38% higher than the prior year.

United’s massive fan base and iconic brand deserves a new and improved stadium that would be befitting of a club of its stature.

Bear Case

1. Public shareholders have zero control, and the Glazers have proven to be poor capital allocators

The Glazers’ supernormal voting rights mean that MANU Class A shareholders have no say in forcing a sale, demanding capital allocation discipline or any other matter. This is why the stock can trade below private-market value for a long time. The club may be worth $6B or $7B to a buyer, but if no control transaction happens, public shareholders only own a listed minority stake in a controlled company.

The Glazers have left the club with persistent debt, and paid themselves dividends while the club remains indebted and loss-making. For instance, in FY2022, they paid themselves £33.6m of dividends while also drawing £40m on its revolving credit facility. In the same year, net debt increased to £514.9m, finance costs were £62.2m, and the club made a net loss of £115.5m. United also had the most negative net transfer balance among big-five league clubs over a ten-season period, with a negative balance of more than €1B.

2. Debt is significant and does not appear to be decreasing

21 years after Malcolm Glazer loaded £550M of acquisition debt onto Manchester United's balance sheet, the club carries more financial obligation today than at the 2009 peak and there is no clear path to reduction.

Combined interest runs ~£68M per year against operating free cash flow that barely exceeded £70M in FY2025 before player investment. There is no deleveraging catalyst visible. The proposed 100,000-seat New Trafford will require ~£2B in additional financing. Every Champions League miss will deteriorate the debt-to-revenue ratio further.

3. United’s sporting performance is very volatile, and the financial model depends on it

United’s financial results are heavily tied to on-pitch outcomes. Broadcasting revenue, Matchday revenue, sponsorship visibility, merchandise sales and player costs all move with sporting performance.

FY2025 is a good example. Broadcasting revenue fell 22.0% YoY to £172.9m, mainly because United played in the Europa League rather than the Champions League and finished 15th in the Premier League versus 8th the year before.

This is a single source dependency and not exactly something that breeds confidence. Shareholders would therefore have to buy into an unknown future that is ever-changing.

4. The stadium upside may come with dilution or more debt

The stadium is the biggest call option, but it is also one of the biggest risks. United has only said work continues on the ambition to build a new 100,000-seat stadium, however there are huge question marks over the funding structure.

Real Madrid proves the revenue opportunity, but it also proves the capital intensity. Real Madrid’s stadium remodelling project had total investment of €1.347B by FY2024/25, with €1.132B of stadium project loan used.

For United, the bear concern is that stadium upside may be real but not necessarily equity-accretive for minority shareholders. If the project requires large new debt or dilution, the market may apply an even bigger discount.

5. Commercial strength is not immune to underperformance

I think one of the scariest threats to United is the prospect of its rivals overtaking them in terms of revenues and popularity. The chart below is an obvious sign. Ultimately, sponsorship and merchandise revenue depend on visibility, sentiment and relevance. If the club is not competing at the top level, commercial partners may still pay for the brand, but the highest-value deals become harder to justify.

In a relatively short 10 year span, United has seen many of its rivals catch up with its revenue numbers despite being ahead by at least 50-100%. Younger fans will naturally support more successful teams, and in the Premier League, those are Man City, Arsenal and Liverpool today. In fact, it has been the case for a decade now.

8. Concluding Thoughts (What I’m personally doing)

I'll start by acknowledging the obvious conflict of interest. I am a Manchester United fan, and I have been for most of my life. I've tried to write this as objectively as possible, but you should factor in that bias when reading my conclusions.

The honest answer is that this is not a clean investment. It does not fit into the typical framework of a business I like:

There is no clear earnings inflection, the debt is incredibly high, governance is structurally broken and free cash flow is negative.

Yet, I think there is a case to be had here for certain investors. The case is that you are buying a scarce global trophy asset at a discount to its private market value, with a credible near-term catalyst in the form of a Glazer exit. The June 2026 Bloomberg report on the family studying a full or partial sale is the most significant development for MANU equity in years.

A full Glazer exit to a well-capitalised buyer such as sovereign wealth, US sports money or a Middle Eastern consortium would retire the LBO debt, restructure governance, and likely unlock a re-rating toward private market value. Ratcliffe also paid $33 per share for his stake, about 50% higher than the price it now trades at.

There are of course, many risks that was just highlighted, largest of which is that the debt continues to accumulate, the Glazers stay in power and performances remain inconsistent.

Personally, I do not hold a position in MANU and do not intend to for the foreseeable future. That said, this has been a very eye-opening deep dive for me and one that I thoroughly enjoyed. I hope you learned something from this deep dive regardless of whether you decide to take the opportunity to invest.

Thank you for reading!

-Gab

Additional Content to Watch/Read:

If you’re interested in learning more about Manchester United stock, I would highly recommend these resources:

1. Manchester United Finances 2024/25 by SwissRamble Substack

2. Manchester United’s Stock: Valuing a Football Empire by The Intrinsic Value Podcast

3. Manchester United Deep Dives by UnitedPeoplesTV

If you enjoyed this and would like to read more deep dives by me, click on this link.

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If you know a football (soccer) supporter who you think would enjoy this, kindly share this article with them. It is completely free to read and I would be extremely grateful.

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Disclaimer: The content presented in this thesis is for informational and academic purposes only and does not constitute financial advice. The analysis and opinions expressed are based on research and should not be interpreted as a recommendation to buy, sell, or hold any security. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Their primary business model is renting GPU capacity to the most important companies in the world, with a client list including OpenAI, Meta, Anthropic, and Microsoft. Its largest shareholder after the founders is NVIDIA. Revenue grew 112% year-over-year in Q1 2026 to $2.08B and its contracted backlog is now $99.4B.

Yet, it carries $35B in debt, which resulted in a $536M interest payment in a single quarter while burning $4.71B in free cash flow within that same 3 month period. CAPEX guidance for 2026 is $31-35B, which is larger than the annual revenue of most S&P 500 companies.

The bull case for CoreWeave is that it is a generational infrastructure franchise that will be the key cog in the AI buildout.

The bear case is that it is an AI bubble proxy that rests on a handful of hyper-scaler contracts that could be re-negotiated or cancelled if demand falls.

In this piece, we will work through the key debate points and end with what I am personally doing and why.

Table of Contents

1. The Bear Case

2. The Bulls’ Counter to the Bear Case

3. The Bull Case

4. Conclusion: My View

1. The Bear Case

Let’s first start with the bear case, and understand it from the bears’ point of view.

1. GPU depreciation makes the economics look better than they are

CoreWeave reports adjusted EBITDA margins of 56-60%. Some bears argue that GPU hardware depreciates at approximately 30-40% per year as successive generations are released. On a $31-35 billion CAPEX programme, the depreciation charge flowing through operating income over the next 3-5 years will reach an estimated $7-12 billion per year by 2027.

If that holds true, the 60% EBITDA margin collapses to 7-8% at the adjusted operating income level. In essence, bears are arguing that the H100 cluster generating revenue today is partially obsolete the moment Rubin is deployed. They also argue that investors pricing CoreWeave on EBITDA are systematically ignoring a real economic cost embedded in the asset base.

2. The backlog is not a receivable

The $99.4 billion figure is reported under ASC 606 (U.S. GAAP Standard) as remaining performance obligations, which sounds unconditional. However, it is not a guaranteed number. Take-or-pay provisions vary by contract and some backlog includes customer options to expand that are included on a signed basis but represent customer rights, not CoreWeave’s receivables. CoreWeave does not disclose what proportion of the backlog is genuinely non-cancellable versus terminable with penalty payments.

3. The Training-to-Inference transition structurally impairs the business

CoreWeave’s architecture of bare-metal servers, InfiniBand fabric, dense GPU clusters is purpose-built for model training. Inference at scale, which is where the volume goes as AI products serve hundreds of millions of users, requires geographically distributed compute with low latency to the end user. AWS has 32 regions globally while Azure has 60+.

CoreWeave has 40 facilities, but they are primarily in the United States. For global consumer inference, that footprint is not enough to stay competitive. As the frontier AI labs shift from building models to running them at scale, the demand profile could migrate towards hyperscalers.

4. The leverage is permanent, not transitory

CoreWeave is paying around $2.1 billion of annual interest expense, which is roughly 17-18% of guided 2026 revenue. That is a real drag on equity holders, regardless of how exciting the top-line growth looks. The other issue is that the debt is not simple corporate debt. A lot of it is backed by GPUs, and GPUs are depreciating assets. Every time NVIDIA releases a new generation, the collateral value of the older GPUs falls. That matters because CoreWeave will need to refinance a large part of this debt in 2027-2028.

If the company enters that refinancing window without proving it can generate real free cash flow, lenders are not going to underwrite it cheaply. They will price in the uncertainty through higher spreads, tighter terms, or both.

2. The Bulls’ Counter to the Bear Case

1. GPU depreciation makes the economics look better than they are

The bull counter is that bears may be treating GPU depreciation too harshly. While H100s and Blackwell’s will be less valuable once Rubin and future generations are widely available. However, that does not mean previous generations become worthless overnight.

Older GPUs can still be used for inference, fine-tuning, enterprise AI workloads, batch processing, rendering and lower-priority compute. In a world where AI demand continues to outstrip available power, data-centre capacity and advanced GPUs, the useful life of older chips could be longer than bears assume.

CoreWeave itself depreciates technology equipment over six years, after changing its estimate from five to six years in 2023. That does not prove the economic life is six years, but it shows management is assuming a much longer life than the 30-40% annual obsolescence bear case implies.

In recent months, we have gotten more evidence that GPUs can run workloads for much longer than bears are predicting, and still earn attractive revenue even after new and future architectures are widely available.

1. NVIDIA’s own vGPU lifecycle docs state that supported GPUs usually come with an OEM hardware warranty of around 3 years, and NVIDIA’s software support lifecycle can extend beyond the first full-support period through extended full support and maintenance support phases. That tells us these GPUs are not designed to become unusable after one generation.

2. Second, hyperscalers generally use multi-year depreciation lives for servers and networking equipment. Microsoft moved server and network equipment useful lives from 4 years to 6 years in FY2023. Alphabet also moved servers and certain network equipment to 6 years in 2023.

3. Older GPUs are still commercially useful. AWS still lists P3 instances with NVIDIA V100 GPUs, even though V100 launched back in 2017. AWS also still offers A100-based P4 instances (launched in 2020), while Google Cloud and Azure still list A100-based GPU products. As we know, data center space and power capacity are one of the crucial bottlenecks today. If these old GPUs weren’t profitable to operate, and if they were dragging down margins, why would the 3 hyperscalers not replace them?

4. xAI built phase one of Colossus I with 100,000 H100 GPUs. This was despite H200 having already been released and right before the launch of the B200. Why did Elon decide to choose the H100, despite the H200 being available?

Gavin Baker also made a very good point on the recent “Invest Like The Best” podcast, where he argued that disaggregating prefill and decode could extend GPU useful lives from the 3-4 years many lenders were underwriting to something much longer. In his framing, you could put a specialised inference system in front of Hopper or Ampere capacity, use those older GPUs for the phase where they still perform well, and extend the useful life of the asset materially.

If this is true, it would change the CoreWeave debate pretty meaningfully. The bear case assumes that GPUs become obsolete in 2.5 to 3 years. The bull case is that software, workload routing and inference architecture can extend the monetisable life of the hardware. In that scenario, the useful life of a GPU is not just determined by NVIDIA’s product cycle, it will also be determined by how well the market can reallocate older chips into the right workloads.

This would also matter for financing too. If lenders and the market believes that older GPUs can remain cash-generative for much longer, then collateral values improve, financing rates come down, and the entire AI infrastructure build-out becomes easier to fund.

2. The backlog is not a receivable

I believe the bears have a very good point here and it is also one of the core concerns I have.

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The MSCI Emerging Markets Index returned 33.6% in 2025, ahead of the S&P 500 at 17.9% and the MSCI World at 21.1%. EM ex-China did slightly better at 34.6%.

The index has carried that momentum into this year and is up ~25.6% YTD. Pretty much every strategist desk from JP Morgan to Lazard to State Street has been publishing constructive notes on EM since January.

Typically, when we see consensus like this, the chart has already played out and the easy money is often behind us, not in front of us.

The truth is that when we look deeper into the EM indexes, most people who say “I am bullish on emerging markets” do not know what they are actually buying. The MSCI EM Index is now ~40% concentrated in its top ten names, and TSMC alone is more than 14% of it. When we add the rest of the Taiwanese and Korean semiconductor complex, the EM index is in large part, a leveraged bet on global AI capital expenditure.

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The Other Side

However, the headline EM number hides a much more complicated story underneath.

On one side sits North Asian semiconductors and memory names like TSMC, SK Hynix and Samsung Electronics that have run incredibly hard on the AI build out. The forward returns for these businesses are now hostage to the same CAPEX revisions that govern Nvidia, Micron, Broadcom and others.

On the other side sits the structural EM story, which I believe has legs and a massive secular tailwind in the decades to come. These are typically businesses that operate in truly developing economies, the likes of Vietnam, Thailand, Indonesia, Brazil and Argentina. These businesses are levered to local consumption, financial inclusion, and demographics.

While the semis half of the story re-rated higher, several of the best domestic-demand compounders went the other way. They de-rated hard, through late 2025 and the first half of 2026. For instance:

• Sea Limited has fallen from a high of $199 in October 2025 to ~$85 today, marking a ~60% drawdown despite posting three of its best quarters since.

• Mercado Libre is down around 22% year to date and trades below its own 52-week low set last year, despite posting 49% revenue growth, its fastest since Q2 2022.

• Grab sits near its 52-week low around $3.50, down roughly 28% over six months, while revenue grew 24% and adjusted EBITDA grew 46%.

• Nubank is down over 26% YTD, after a quarter with record revenues of $5B (up 53% YoY) and $871M in net income.

• dLocal is down 8% YTD despite accelerating TPV growth and its re-investment cycle coming to end.

Why I Believe The Other Half Will Re-Rate

There are four main reasons behind this.

1. The Iran war ending, and oil normalising with it.

The war that began on 28 February choked the Strait of Hormuz, through which roughly a fifth of the world's oil flows, and drove Brent toward $112 with Dated Brent spiking above $140.

Just a few days ago, the US and Iran reached a deal to end the war and reopen the strait, with formal signing set for 19 June in Switzerland. Crude is already back near $92, down around 20% from its 2026 peak.

Southeast Asia is a bloc of net oil importers, so the single largest macro pain of the last four months, imported inflation forcing local central banks to stay hawkish, is now reversing.

As the strait reopens and oil grinds back toward its pre-war equilibrium in the high-$50s to $60, that will be dis-inflationary for Indonesia, the Philippines, Thailand and Vietnam. This also gives central banks in the region the flexibility and option to cut, which feeds consumer spending and lowers funding costs for the digital lenders.

2. The earnings gap.

Consensus expects EM earnings growth in the high teens to around 20% for 2026, against roughly 13% to 15% for the US and developed markets.

However, the businesses I’m highlighting today are growing revenue at two to three times that index pace. Sea grew revenue 47%, Mercado Libre 49%, Grab 24%, Nubank 53% and dLocal 55%. The market can ignore the fundamentals for a year or two, but not forever.

What is the catalyst? I believe we are seeing a return-on-equity convergence, and that is crucial because it makes a re-rating permanent rather than a short-term trade. Return on equity is simply how much profit a company generates for every dollar of shareholder capital it holds, the cleanest single measure of how well a business compounds your money.

EM companies have historically earned a lower return on equity than their developed-market peers, and that gap is now narrowing as EM returns rise toward developed-market levels. One of the clearest signs of this playing out is that buybacks are becoming standard across these exact names.

Sea Limited:

• $1 billion buyback programme announced on 17th Nov 2025

• $168.4M exercised at average price of $93.55 per share as of Q1 2026

Nubank:

• $1 billion buyback programme announced on 4th June 2026

• Programme runs for 12 months from 4th June 2026 to 3rd June 2027

dLocal:

• $300 million buyback programme announced on 18th March 2026

• Permanent dividend programme, paying out 30% of FCF each year

Grab:

• $500 million buyback programme announced in February this year

• $400 million execution over 4 months ($250M ASR with JPM + $150M CFP with MS)

Governance and capital discipline are improving. I believe this will lead to a permanent re-pricing of high quality emerging market businesses.

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3. The rotation out of the AI trade.

The AI trade has been the story of much of 2025 and all of 2026. Most of the deals have been led by the hyperscalers who have poured in billions in CAPEX and are expected to continue. However, there will be a physical limit to this eventually, as CAPEX guidance is beginning to run ahead of operating cash flow and free cash flow is heading negative. CAPEX revisions cannot keep ratcheting up indefinitely.

The moment those revisions stall, the optionality premium attached to anything AI-adjacent deflates, and a very large pool of capital will have to start looking for a new home.

The 2025 and 2026 YTD EM rally was substantially the semiconductor and AI complex. Globally, quality compounders have seen huge outflows and underperformance. I believe this will reverse soon, and benefit from a massive re-rating.

4. The dollar is the single largest driver of EM returns.

Emerging market debt is substantially dollar-denominated, commodities are priced in dollars, and for a foreign holder the entire return is translated back through the exchange rate.

When the dollar rises, EM is paying down hard-currency debt with depreciating local currency, importing inflation, and handing the foreign investor a currency loss on top of everything else.

When you look at the chart above, there is a near perfect inverse correlation between DXY (in candles) and EM (in blue). Cheap valuations did nothing for EM for over a decade (2011 to 2020) because the dollar was against the asset class the entire time.

The key catalyst is the dollar turning, and it has turned. There have indeed been several false dawns in the past decade. However, this time, there are 3 independent forces pushing the same way:

1. Cyclically, the Fed is easing, which narrows the rate differential that supported the dollar.

2. Structurally, the world is de-dollarising: the dollar's share of global reserves has fallen from about 71% in 1999 to around 56 to 57% by 2025. Emerging-market central banks cut their dollar holdings from 68% to 52% between 2013 and 2024.

3. Politically, a weaker dollar is the explicit aim of US policy under this administration, which views dollar strength as an obstacle to its trade agenda and is leaning on the Fed through a dovish chair willing to prioritise jobs over the inflation mandate.

Conclusion

I believe there are really two emerging-market trades today.

The first is the trade everyone already owns: Taiwan, Korea, semiconductors, memory, AI capex, and everything downstream of that cycle. That trade has worked incredibly well, but it is now crowded, consensus, and increasingly dependent on the next round of AI CAPEX revisions.

The second is the trade people are currently ignoring. High-quality domestic-demand compounders in genuinely developing markets.

There are massive secular tailwinds and structural growth in EM that reside in domestic demand. The best domestic-demand businesses have been left behind because they don’t fit the current narrative.

I can’t promise that these names will re-rate next quarter, but there are very real catalysts and reasons for them to perform incredibly well in the next few years. Assets typically bottom when nobody is buying and it feels dead. I believe that time is now.

Thank you for reading!

-Gab

Disclaimer: The content presented in this thesis is for informational and academic purposes only and does not constitute financial advice. The analysis and opinions expressed are based on research and should not be interpreted as a recommendation to buy, sell, or hold any security. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

I think the next phase will increasingly move into the physical world.

As AI moves from pure software into real-world applications, a different set of companies should start to matter.

These are not necessarily the companies building the models themselves, but the ones providing the infrastructure, tools, and enabling layers that allow AI to be deployed outside controlled digital environments.

If the next decade of AI is increasingly about connecting intelligence to the physical world, I think this company gives me an interesting way to express that view.

I’ve raised 16% cash in the past month to deploy opportunistically in certain opportunities, and I believe this may be one of the more important thematic bets in my portfolio.

In this article, I’ll cover the business and share why I am starting a position now.

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As many of you know, I’ve been covering Sea Limited for a long time and have built up a fairly deep understanding of the business over the years.

Along the way, I’ve maintained various documents tracking different parts of the company: Shopee, Garena, Monee, financials, market share data, segment KPIs, and broader industry developments.

Over the past month, I decided to consolidate all of that into one comprehensive spreadsheet, or more specifically, a Google Sheets dashboard.

This dashboard contains 15 separate tabs, covering everything from the income statement and balance sheet to more granular operating data across Shopee, Garena, and Monee. It also includes what I personally find to be some of the most useful data points for understanding Sea: e-commerce market share, food delivery market share, and other segment-level KPIs that help track the real progress of the business.

The dataset goes all the way back to 2015, two years before Sea went public, and includes both quarterly and annual data where available. I’ve also tried to include information that is not typically found on financial aggregator websites, but is instead buried in 20-F filings, earnings calls, investor presentations, and other company disclosures.

The goal of this dashboard is to create a single place where investors can track Sea’s business evolution properly, moving beyond just the headline numbers and looking at the actual drivers of the business.

Sea is not an easy company to analyse from surface-level numbers alone. The group has multiple moving pieces across e-commerce, gaming, digital financial services, logistics, advertising, credit, and food delivery.

For example, Shopee’s reported revenue only tells part of the story. To really understand the business, we need to track GMV, take rate, order growth, monetisation, logistics strategy, advertising revenue, competitive intensity, and market share across Southeast Asia, Brazil, and other markets.

Monee is also becoming increasingly important. As the credit business scales, investors need to pay attention not only to revenue and EBITDA growth, but also loan book size, non-performing loans, user penetration, and how Sea is balancing growth with credit risk.

This will also be a working document. I plan to update it every quarter as Sea reports earnings and as more data becomes available. Over time, I expect the dashboard to become more useful as the historical dataset deepens and more segment-level trends become visible.

I’m also open to feedback. If there are additional metrics, charts, or datasets that would make the dashboard more useful, I’m happy to consider adding them.

For now, I hope this serves as a helpful resource for anyone trying to understand Sea Limited at a deeper level.

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Today, we’re diving into the largest IPO in history. On 20 May 2026, Space Exploration Technologies Corp. (or SpaceX for short) filed its S-1 with the SEC, formally kicking off the road to what is expected to be a 12 June 2026 listing on NASDAQ under the ticker $SPCX.

Reuters and WSJ are pegging the targeted valuation at $1.75T to $2T, with an intended raise of approximately $75B.

This is a massive raise, and to put it in context:

• It would be ~3x the size of Saudi Aramco’s 2019 IPO, the previous record

• SpaceX would instantly be one of the top 8 most valuable companies in the world

• The synthetic SPCX-USD contract on Hyperliquid is implying a $2.2T valuation

SpaceX reported $18.7B in revenue in 2025, with the proposed $1.75T valuation implying 94x P/S.

The counter-argument would be that SpaceX is three massive businesses, with huge addressable markets. In this piece, we will work through the growth prospects of each segment, determine what the moats are, whether they are truly differentiated and defendable, and most importantly, determine a fair value for the business.

Table of Contents

1. Introduction

2. Company History

3. Business Model

4. Value Proposition

5. Product Offerings

6. Moats & Differentiation

7. Market Context & Industry Positioning

8. Competitive Landscape

9. Financials

10. Ownership & Management

11. Valuation

12. Bull and Bear Case

13. Concluding Thoughts (What I am personally doing)

1. Introduction

Most of us know the founding story of SpaceX, about how Elon tried to purchase ICBMs from the Russians. But for the benefit of those who don’t, here’s a very short backstory.

If you tried to ship something into orbit in 2002, you had two real options, pay Boeing or Lockheed in the US, or pay the Russians. The price was about $18,500 per kilogram to LEO (Low Earth Orbit). The industry had not had a serious cost innovation in 30 years, and the rockets were expendable.

Basically after each launch, the rocket would be disposed of. Imagine flying for a holiday and the plane you were travelling in gets disposed of immediately after. That was the launch industry barely 20 years ago.

SpaceX broke that and set off a new space race that we haven’t seen since the Cold War in the 60s. SpaceX’s Falcon 9 in 2010 reduced the cost to orbit by 85%, dropping payload prices to $2,700 per kg. With Falcon Heavy in 2018, it fell by another half to $1,400 per kg. (The numbers above show the latest vintage cost per kg by year, not the first-version cost, and with reuse maturing + economies of scale, costs have come down massively.)

Starship is SpaceX’s latest launch vehicle that is designed to be fully reusable and is described as a super heavy-life launch vehicle. In documents from Voyager, we found that SpaceX charged just $90M for usage of Starship, which can reportedly support a 150-ton payload. At those numbers, it would equate to a cost per kg of $600.

In about 2 decades, SpaceX has reduced the cost to orbit by 97%. Almost every other business SpaceX has built since exists because of this launch cost collapse:

• Starlink would have been economically impossible without Falcon 9 reusability. Even today, 73% of SpaceX’s Falcon 9 launches in 2025 were dedicated to deploying its own satellites (165 launches, only 43 for external customers).

• Starlink Mobile (direct-to-cell) sits on top of Starlink.

• Orbital AI compute, which is the headline ambition in the S-1, is only economically viable if Starship works at scale and reduces launch cost by another 99%.

• The lunar economy and Mars are entirely dependent on Starship.

Hence, when we evaluate SpaceX as a business, we are basically evaluating a stack with Starship at the bottom, Starlink in the middle, AI compute at the top with X, Grok, Macrohard, Cursor and Terafab layered on.

2. Company History

SpaceX was founded in March 2002 by Elon Musk, who put in $100M of his PayPal exit proceeds. The original founding team also included Tom Mueller (propulsion), Gwynne Shotwell (who joined in 2002 as VP of Business Development and is now President & COO), and a small group of engineers Musk recruited largely from TRW, Boeing, and JPL.

The early years were brutal, as to be expected for a business attempting to do the impossible. The first launch vehicle, Falcon 1 failed three times between 2006 and 2008, and SpaceX was reportedly weeks from insolvency before the fourth attempt succeeded in September 2008.

The same year, NASA awarded SpaceX a $1.6B Commercial Resupply Services contract, which kept the company alive.

What followed was a 17-year run of step-function milestones.

Timeline Highlights:

• 2002: SpaceX founded by Elon Musk in El Segundo, California

• 2006: First Falcon 1 launch (failure)

• 2008: Falcon 1 reaches orbit (first private liquid-fuel rocket to do so); NASA awards $1.6B CRS contract

• 2010: Falcon 9 first flight: Dragon becomes first private spacecraft recovered from orbit

• 2012: Dragon docks with the ISS, first private spacecraft to do so

• 2015: First successful Falcon 9 booster propulsive landing, “the impossible thing”

• 2017: First re-flight of a flight-proven Falcon 9 booster

• 2018: Falcon Heavy maiden flight, putting the Tesla Roadster into solar orbit

• 2019: First Starlink launch (60 satellites)

• 2020: Crew Dragon Demo-2: first private company to fly humans to orbit

• 2023: First Starship integrated flight test; SpaceX launches >80% of global mass-to-orbit

• 2024: First successful “chopstick” booster catch at Starbase

• March 2025: xAI acquires X (formerly Twitter), valuing the combined entity at ~$113B

• July 2025: SpaceX invests $2B into xAI as part of a $5B equity round

• December 2025: SpaceX completes secondary at ~$800B valuation (per Bloomberg)

• Feb 2, 2026: SpaceX acquires xAI in all-stock deal: xAI now SpaceX’s AI segment

• March 2026: Terafab announced with Tesla (Intel joins April 2026); SpaceX Bridge Loan of $20B signed with Goldman

• April 2026: Cursor compute & option agreement signed (implied $60B equity value)

• May 12, 2026: FCC approves $17B EchoStar spectrum acquisition for V2 Mobile

• May 2026: Anthropic Cloud Services Agreement signed: $1.25B/month through May 2029 (~$45B total)

• May 20, 2026: S-1 filed

The two most important recent events on this timeline are the xAI merger and the Anthropic deal, both of which I will keep coming back to.

3. Business Model

SpaceX now reports three operating segments. The simplest way to think about the business is as three businesses stacked vertically, with the Space segment at the foundation enabling the rest.

Space (22% of 2025 revenue, $4.086B)

This is the legacy launch business, of which the launch vehicles are Falcon 9, Falcon Heavy, and (soon) Starship. Dragon is the reusable capsule that sits on top of a rocket and holds up to 8 people and thousands of kilos of cargo. The Space segment sells launch services to commercial customers, the U.S. government (~20% of total SpaceX revenue), and other governments.

The key thing to understand here is that the Space segment’s reported revenue dramatically understates its strategic value. Of 165 Falcon 9 launches in 2025, only 43 were for external customers.

The other 122 launched Starlink satellites. Those internal launches don’t generate Space segment revenue, as they get capitalised into the Connectivity segment (discussed later). Space, in other words, is partly a captive launch vehicle for Starlink and for orbital AI compute in the future. Reported Space revenue is essentially what is left over after SpaceX feeds itself.

Connectivity (61% of 2025 revenue, $11.387B)

This refers to Starlink, the main revenue and profit driver for the business today. Starlink is a satellite internet constellation that provides global mobile broadband and the nascent Starlink Mobile direct-to-cell business.

As of March 31, 2026, Starlink has the following traction metrics:

• ~9,600 broadband and mobile satellites in LEO (≈75% of all active maneuverable satellites in orbit globally)

• 10.3M Starlink Subscribers across 164 countries (up 105% YoY from 5.0M)

• 7.4M monthly unique devices on Starlink Mobile across 30 countries

• Median peak download speed: 225 Mbps; median latency: ~25 ms

  • For reference, the typical global fixed broadband speed is ~95 Mbps with 30-50 ms latency while US fixed broadband speed is ~290 Mbps with 15-30 ms latency.

  • However, the target market for Starlink is the rural customer who might be on 25 Mbps in the US, or an Indonesian customer outside Java with no fixed line at all. 225 Mbps / 25 ms is transformational for many.

• ARPU: $66/month (down from $86/month a year earlier as the subscriber mix shifts to lower-priced international tiers and lower-ARPU developing markets)

~60%+ of Connectivity revenue is from consumer subscribers, the rest from enterprise and government. It is key to note that ARPU is declining quite fast, although margins continue to expand because of network density (no marginal cost to serve).

AI (17% of 2025 revenue, $3.201B)

This segment was bolted on in February 2026 via the xAI merger and includes:

• Compute infrastructure: COLOSSUS + COLOSSUS II, ~1 GW of nameplate compute in Memphis, TN

• Grok: xAI’s frontier model (Grok-4 currently deployed, Grok-5 in training)

• X: Social platform with ~550M MAUs and 350M daily posts

• Recent additions: Cursor (via option), Macrohard (co-owned with Tesla), the future Money Product

The key here is probably the Anthropic deal that was announced just a couple weeks ago. Anthropic has been extremely low on compute for several months and have therefore enforced sudden throttling and dynamic 5-hour session limits during peak hours. As such, Anthropic signed a $1.25B per month (once fully ramped) deal through May 2029 with xAI for access to COLOSSUS I. This equates to $15B yearly, which is 80% of SpaceX’s 2025 revenues. It is a massive deal.

That said, there is certainly room for concern. The deal states that either party can cancel the deal with 90-days notice. With the massive ramp up in compute, it is a possibility that Anthropic finds other available compute and decides to cancel the contract prematurely, especially as it would prefer to avoid funding a direct competitor.

This translates to 300+ MW of compute capacity with 220,000+ NVIDIA GPUs that will ramp to full utilisation within this month. At these prices, Anthropic is paying about $50M per MW per year, which stacks against Neoclouds that are charging ~$10-12M per MW per year, a whopping 4x premium.

Basically, Anthropic is paying a major scarcity premium for immediate, large-scale, contiguous AI compute. This may seem irrational, but due to the demand for compute being excessive at the moment, they seemingly have no other option.

This does, however, say something about Grok. Clearly, the demand for compute at Grok has been lackluster hence them being willing to rent out the whole Colossus I cluster to Anthropic.

4. Value Proposition

SpaceX’s pitch is fundamentally about owning the physical stack of the future: launch, satellites, energy, chips, compute, models, and applications, all under one roof.

Firstly, space is the next frontier not just for exploration but also for infrastructure. With Falcon 9 reusability already in production and Starship targeting another 99% cost reduction, things that were uneconomical 5 years ago are becoming economical. The most obvious example is global broadband from LEO. The next examples are direct-to-cell and orbital AI data centers.

Secondly, AI is becoming compute-bound and energy-bound. Reasoning models can be 10-100x more compute-intensive per query than chat. Inference is growing 2x+ faster than training. Meanwhile, US electricity generation has grown at less than 3% annually since 2023 while AI data center demand has roughly tripled. The Sun produces 99.8% of the solar system’s energy and if compute can be put in Sun-synchronous orbit, you will be able to bypass the terrestrial grid bottleneck entirely. Of course, making this happen is a multi-year or even multi-decade challenge.

Thirdly, SpaceX is uniquely positioned to capture this. They already build, launch, and operate the world’s largest satellite constellation, and also operate the largest coherent AI training cluster on Earth. They are building a chip fab (Terafab) with Tesla and Intel, while owning one of the four frontier models (Grok), and a major distribution channel (X). Recently, their purchase of Cursor, which is the most engaged developer workflow also fits seamlessly in this.

5. Product Offerings

A. Launch Vehicles

Falcon 9 (Fully Operational)

• This is the workhorse. Two-stage system with a reusable first stage.

• 23 metric tons to LEO when fully expendable, ~17.5 tons reusable.

• ~620 launches as of March 31, 2026 with >99% mission success.

• Boosters now demonstrated to re-fly 34 times.

Falcon Heavy (Fully Operational)

• Partially reusable super heavy-lift.

• 64 metric tons to LEO. 11 launches with 100% success rate.

• Used for the most demanding missions (NSSL heavy, Europa Clipper, Psyche).

Starship (Active Testing & Development Phase)

• Fully reusable super heavy-lift.

• Designed for 100+ metric tons to LEO in reusable mode (vs. ~150 tons fully expendable).

• 33 Raptor engines on the Super Heavy booster + 6 Raptors on the upper stage.

• This is the biggest and most important bet. Starship is in active testing and has done 12 test flights so far. The most recent was just last week, the first of its V3 iteration that was launched from Starbase.

• It ⁠deployed a clutch of mock satellites and executed a controlled splashdown of the spacecraft in the Indian Ocean. But it failed to achieve a controlled landing ​of the Super Heavy booster, which tumbled into the Gulf of Mexico.

If Starship works as intended (full reusability + airline-like turnaround), SpaceX will be targeting multiple launches per day per pad. Currently, Starship is the largest and most powerful of the heavy-lift rockets, easily towering over competitors.

B. Spacecraft

Dragon

• Sends crew and cargo to LEO and the ISS.

• 78 crew members from 20 countries flown since 2020.

V1 Mobile

• Direct-to-cell satellites (~650 in orbit).

• Provides SMS, light data, and OTT voice today.

V2 Mini

• Current broadband satellites.

V3

• Next-gen broadband, 1 Tbps downlink per satellite, 60 deployable per Starship launch (vs. ~22 V2 Minis per Falcon 9).

• Expected to be deployed in H2 2026.

V2 Mobile

• Next-gen direct-to-cell with full 5G NR-NTN compliance.

• Targeting 2027 deployment on Starship.

• Requires the EchoStar spectrum to close (Nov 2027 expected) and handset manufacturer adoption of new RF front-ends.

C. AI Compute

COLOSSUS I

• 130 MW initial cluster brought online in 122 days, ~100,000 H100s. Currently, Colossus I has over 300 MW of capacity, with 220,000 NVIDIA GPUs, consisting of a mix of H100, H200 and GB200 accelerators.

• This is currently rented out to Anthropic for $1.25B per month.

COLOSSUS II

• Memphis + Southaven, MS. Combined ~870 MW. Initial 110,000 GB200 cluster brought online in 91 days with a follow-on 110,000 GB300 cluster in 64 days.

• Future expansion: +220,000 GB300s and +400 MW. This is currently training Grok-5.

Combined: ~1 GW of coherent compute today, with line of sight to multi-GW.

Terafab

• Chip manufacturing JV with Tesla and Intel.

• xAI is targeting 1 terawatt of compute hardware per year.

• This however, is extremely aspirational and is a far stretch today.

D. Software & Models

Grok

• Grok-1 was launched in Nov 2023 with Grok-4 currently in production. xAI is training Grok-5 using Colossus II.

• While Grok is a capable model, it is still behind the leading frontier labs: OpenAI and Anthropic.

SuperGrok, SuperGrok Heavy, SuperGrok Lite: Consumer Subscriptions

Grok Business, Grok Enterprise, xAI Gov: B2B Subscriptions

Grok API: Developer Access

Imagine: Image/Video Generation

Grok Voice: Real-time speech.

Macrohard: Early-stage AI workflow platform being co-developed with Tesla.

E. Future / Speculative

As with every Elon company, there is a long list of potential businesses in play. These are some that have been listed in the S-1.

• Orbital AI compute (target deployment from 2028)

• Lunar mass driver (electromagnetic launch from the Moon)

• Money Product on X (payments + banking)

• Asteroid mining, in-space manufacturing, lunar/Mars passenger transport

6. Moats & Differentiation

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S&P 500: +5.15%
NASDAQ: +8.43%

May was a strong month for the indexes, not least led by semis and tech, as we have become accustomed to.

The MAG7 was up strongly, AAPL up 15%, TSLA up 14%, MSFT up 10%. Of course, the real strength was in the AI/Semi/Compute trade (AMD +45%, MU +87%, DELL +101%, QCOM +39%). Interestingly, we also saw some rotation to software (!), who would’ve guessed it?

CRWD and FTNT were up 64% each, NOW up 40% and DDOG up 87%. Incredible numbers for stocks that got sold off just a couple months back as the entire market seemingly believed Anthropic was eating all of software up.

However, this did hide a lot of weakness in other sectors of the market. Financials, Consumer Defensive, Energy and Utilities were notably weak. It was by no means a perfect month for the index. However, due to the relatively larger weighting of tech and semis in particular, we of course saw the index continue climbing.

SPY is now up nearly 11% for the year while QQQ is up over 20%. This is of course following a weak March and April where stocks tanked and the indexes were down 7-8% respectively for the year. This is a remarkable turnaround that I cannot claim to have foreseen.

Portfolio Performance (Since Inception)

(Portfolio Inception Date: 27th October 2023)

Portfolio: +188.08%

S&P 500: +83.22% (Outperformance: +104.86%)

NASDAQ: +118.23% (Outperformance: +69.85%)

Portfolio Performance (YTD)

Portfolio: -3.08%

S&P 500: +10.73% (Underperformance: -13.81%)

NASDAQ: +16.34% (Underperformance: -19.42%)

Portfolio reviews are exclusively for paid subscribers. If you would like to gain access to my portfolio holdings, deep dives, and tons of other articles, do consider subscribing.

I post several articles per month, ranging from extensive 50-60 pager deep dives on the most interesting businesses I can find, to shorter articles on valuations, market musings and specific verticals/geographies.

In the past month, I’ve shared these articles with subscribers:

Free subscribers get access to posts too, of course, with free earnings reviews and occasional articles.

In the next few segments, I discuss my general thoughts on the market, portfolio companies, performance, portfolio allocation and portfolio changes.

General Thoughts on the Market & Performance

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EPS: $0.70 v $0.77 🔴

Sea Limited reporting earnings on 12th May before the market open.

The stock closed the day up 13%.

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Selected Key Metrics

Total Gross Profit: $3.145B (+40.7% YoY)
Total Net Income: $438.22M (+6.7% YoY)
Total Adjusted EBITDA: $1.034B (+9.3% YoY)
Cash & Cash Equivalents: $11.1B (up from $10.3B in Q1 2025)

E-Commerce (Shopee)

Gross Orders: 4.0B (+29.3% YoY)
GMV: $37.3B (+30.2% YoY)
Revenue: $5.1B (+45.1% YoY)
Adjusted EBITDA: $223.2M (-15.5% YoY)

Digital Financial Services (Monee)

Consumer & SME Loans Outstanding: $9.9B (+71.3% YoY)
Revenue: $1.2B (+57.8% YoY)
Adjusted EBITDA: $275.2M (+14.0% YoY)

Digital Entertainment (Garena)

Bookings: $931.4M (+20.1% YoY)
Revenue: $696.6M (+40.6% YoY)
Adjusted EBITDA: $573.6M (+25.2% YoY)
Quarterly Active Users: 666.5M (+0.7% YoY)
Quarterly Paying Users: 72.6M (+12.4% YoY)
Quarterly Paying User Ratio: 10.9% (vs 9.8% in Q1 2025)

Share Repurchase Program

Repurchased 1.8M shares for an aggregate of $168.4M = $93.55 per share

Sea Limited saw a massive top-line beat, beating estimates by over 10%. The bottom-line missed, but again, this was to be expected as the focus is on investing in logistics and Shopee VIP to maintain its lead. More on this later.

As I’ve discussed often, my base case is >20% growth for the decade to come. Growth has only accelerated since. All 3 segments are growing top-line over 40%, which is absolutely incredible to see. I continue to think this is one of the most asymmetric investments in the market.

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Table of Contents

1. Shopee (E-Commerce)

2. Monee (Digital Financial Services)

3. Garena (Digital Entertainment)

4. Management Commentary

5. Concluding Thoughts

1. Shopee (E-Commerce)

Shopee’s GMV hit a new all-time high this quarter, making it the 8th consecutive quarter of growth. Sequential growth of $700M is especially impressive considering seasonality of Q4 to Q1. In addition, monthly active buyers were up 16% YoY and monthly average purchase frequency grew around 12% YoY. So before even considering average order value, Shopee’s buyer activity implies roughly 30% YoY growth in purchase occasions. This shows habit formation is increasing.

Management reiterated guidance of 25% GMV growth, which I expect to be hit relatively easily. As we can see, GMV growth has maintained over 20% for the past 10 quarters, a huge feat in itself.

Shopee’s GAAP take rate continued to climb, up to 13.7% this quarter.

A large reason for the 13% stock price increase was this slide. Adj. EBITDA margin as % of GMV appears to have stabilised at 0.6% following the previous quarters’ drops.

Management reiterated their guide for “full year adjusted EBITDA no lower than that of 2025 in absolute dollar terms”.

The reason for the slowdown in Adj. EBITDA growth is of course due to the Shopee VIP program that has been a huge success. So far, member growth has been exponential:

• Q1 2025: 1M members

• Q2 2025: 2M members (+100% QoQ)

• Q3 2025: 3.5M members (+75% QoQ)

• Q4 2025: 7M members (+100% QoQ)

• Q1 2026: 10M members (+43% QoQ)

Despite the rapid growth in VIP members, it represents just 2.5% of the entire active user base of Shopee (400M people). Incredibly, these 2.5% of users make up ~20% of total GMV, as revealed by management. This implies that VIP members spend on average 9.75x more than non-VIP members.

Shopee Ads

In Q1 2026, ad revenue grew 80% YoY and ad take rate increased by over 90bps. Ad-paying sellers and their average ad spend both increased by ~35% YoY.

This was an inflection in growth from Q4 2025 which I mentioned in the previous earnings report was something I expected. Ads continue to be a key contributor to the bottom-line and will get larger over time.

Shopee Logistics (SPX Express)

In Indonesia, Shopee’s instant delivery order volumes grew over 35% YoY with cost per order reducing ~20% YoY in Q1 2026. This is the shift towards quick commerce that I have been discussing. and I wrote a full length article (FREE) on this that discussed how China’s quick commerce landscape was moving to Southeast Asia. Shopee happens to be at the bleeding edge of it:

Management also noted that fulfilment order volumes grew ~25% QoQ in Q1 2026. In Asia, over one third of parcels fulfilled by SPX Express were delivered within the next day in March.

Shopee VIP Program

As we discussed earlier, the Shopee VIP program is front and center of focus now. Management shared that VIP members total over 10 million, growing over 40% QoQ, with program retention averaging over 80%.

This is extremely impressive and only possible due to Monee’s capabilities. Management discussed that for a paid VIP programme, the hard part is not only convincing users to subscribe. It is getting the subscription to renew successfully every month.

In markets with high credit-card penetration, this is easier because the card just gets charged automatically. But in Shopee’s markets, many users do not have credit cards, so subscriptions can fail when moving from one month to the next.

Chris Feng said Shopee solved this by working closely with Monee to create a smoother payment process for Shopee VIP. As a result, Indonesia’s VIP renewal rate improved from around 40% to 70% over the past few quarters.

2. Monee (Digital Financial Services)

Monee continued with yet another record quarter of loans principal outstanding. Its loan book grew ~70% YoY to $9.9B while the NPL ratio held steady at 1.1%.

There are now over 38 million active credit users on the platform, up more than 35% YoY. Average loan outstanding per user also grew to ~$250 at the end of the quarter, up 25% YoY.

Brazil has become the 4th market to cross $1B in loan book size, growing over 250% YoY. As we can see from Mercado Pago’s numbers in the region, Brazil is certainly a massive market for growth.

Brazil is still very early in Shopee’s FinTech monetisation curve. SPayLater GMV penetration is only ~10% in Brazil, well below mature Shopee markets. This suggests that Brazil has much room to grow. SPayLater usually increases conversion rate + basket size + purchase frequency + retention, which is a natural flywheel for Shopee.

GAAP revenue for the quarter came in at $1.24B. Adjusted EBITDA continued climbing, to $275M for the quarter.

The key to watch here is off-Shopee momentum. Management shared that following strong momentum in Malaysia, they are also seeing good traction in Thailand and Indonesia, with off-Shopee SPayLater loans in both markets exceeding 20% as of end-March.

There is also strong growth in higher-value categories such as electronics and two-wheelers in Indonesia, where instalment credit plays a meaningful role in enabling such purchases.

Again, the major worry I have here is off-book loans. They are growing very slowly compared to on-book loans. This will take time, as 3rd party financial institutions are difficult to convince, typically requiring default history across economic cycles, regulatory approvals in each individual market, and a minimum track record on the specific product.

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3. Garena (Digital Entertainment)

Garena had a stellar quarter in Q1, with the strong quarter of results since 2021. Bookings came in at $931M, against a significantly high comparable last year. This was driven by a huge increase in the Quarterly Paying User Ratio, up from 9.8% in Q1 last year to 10.9% this quarter.

Management cited strong response to Free Fire’s collaboration with Jujutsu Kaisen, which generated over 700 million official content views. It appears that Garena has mastered IP collaboration, with last year’s NARUTO SHIPPUDEN also being a massive success. They also pointed towards Arena of Valor which delivered record high quarterly bookings this quarter, its tenth year of operation.

Again, the continued success of Free Fire, which is in its 9th year of operation proves that many of these hit games are certainly evergreen.

4. Management Commentary

This section focuses mainly on questions during the earnings call, with key highlights of what I believe are important points to takeaway. I may adjust a few words here and there for clarity purposes, (English is not the first language for the majority of Sea’s management team) but I will not change the meaning of these quotes.

On Quick Commerce:

“In Indonesia, our instant delivery service can deliver orders in as little as 2 hours in urban areas. Order volumes for this service grew over 35% in the first quarter with cost per order reducing by around 20% year-on-year.

Building this service has enabled us to expand our product assortment into higher frequency categories. We expanded partnerships with major convenience stores and the pharmacy chains such as Indomaret.

At the end of March, we had around 7,000 offline stores available on our instant services. This has shifted more offline purchasing behavior online and into the Shopee ecosystem.”

On Shopee Taiwan:

“In Taiwan, our collection point network expanded to over 3,100 locations at the end of the fourth quarter, nearly 50% more locations compared to just a year ago.

We leveraged our growing fulfilment capability to scale initiatives such as shipping directly to lockers without additional packaging, improving speed while reducing costs. With these efforts, average buyer waiting time improved 12% in the first quarter year-on-year.

We reported double-digit GMV growth year-on-year in the first quarter in Taiwan”

On Shopee’s Content Ecosystem:

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

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

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

On Shopee Brazil:

“We continued to improve delivery time by more than 1 day in the first quarter compared to last year. We opened 3 new fulfilment centers, bringing our total to 5.

This effort allowed us to onboard more merchants, especially to Shopee Mall, supporting stronger spending among buyers. In the first quarter, GMV from Shopee Mall sellers more than doubled year-on-year and now contributes around 15% of GMV.

We remain confident in Brazil’s long-term growth potential and in our ability to further strengthen our competitive position in this market.”

On Shopee Brazil’s Profitability:

“We have been profitable in Brazil for the last few consecutive quarters. I don’t foresee any change towards that at this point in time.

We will continue to grow healthily in Brazil, likely with the profitable kind of margins we see right now.”

On Shopee Brazil’s Fulfilment Potential & Plans:

“On the fulfilment business, especially in Brazil, we do expect fulfilment to become a larger percentage of the business as we continue to build it out.

We only started not too long ago, so we are still in the early stages of scaling our fulfilment operations. Typically, we do not overbuild too aggressively. Our fulfilment centre capacity utilisation is relatively high because we are able to forecast fulfilment volumes well ahead of time, and then build our fulfilment centres according to that timetable.

So it is unlikely that we will build a lot this year, stop next year, wait for demand to catch up, and then start building again. Instead, we expect this to be a continuous process as we scale our fulfilment network.

Ultimately, we would like our fulfilment network to be larger than our closest competitors in the market, in terms of absolute volume.

In terms of the return on investment, if you look at individual fulfilment centers, typically, the CAPEX is actually not that high as we don’t own the fulfilment center itself.

We typically rent a fulfilment center. The CAPEX essentially is to make sure the fulfilment center is well equipped. So if you look at that particular part of investment, the return on investment is pretty fast.

It’s not that long ahead of the time. The other product investment we’re doing for the fulfilment businesses is more about moving the seller to be a part of the fulfilment center and advocating the buyers to understand the fulfilment business that we have. So that’s part of the ongoing investment we use to drive business growth.”

On the Impact of Oil:

“The first-order impact is the absolute oil price, which does affect our operating costs.

The positive is that, in many of the countries we operate in, we benefit from government subsidies that help absorb part of the cost increase, especially in last-mile delivery, which is the largest component of delivery cost. We also work closely with our partners, such as our line-haul and airline partners, to manage costs together.

So overall, if you look at actual costs, higher oil prices do have an impact. But we believe we can manage this within the guidance we have provided. And from a timing perspective, you are right that Q2 will likely see a larger cost impact than Q1.

The second-order impact is that higher oil prices could affect consumer spending power in some countries, especially if people have to spend more money at the gas station. That said, we are generally seeing only a moderate impact on our platform.

The main reason is that our platform is one of the cheapest places for consumers to find the products they need. So when people are looking to save money, they actually tend to come to us more. Our platform is also more focused on essential products, rather than luxury or highly discretionary spending. Compared to offline spending and other discretionary categories, our platform is less exposed to that kind of pullback.

All of this helps reduce the second-order impact we see from higher oil prices.”

On Monee/SPayLater’s Expansion Beyond Shopee:

“On the split between On-Shopee and Off-Shopee, SPayLater usage on Shopee was the majority of the business when we first started. Today, it is already less than half of the business.

Even when you compare SPayLater usage on Shopee versus off Shopee, SPayLater on Shopee now represents only around 20% of total expenditure across both On-Shopee and Off-Shopee channels. This is a significant milestone for us.

It proves that we are not only able to drive credit adoption within the Shopee ecosystem, but that we have also successfully expanded it beyond Shopee. In fact, we are seeing higher growth in the Off-Shopee ecosystem compared to the On-Shopee part of the business.”

On Factors Driving Monee’s Growth:

“There are three key factors driving this growth.

First, within our existing user base, we still see significant room to drive more credit adoption. This will come from more product rollouts, better credit assessment as we accumulate more data over time, deeper integration with Shopee, and the expansion of more non-Shopee use cases for these users. Essentially, even within the same user base, there is still a lot of room for us to deepen credit penetration.

Second, we are expanding into new usage scenarios beyond what we have today. This includes partnering with more online merchants that can accept SPayLater, as well as more offline merchants that can accept SPayLater.

In some markets where credit card usage is more developed, we have also rolled out a debit card product that leverages the user’s existing credit limit. This allows users to spend their SPayLater credit through the card network as well. All of this expands the addressable market for our existing user base.

Third, we will continue to expand into new user segments. This is also very important for us. As Forrest mentioned in the opening remarks, we initially started more with the subprime segment. But as we accumulate more risk data and improve our risk models, we are able to expand into more prime user segments with slightly different products across different markets.

These users may have slightly lower ROA, but they give us access to a much larger outstanding loan pool.

Overall, we believe these factors will continue to drive the growth of our lending business across our markets in the coming years.”

5. Concluding Thoughts

As I write this, the stock is down over 3% today, following a 2% down day yesterday, wiping out a large portion of gains.

We are clearly in an environment where the market is focused on companies on the AI train. That, combined with the uncertainty of oil, in my view is what has led to the weakness in Sea Limited stock in the past couple of months. Of course, there is also the overhang of TikTok Shop, Mercado Libre and other competitors, and what it does to Shopee’s margins.

Personally, I think these set of results that Sea has displayed, shows that reinvesting in the business today, both in logistics and the VIP program are the right decisions. Much of my conviction in continuing to buy Sea is trust in the management team. They have proven their ability to out-hustle and out-compete their closest rivals in the past. I believe this is no different.

From a simple SOTP or a very conservative discounted cash flow, Sea is a steal at these prices. Frankly, I have been flabbergasted by the reaction of the market to its extremely strong earnings results. However, this is simply how the market reacts in the short term.

As long-time followers will know, this does not faze me, and I hope it doesn’t faze you either. If there was a deterioration in the quality of the business, I would certainly highlight it. Yet, I believe this was possibly one of the best quarters the business has put up. All 3 segments are firing on all cylinders.

Should the stock revisit the $70s, I will certainly be a buyer again.

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Disclaimer: The content presented in this thesis is for informational and academic purposes only and does not constitute financial advice. The analysis and opinions expressed are based on research and should not be interpreted as a recommendation to buy, sell, or hold any security. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Today, we’re looking at something slightly different. For the first time, I’ll be covering the S-1 (registration statement) of a business looking to IPO imminently.

The business we’ll dive into today is Cerebras ($CBRS). Cerebras is at its core, an AI chip and AI compute infrastructure company. And we know how high in demand these are today.

It will IPO on Thursday this week (14th May 2026) with Reuters reporting an exclusive earlier this week that it intends to raise its IPO price range to $150-$160 ($34B market cap) up from $115-$125 ($26.6B market cap). It also intends to increase its offering to 30M shares, up from 28M shares, meaning it will raise about $4.8B at the top end.

Against $510M in 2025 revenue, that implies a ~67x P/S, a steep number for sure.

But of course, that is a simplified manner of looking at things. In this piece, we will look at the growth prospects of Cerebras, determine if the business has a moat, and just how large it could become. Is this truly an NVIDIA competitor, or merely a pretender?

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Table of Contents

1. Introduction

2. Company History

3. Business Model

4. Value Proposition

5. Product Offerings

6. Moats & Differentiation

7. Market Context & Industry Positioning

8. Competitive Landscape

9. Financials

10. Ownership & Management

11. Valuation

12. Catalysts & Outlook

13. Bull and Bear Case

14. Concluding Thoughts (What I am personally doing)

1. Introduction

If you walk into any AI data center today, you will find racks full of NVIDIA GPUs. Each GPU is a small chip, about the size of a postage stamp. To train or run big AI models, you wire thousands of these little chips together with cables, switches, and networking gear. The model gets "chopped up" and spread across all of them.

This works, and is why NVIDIA is the largest company in the world. However, there is one problem, moving data between chips is slow and power-hungry. Every time one GPU needs to talk to another, the signal has to leave the chip, travel down a wire, through a switch, and into the next chip. AI models do this trillions of times. The chips end up spending most of their energy and time just shuffling data around, not actually computing.

Cerebras solves this exact problem. Instead of cutting a silicon wafer into hundreds of small chips, Cerebras decided to use the entire wafer as one chip.

The result is the Wafer-Scale Engine (WSE), the largest computer chip ever sold commercially, about the size of a dinner plate.

To give you a sense of scale, the current WSE-3 is:

• 58 times larger than NVIDIA’s flagship B200 chip

• Has 900,000 compute cores on one piece of silicon (a B200 has tens of thousands)

• Has 44 GB of memory built directly onto the chip (250x more than a B200)

• Moves data internally at 21 petabytes per second (about 2,600 times the memory bandwidth of a B200)

For 50+ years, the entire chip industry assumed wafer-scale chips couldn't be made commercially. For 3 reasons:

1. Yield. Every silicon wafer has tiny manufacturing defects. The bigger the chip, the more likely it contains a defect, and traditionally one defect ruins the whole chip. A wafer-sized chip should be un-manufacturable.

2. Power and Heat. A chip the size of a dinner plate draws enormous power and generates enormous heat. Cooling it without melting the system around it is hard.

3. Connecting the regions. Wafers are normally exposed to light in small rectangular sections called "reticles." Getting those sections to communicate as one chip required inventing a new manufacturing technique.

Cerebras spent roughly a decade solving all three. Their architecture is fault-tolerant. If a small region of the chip has a defect, the chip routes around it. They invented a custom water-cooling system and a proprietary cross-reticle interconnect built into TSMC's fabrication process.

When Cerebras first shipped chips in 2020, the market didn't really need them as AI was nascent, training was slow, and most people didn't care about speed.

The ChatGPT moment happened, and then “reasoning models” were released with o1 by OpenAI. Modern AI models think through questions, sometimes generating tens of thousands of internal tokens before responding. Speed became a bottleneck, and a coding agent that takes 30 seconds to respond is useless compared to one that responds in 2 seconds.

In January 2026, OpenAI signed a $20+ billion deal to run a chunk of its inference compute on Cerebras hardware. And in March 2026, AWS agreed to put Cerebras chips inside Amazon Bedrock, making Cerebras compute available to every AWS developer.

2. Company History

Cerebras was founded in 2015, 11 years ago by 5 founders: Andrew Feldman (CEO), Gary Lauterbach, Michael James, Sean Lie and Jean-Philippe Fricker. The 5 of them worked together at SeaMicro (a low-power server startup), started in 2007 by Andrew and Gary and was later sold to AMD in 2012 for $334M.

That exit gave the founding team operational credibility and the AMD network that would later prove instrumental.

The founders saw in 2015 that AI was on the horizon and knew it would consume vast amounts of compute. They made two fundamental bets.

First, existing general-purpose processors would not be sufficient for AI. They believed what PCs did for x86, graphics did for GPUs and mobile did for ARM, would prove true in AI too.

Second, they bet that modifying existing compute architectures would not realise AI’s potential. They would need to build a new computer architecture from first principles, optimised in every way for AI.

Both bets were contrarian at the time, and have proved to be right.

Timeline Highlights:

• 2016: Series A of $27M led by Benchmark, Foundation Capital, and Eclipse Ventures

• 2018: Elon Musk reportedly tried to acquire Cerebras through Tesla to support OpenAI — founders declined

• August 2019: First-generation WSE-1 announced (16nm, 400,000 cores)

• 2020: First CS-1 systems delivered to Argonne, NETL, GSK etc…

• April 2021: WSE-2/CS-2 launched at 7nm (850,000 cores, 40GB SRAM)

• November 2021: Series F at >$4B valuation, led by Alpha Wave Global with G42 participation.

• 2023: Condor Galaxy supercomputer network announced in partnership with G42

• 2024: WSE-3/CS-3 launched at 5nm. First S-1 filed in September. CFIUS opens review of G42’s stake within weeks; IPO indefinitely delayed

• May 2025: CEO Feldman publicly confirms CFIUS clearance obtained

• September 2025: Series G of $1.1B at $8.1B valuation

• October 2025: Original S-1 withdrawn (”out of date”)

• December 2025: $1B OpenAI loan + warrants secured. NVIDIA acquires Groq IP for ~$20B in the same month (Groq is the closest pure-play competitor to Cerebras)

• January 2026: Master Relationship Agreement with OpenAI announced — $20B+ over multi years, 750 MW base

• February 2026: Series H of $1B at $23B valuation, led by Tiger Global, with AMD, Coatue, Benchmark, and Fidelity participating

• March 2026: Binding term sheet signed with AWS for Bedrock integration

• April 17, 2026: New S-1 filed

3. Business Model

The best way to describe Cerebras is as a vertically integrated AI compute company. They have three revenue streams that are converging:

1. Hardware Sales (On-Prem Systems)

Customers buy CS-3 systems (a third-generation, wafer-scale AI accelerator system designed for training and inferencing massive AI models) from Cerebras outright. This was historically the entire business. In 2025, this accounted for 70% ($358.4M) of total revenues.

Customers in this bucket include Sovereign AI initiatives, foundation model labs that demand data isolation, and national labs/defence.

2. Cloud (Cerebras Cloud + Partner Clouds)

Customers consume tokens or rent compute by the month/year through Cerebras's own cloud, or through AWS, Microsoft Azure Marketplace, IBM watsonx, Vercel, OpenRouter, and Hugging Face. In 2025, this accounted for 30% ($151.6M) of total revenues.

The OpenAI Master Relationship Agreement is structured primarily as a multi-year compute commitment funnelled through this layer.

3. Co-development & AI-model Services

Cerebras's engineers help customers select architectures, prepare training data, build draft/speculative-decoding models, and tune deployments. Bundled with strategic accounts (explicitly cited in the S-1 as a reason top-10 customers grew spend ~80% within 12 months of initial purchase.)

This is not a revenue generating segment, but is inarguably a key piece of Cerebras’ competitive advantage.

Revenue Concentration

The S-1 discloses MBZUAI (world’s first graduate-level, research-based artificial intelligence university in UAE) at 62% of 2025 revenue and G42 (leading UAE-based AI and cloud computing company) at 24%. Together, they account for 86% of total revenues. However, OpenAI’s $20B+ commitment will reshape this mix dramatically from 2026 onward.

4. Value Proposition

The key to Cerebras’ pitch is all about speed.

In Cerebras’ S-1, they make the analogy that going from GPU inference to Cerebras inference is “like going from dial-up to broadband”.

Cerebras claims that they are up to 15x faster than leading GPU solutions on standard open-source benchmarks. They are 1,000x+ faster on certain exotic workloads and are >10x faster in training time-to-solution vs. same-generation GPUs.

This speed also unlocks several other advantages for Cerebras:

1. Speed unlocks new product categories. For instance real-time coding agents (Cursor, Codex, Claude Code), digital twins/voice avatars that require sub-second latency, and “deep research” agents that can scan thousands of documents in seconds.

2. Quality. GPU-based systems force a tradeoff between answer quality and latency (developers cap reasoning tokens to keep response times tolerable). Cerebras’ speed allows models to use more reasoning tokens within the same response time, producing better answers for users.

3. Cost. Power is the dominant operating expense in AI compute, and most of that power is spent moving data between chips. Keeping data on a single wafer reduces data movement and the elaborate networking stack that comes with GPU clusters.

In essence, Cerebras is betting that wafer-scale is what wins AI, much like how x86 won PCs and ARM won mobile.

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5. Product Offerings

Hardware

• Wafer-Scale Engine 3 (WSE-3)

  

  • This is the main product. WSE-3 uses a 5nm TSMC node with 900,000 AI cores, 44GB on-chip SRAM, 21 PB/s memory bandwidth, 4 trillion transistors, 46,225 mm² die.

  • It is 58x larger than NVIDIA’s B200, with 19x more transistors, 250x more on-chip memory, and 2,625x more memory bandwidth than a B200 package.

• CS-3 System

  

  • This is the data-center-ready chassis which houses one WSE-3 with proprietary power delivery, water cooling, networking and slots into standard racks.

• Cerebras AI Supercomputers

  

  • Clusters of CS-3 systems orchestrated as a single logical machine. The Condor Galaxy network with G42 represents some of the largest deployed.

Software

• CSoft (Cerebras Compiler)

  • Compiles PyTorch models directly to the WSE. No CUDA dependency.

• Inference Serving Stack

  • Manages hosting, scaling, and routing; exposes standard OpenAI-compatible API endpoints.

• Cluster Manager

  • Telemetry, scheduling, health monitoring. Lets customers flip between training and inference on the same systems.

Deployment Models

• On-premises

  • Full CS-3 supercomputers shipped to customer data centers (Sovereign AI, defense, regulated enterprises, foundation model labs).

• Cerebras Cloud

  • Managed inference and training, API-based.

• Partner Clouds

  • AWS Bedrock, Microsoft Azure Marketplace, IBM watsonx, Vercel, OpenRouter, Hugging Face.

• Hybrid

  • Unified software stack across on-prem and cloud.

Roadmap

Cerebras has shipped 3 generations of WSE, from 16nm to 7nm and now 5nm. The company intends to continue investing in expanding on-chip memory, memory bandwidth, interconnect density, and process-node migration.

Notably, the architecture is presented as forwards-compatible, meaning customers don't have to rewrite code as Cerebras moves between generations. Currently, when NVIDIA releases a new GPU generation (say H100 to B200), developers often have to re-write or re-optimise their code to take full advantage of the new hardware. The CUDA ecosystem mitigates this but doesn't eliminate it.

Cerebras claims that customers won’t have to do this, as a model that ran on WSE-2 will run on WSE-3 without code changes and will run on WSE-4 the same way.

6. Moats & Differentiation

I believe Cerebras’ moats are purely technological. That could turn into distributional or other types of moats in future, but I do view it to be rather limited at this point.

1. Wafer-Scale Integration IP and Process Know-How

Historically, there have always been two problems that made wafer-scale chips impossible to produce commercially.

Firstly, chip-making machines can only “print” patterns onto silicon in small rectangular sections (about the size of a postage stamp). Normally, those sections get cut apart into individual chips. To make one giant chip, Cerebras needed wires that cross between those sections. They worked with TSMC for years to develop a custom process that creates these connections. This is now baked into TSMC’s manufacturing flow specifically for Cerebras.

Secondly, defects. Every silicon wafer has tiny manufacturing flaws scattered randomly across it. A normal chip with one flaw gets thrown out. Each Cerebras chip, owing to its size, has 40-50 flaws. By normal logic, it should be unusable. However, Cerebras solved this by designing the chip with hundreds of thousands of small identical cores plus spare cores. When a defect is found, the chip automatically routes around it and switches in a spare.

Multiple companies have tried wafer-scale chips for 50 years but only Cerebras has commercialised one. Replicating this will require years of work with TSMC.

2. Full-Stack Co-Design

Running AI on NVIDIA GPUs is complicated as customers manage a stack of software from CUDA to distributed training frameworks, cluster management and inference servers. Major AI labs have to hire hundreds of engineers just to keep the stack working.

Cerebras’ pitch is that you are able to write your model in PyTorch, hand it to Cerebras’ compiler, and it runs smoothly with all the complexity hidden. Once a customer is committed, this becomes a workflow lock-in, similar to a switching cost moat that the likes of Microsoft possesses with its Microsoft Suite.

3. Manufacturing Relationship

Cerebras has spent years working with TSMC on the cross-reticle process. Even a well-funded competitor would need 3-5 years to catch up. However, this also means TSMC is a single point of failure. If something disrupts TSMC, Cerebras has no Plan B.

4. Strategic Partnerships

Cerebras has three anchor relationships today, which is probably why most are interested in the stock, and also proves its capability.

Firstly, it has a $20B+ multi-year deal with OpenAI, and a $1B loan plus warrants for ~10% of Cerebras stock if the full deal is exercised. OpenAI has a direct financial incentive in Cerebras’ success.

Secondly, Cerebras chips are being added to Amazon Bedrock, which means every AWS developer will be able to use them. This is a level of distribution that Cerebras could never build itself, but provides them with network effects.

Lastly, the legacy relationship in MBZUAI and G42 that today account for 86% of their revenue. Their close relationship has enabled the business to put up the strong numbers and validated their investment in wafer-scale chips.

While these may not be moats in the strict sense, they create demand visibility, customer validation, and a sales proof point.

7. Market Context & Industry Positioning

Bloomberg Intelligence estimates that the combined AI training infrastructure and inference market was $251B in 2025 and will grow to $672B by 2029 implying a 28% CAGR. Inference is also growing >2x faster than training infrastructure.

IDC projects AI investments will yield $22.3T in global GDP impact by 2030.

I don’t think any of us are doubting these numbers. They are quite clearly a large enough addressable market and even a small slice probably supports a $34B market cap. The question is, how large of a slice could Cerebras get and how many other players are vying for that slice?

The Inference Shift

One of the dominant stories in the past 6 months has been that inference, not training, drives the bulk of new compute demand. This has been corroborated by the performance of AMD compared to NVDA in the past year (+320% v +80%). The perception has always been that AMD is more focused on inference than NVDA.

The demand for inference is driven by 3 compounding forces:

1. More users

2. Higher frequency of use per user

3. More compute per use (reasoning models do “test-time compute” generating long internal chains of thought that consume many more tokens than a single Q&A)

Inference-time compute is driving the demand for Cerebras. Due to reasoning models, speed has become a binding constraint rather than a nice-to-have. A 15x speed advantage on a 30-second-thinking reasoning model is more economically meaningful than a 15x speed advantage on a 1-second chat reply.

HBM Bottleneck

A point worth flagging is that Cerebras is a natural hedge against HBM (High Bandwidth Memory) shortages. GPUs depend on HBM, which is supply-constrained by Samsung/SK Hynix/Micron capacity. Cerebras uses on-chip SRAM. As HBM remains tight through 2026-2027, this is a structural tailwind for Cerebras.

8. Competitive Landscape

This is the most important section to understand, because Cerebras's valuation depends almost entirely on whether they can hold a defensible position against this list.

18 months ago, the AI silicon market was a wild zoo with dozens of well-funded competitors (Cerebras, Groq, SambaNova, Graphcore, Tenstorrent, Mythic, Rain AI, Tachyum, Lightmatter, D-Matrix etc.), most of whom claimed to be the “NVIDIA killer”. The inference compute market has consolidated dramatically in the last six months.

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Revenue: $955M v $921M est. (+24% YoY, 19% Constant Currency)

EBITDA: $154M v $142M est. (+46% YoY)

EPS: $0.04 v $0.02 est.

Selected Key Metrics

• On-Demand GMV: $6,131M (+24% YoY)

• On-Demand GMV per MTU: $130 (+4% YoY)

• Group MTUs: 51.6M (+16% YoY)

• Loan Portfolio: $1,438M (+130% YoY)

• Adjusted EBITDA: $154M (+46% YoY)

• Adjusted Free Cash Flow: $76M (+10% YoY)

Grab’s earnings for the quarter beat expectations on both top and bottom-line. This was quite surprising considering Q1 was expected to be a weak quarter due to fuel price spikes related to the Strait of Hormuz crisis.

Interestingly, it was not a case of deliveries/financial services cushioning the fall in mobility. The mobility business remained extremely strong, with volumes in April up 32% YoY despite the increased fuel prices.

In this piece, I will break down the earnings in full, highlight key points on management commentary during the call and discuss my personal thoughts in the last section.

Table of Contents

1. Deliveries & Mobility

2. GFin, Financial Services

3. Key Call Commentary

4. Positives & Negatives

5. Conclusion

1. Deliveries & Mobility

Deliveries is Grab’s largest segment by GMV and Revenue.

GMV grew 24% YoY (or 22% on a constant currency basis). Adj. EBITDA margin also grew from 2.0% to 2.3%, tracking closer towards management’s long-term target of 4+% margins.

This growth has been attributed to higher contributions from advertising and gains in operating leverage. Segment Adjusted EBITDA was up 40% YoY as a result.

Mobility GMV grew 23% YoY (or 19% YoY on a constant currency basis). Revenue growth was slower at 19% YoY (or 15% YoY on a CC basis) due to the continued focus on affordability.

Segment Adj. EBITDA continued expanding from 8.8% to 8.9%. This is more or less the steady state margin target that management has issued for mobility (9+%).

2. GFin, Financial Services

This quarter was yet again very strong for GFin, following on from last quarter. The net loan portfolio reached $1.44B, up from $1.18B just last quarter. That represents 22% QOQ growth and 130% YoY growth.

Management has set a FY2026 target of $2B, that appears to be a rather low bar considering the current numbers. Segment Adj. EBITDA margin improved from -41.1% to -15.71%. Grab tracks closer towards profitability, which it expects in the 2nd half of this year.

Customer deposits across GXS Singapore and GXBank Malaysia remained relatively stable at $1.63B.

As I’ve discussed in the past, I believe Grab has the potential to grow much faster than ~40%. For instance, Sea has 10x the loan book but is growing faster. Grab’s recent launch of cash loans for consumer could help spur this.

3. Key Call Commentary

Again, Grab hosted a live video earnings call with an IR head taking charge of questions.

On New Product Innovations

“Product innovations we have made have really targeted affordability and reliability. Group orders, for example, has GMV up 74% year-on-year, and we launched group rides at GrabX last month, which is a similar concept for sharing rides to reduce pricing for individual consumers. And that’s now available across all 6 of our core markets. GrabUnlimited, of course, is very good value for high-frequency customers, and it continues to account for 1/3 of our deliveries GMV. So all of these are highly affordable products, which keep the demand strong even when consumers are stretched.”

On Fuel Crisis

“We’re monitoring the fuel situation extremely closely. And of course, we will not hesitate to act further if needed. In the medium term, we are committed to accelerate the EV transition to reduce our driver partners exposure to fuel price volatility.

So for example, in Thailand and Philippines, we have a drive-to-own program that connects our drivers with OEMs like BYD and GAC, where we have deals of up to 70,000 vehicles available across 6 markets with accessing to financing so they can own those more easily. In Vietnam, we have secured preferential charging rates also through our charging network partners, EBOOST and Charge+, which helps our drivers in the transition also. And finally, in Thailand, I am pleased to say that our total fleet supply has crossed 30,000 EVs on the platform and demand for those from consumers is also strong, where they can select that EV option, and that demand has grown by over 35% year-on-year.

So this fuel crisis has become an opportunity in the sense that it helps us to accelerate that EV transition.”

On Indonesia’s 8% Commission Cap

“The recent announcements are explicitly focused on Ojek drivers, who are our 2-wheel ride hailing partners. The 4-wheel drivers earn well above the minimum wage, so we believe they're less of a concern for regulators in Indonesia.

That said, of course, we're engaging very proactively with the relevant ministries to try to seek absolutely clarity and the technical aspects of how the decree will be implemented.

It's worth noting that 2-wheel mobility, that the decree referred to in Indonesia, is less than 6% of our total mobility GMV. So we are, therefore, reiterating our expectations for mobility margins to stabilise within that historical range and not to go outside of that range."

On GrabMart

“GrabMart is an exciting segment. The TAM is very large, arguably larger than food delivery altogether. So we are doing a lot to accelerate the product innovation particularly the front end, the AI-powered shopping agent, which we think will transform the ease with which consumers can, for example, create a weekly shopping basket and then improve the targeting for Grab more cross-sell as well.

And by the way, GrabMore grew more than double-digits quarter-on-quarter. Overall, as a result, the grocery MTUs are growing at 2.6x the rate of food MTU growth on a year-on-year basis. So that shows you that it’s really expanding the top of our funnel, which is extra important in the age of AI in terms of generating data and deepening the long-term value relationships that we have with our consumers.

And then the order frequency that we saw were 1.8x higher than the food-only users, which illustrates that long-term value enhancement that I was speaking about. So over the long term, the North Star is very clear. We’ve got global peers, who have achieved like 20% to 40% mart penetration as a percentage of their deliveries business overall. So it’s definitely the right model that we’re pursuing.”

On Grab’s Loan Book

“We actually don’t have any issue at all in raising deposits. We’ve been really gratified at the trust that consumers have in the Grab brand, the Grab ecosystem, our capabilities to protect their money. And if you look at the pricing of our deposits, we are never the most aggressive in the market. We’re able to actually gather sufficient deposits to create the right shape of balance sheet. So there’s no point having excess deposits, particularly in this yield curve environment. So what you’re seeing is that’s carefully managing the level of deposits to make sure that we optimise for P&L purposes. If we needed to raise more deposits, we’re very confident that we can do that.”

4. Positives & Negatives

Positives:

1. Growth accelerated despite seasonality and fuel price concerns

Coming into earnings, one of the biggest worries was the increase in fuel prices that would affect demand across the region. Yet, transport volumes were up +32% YoY in April.

GMV also came in much stronger than expected which led to a beat in top-line expectations.

2. Operating leverage in action

Grab’s Adj. EBITDA margin increased from 13.7% to 16.2% YoY, which combined with GMV increasing 24% YoY led to a 46% increase in Adj. EBITDA.

This is classic operating leverage in action, and I believe we will start to see this increase exponentially in the months and years to come, especially as GFin turns profitable in H2 2026.

3. Advertising is becoming a real profit lever

GrabAds is becoming a core profit driver for the business. Average spend of quarterly active advertisers on Grab’s self-serve platform had average spends grow 44% YoY.

GrabAds is vital for Grab because it can lift delivery margins without hurting consumers or drivers. It is similar to how advertising improved the economics of other marketplace businesses. (Think Amazon, DoorDash, Meituan)

4. New product innovations are contributing to top and bottom line growth

Group orders for instance, grew by 74% YoY and has contributed significantly to deliveries growth. I discussed my take on new product innovations that were announced at Grab’s 2026 product day.

5. The initial reaction to the 8% commission cap appears to be overblown

Grab discussed during the earnings call that it was only applicable to 2-wheelers, which represented just 6% of total mobility GMV. Using FY2025 numbers, and assuming a 12pp cut in take-rates, it would result in a $57M drop in annualised revenue or 1.7% haircut on the group’s top-line.

Negatives:

1. Partner Incentives

It is never good to see partner incentives up 54% YoY. In this case, it was a necessary action to an unexpected event. In time, this will moderate, but it certainly affected the bottom-line, which led to a QoQ fall in net income.

2. Fuel costs are likely to remain a headwind

Management repeatedly referred to elevated fuel costs and the regional fuel crisis. Grab is supporting drivers through fuel discounts, cashback, EV transition initiatives, and government subsidy coordination.

The risk is that if fuel costs stay high, Grab may eventually have to choose between three bad options: subsidise drivers more, raise consumer prices, or accept weaker supply. None are great for margins.

3. Indonesia commission regulation sets a precedent and potential spillover effect

As I discussed in this piece, the worry of Indonesia’s policy, is that drivers in other Southeast Asian countries may push for similar caps. If it spreads to Malaysia, Thailand, Vietnam, Philippines, or Singapore in modified form, the valuation impact could be much larger.

4. GFin growth could be faster

Again, I believe Grab should be much more aggressive in growing its Financial Services business. It has to be a core growth driver that brings the group’s revenue growth closer to 30% as Monee is doing for Sea.

Grab’s management ultimately remains relatively conservative which is one of the largest drawbacks. I believe they do have shareholders’ interest at heart and are long-term thinkers, but to succeed and stake a strong claim on the financial services segment in the region, I do think they have to be more aggressive.

5. Conclusion

Overall, this was a very strong quarter for the business amidst challenges that they couldn’t anticipate or prepare for. Grab stock is down over 25% YTD due to concerns over fuel prices and general weakness in emerging markets.

This quarter has put to bed many of these concerns.

That said, fuel will continue to be a headwind for the foreseeable future.

While fuel will continue to be a headwind for the foreseeable future, it is ultimately a short-term issue and will mean less to Grab as it transitions to EVs and AVs over the long-term. I remain optimistic and positive on Grab at these prices as I have reiterated many times.

Please feel free to read my 2026 thesis to understand why:

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• Earnings Reviews (Grab, Sea Limited, dLocal, Mercado Libre and more)

• 1-2 Deep Dives (always happy to receive suggestions)

• Portfolio Review (sharing all my positions & changes)

Just yesterday, I released my Circle Deep Dive which I would recommend checking out if you are interested!

Disclaimer: The content presented in this thesis is for informational and academic purposes only and does not constitute financial advice. The analysis and opinions expressed are based on research and should not be interpreted as a recommendation to buy, sell, or hold any security. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Circle is undoubtedly the best public market proxy on stablecoins today. Its flagship product, USDC, is a fully reserved digital dollar that circulates across 30+ blockchain networks, effectively a protocol for dollars on the Internet.

At the end of 2025, there was $75.3 billion USDC in circulation (up 72% YoY), with on-chain transaction volume hitting nearly $12 trillion in Q4 alone (247% YoY growth).

While ~95% of Circle’s revenues today are derived from USDC, the business is diversifying its revenue streams into other areas such as Circle Payments Network, Arc, wallet infrastructure, developer services, tokenised money market products, and enterprise settlement tools.

In this piece (11,700 words), we will discuss Circle’s history, its value proposition, moat, future prospects and what I personally think of it as an investment.

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Table of Contents

1. Company History

2. Value Proposition

3. Business Model

4. Product Offerings

5. Moats & Differentiation

6. Market Context & Industry Positioning

7. Competitive Landscape

8. Financials

9. Ownership & Management

10. Valuation

11. Catalysts & Outlook

12. Bull and Bear Case

13. GabGrowth Quality Score

14. Concluding Thoughts (What I am personally doing)

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1. Company History

Origins and Vision (2013-2016)

Circle was founded in October 2013 by Jeremy Allaire and Sean Neville in Boston, Massachusetts, with $9 million in seed funding from Jim Breyer, Accel Partners and General Catalyst.

Allaire was already a serial internet entrepreneur. He'd co-founded Macromedia (maker of Flash) and had a front-row seat to the web, mobile, and cloud platform shifts. He also founded Brightcove in 2004, which became a major online video platform for media companies and brands, helping businesses publish and distribute video on the internet before YouTube and streaming became as dominant as they are today.

When Bitcoin emerged, he viewed it as a potential protocol for value on the internet, analogous to HTTP for information or SMTP for email.

Allaire believed that blockchain technology would eventually allow fully reserved dollars to move on the internet in an open, interoperable way, which would drive the cost of storing and moving value down to effectively zero.

However, in 2013, none of the conditions for that vision existed. Blockchain infrastructure was primitive, regulators was non-existent and banks wouldn't touch it. Consumers certainly weren't asking for internet-native money, or understood it at the time.

Therefore, Circle started with what was available, creating a consumer Bitcoin payment app called Circle Pay. The product let users buy, hold, and send Bitcoin and fiat currencies through a simple mobile interface. It was essentially a Venmo for crypto, and with Allaire’s credibility, Goldman Sachs led a $50M funding round alongside IDG Capital Partners.

In September 2015, Circle became the first company to receive New York's BitLicense, the state's newly created framework for virtual currency businesses. In April 2016, it became the first firm to receive virtual currency licensure from the British government. While competitors were moving fast and breaking things, Circle was collecting licenses. At the time, this was seen as a slow move, but looking back, was probably one of the most decisive moves.

By late 2016, Circle stopped supporting Bitcoin exchange functionality in its consumer app entirely. The company stated it was "now more than ever not a consumer bitcoin exchange" and would focus on global payments and "next-generation blockchain technology." It was the first clear signal that Allaire was pivoting toward what would become USDC.

Pivot & Costly Mistakes (2017-2019)

The next phase of Circle's history is messy, costly, and absolutely critical to understanding the company today.

In February 2018, riding the crypto bull market, Circle acquired Poloniex, one of the largest cryptocurrency exchanges at the time for $400 million. The logic was to build a broad digital asset marketplace. Circle simultaneously raised $110 million in a Series E led by Bitmain (the Chinese mining giant) at a nearly $3 billion valuation. The company was applying for banking and securities licences, envisioning itself as a regulated crypto-financial conglomerate.

However, the 2018 crypto winter crushed trading volumes. Poloniex's ranking plummeted. The SEC began investigating tokens traded on the exchange. Circle found itself managing a regulatory minefield that distracted from its core vision. By October 2019, Circle sold Poloniex (just 18 months after buying it) at an estimated $156 million loss. It subsequently sold its Circle Trade OTC business to Kraken and its Circle Invest retail trading app to Voyager Digital.

Circle made bad mistakes and these were expensive lessons, but by stripping away all their non-core business lines, Circle was left with one product, which embodied its founding vision: USDC.

USDC had launched quietly in September 2018, co-created through the Centre Consortium, a joint venture between Circle and Coinbase. Each USDC token was fully backed by U.S. dollar reserves, issued on the Ethereum blockchain, and designed to be the kind of boring, transparent, fully reserved digital dollar that institutions could eventually trust. In its first few months, over 100 crypto-focused businesses adopted USDC, but it was still tiny, mostly a niche settlement tool for the digital asset ecosystem.

COVID Growth and the SPAC Era (2020-2022)

COVID-19 was an accelerant for digital dollars just as it was for digital commerce. As the world moved online, demand for on-chain settlement surged. USDC circulation grew from roughly $4 billion at the start of 2021 to $52.5 billion by early 2022, a staggering 13x increase in barely a year. Circle went from interesting niche player to systemically important infrastructure almost overnight. Its market share surged during this period to as high as 35%.

In July 2021, Circle announced plans to go public via a SPAC merger with Concord Acquisition Corp, initially valued at $4.5 billion. By February 2022, with USDC's circulation having more than doubled since the deal was announced, the terms were renegotiated to $9 billion.

Then the crypto industry imploded. Terra/Luna collapsed in May 2022, wiping out over $60 billion. Celsius and Three Arrows Capital failed. FTX, once valued at $32 billion, went to zero in November 2022. The SEC, understandably spooked, delayed qualification of Circle's SPAC filing. In December 2022, Circle and Concord mutually terminated the merger agreement.

The path to public markets was dead. But the worst was yet to come. On March 10, 2023, Silicon Valley Bank collapsed. Circle disclosed that $3.3 billion of USDC's cash reserves, roughly 8% of the total backing, were trapped at the failed bank. USDC immediately broke its dollar peg, plunging to $0.87 over the weekend. In a single week, investors redeemed a net $6 billion out of USDC.

This was an existential moment. Had the FDIC not backstopped SVB deposits that Sunday night, Circle could have faced a permanent shortfall in its reserves. The peg recovered within days once the government guarantee was announced, but the damage to market confidence was severe. USDC circulation, which had already been declining from its $55 billion peak, continued falling to a low of roughly $24 billion by late 2023. Tether, which had no direct U.S. banking exposure, surged to over 70% stablecoin market share.

The SVB episode is essential context for understanding Circle today. It exposed a genuine vulnerability (counterparty risk in reserve custody) that Circle has since addressed by shifting the vast majority of reserves into short-term U.S. Treasuries managed by BlackRock.

However, it also demonstrated something important about the network. Even after the worst stress test imaginable, USDC didn't die. It de-pegged, bled assets, and then stabilised and began rebuilding. It proved the stickiness of the underlying network effects and that it had true resilience.

Refocusing, IPO, Platform Expansion (2023-Now)

The 2023-2024 period was Circle's rebuilding phase. The company cut staff, discontinued non-core investments like SeedInvest (sold to StartEngine), and narrowed its entire focus to stablecoin infrastructure. Revenue remained strong during this period driven by high interest rates on the reserve portfolio ($1.45B in 2023 and $1.68B in 2024). Circle started generating real profits from what was now a clean, focused business.

In April 2025, Circle filed its S-1 for a traditional IPO. By June 2025, the company listed on the NYSE under the ticker CRCL. After years of false starts and near-death experiences, Circle was finally public.

Circle stock was priced at $31 per share but was heavily oversubscribed and eventually opened at $69, closing the day at $83. In the subsequent few weeks, Circle traded as high as $289.99, an incredible 4.2x from the opening price. Circle has since been in a significant drawdown as crypto experiences a bear market again, falling to as low as $50 in February this year.

Today, the core layer remains USDC, which by year-end 2025 had rebounded to $75.3 billion in circulation, up 72% year-over-year, with nearly $12 trillion in on-chain transaction volume in Q4 alone. Circle also issues EURC (the largest regulated euro stablecoin at €310 million) and acquired Hashnote to gain USYC, a tokenised money market fund that grew to roughly $1.7 billion.

Below that, Circle launched Arc in Q4 2025, a new Layer 1 blockchain designed as an economic operating system for regulated financial activity, with over 100 major companies in its testnet including Goldman Sachs, Deutsche Bank, Visa, and Mastercard. Arc is pre-revenue and pre-mainnet. It's a bet on the future, not a contributor to today's financials.

Above the core, Circle built Circle Payments Network (CPN), an application layer for cross-border money movement. By February 2026, CPN had 55 financial institutions enrolled, $5.7 billion in annualised volume, and was live in 14 markets with 11 more planned. It also launched StableFX in production beta for on-chain foreign exchange.

The evolution from Bitcoin wallet to crypto exchange to stablecoin issuer to full-stack internet financial platform is what I believe most investors miss when they look at Circle's simple-looking P&L. The 13 years of regulatory groundwork, painful pivots, and infrastructure investment have formed the foundation of the business, and is the moat today.

2. Value Proposition

Before we start with Circle’s value proposition, it is important to discuss the value proposition of stablecoins and how they work, as it is crucially important to the Circle thesis.

Moving money on the internet is still shockingly slow. A wire transfer takes 1 to 3 business days. It costs $25 to $50. Cross-border is even worse due to correspondent banks, FX spreads, compliance checks, and 3 to 5 day settlement windows. The system runs on bank hours which closes on weekends and this hasn't meaningfully improved in decades.

Stablecoins close that gap. A stablecoin is a digital token on a blockchain, pegged 1:1 to a real currency like the US dollar. For every token in circulation, there's a matching dollar sitting in reserve, typically held in cash and short-term US Treasuries. You can think of it as a dollar that lives natively on the internet.

When you send a stablecoin from Singapore to Argentina at 2am on a Sunday, it settles in seconds, costs fractions of a cent with no banks in the middle. There is no waiting for business hours and the blockchain is the settlement layer which never closes.

This matters for 3 reasons:

1. Speed and Cost. Stablecoins do what the traditional banking system does, but faster and cheaper. A cross-border payment that used to take days and cost tens of dollars now takes seconds and costs nearly nothing. For businesses moving money globally, this is a step change improvement.

2. Access. Most of the world doesn't have easy access to dollar-denominated savings or payments. In countries with high inflation, capital controls, or weak banking infrastructure, a dollar-pegged stablecoin on a phone is transformative as it acts as a savings account, a remittance rail, and a payment method in one.

3. Programmability. Unlike a dollar in a bank account, a stablecoin can be programmed. For instance, it can be held in escrow and released automatically when goods are delivered. It can also be streamed as payroll by the second or used as collateral in lending protocols.

The stablecoin market is around $320 billion today, with projections to reach trillions of dollars in a few years. Transaction volumes could hit $100 to $200 trillion annually, while Visa and Mastercard are already integrating stablecoin settlement. Stablecoins are a game changer and have a very enticing value proposition.

Circle's value proposition is fundamentally different from most FinTech companies because it doesn't serve end consumers directly. Instead, it is infrastructure that enables services to be built on top of it. This distinction matters enormously for understanding who Circle actually creates value for and why the network keeps growing without Circle needing to acquire every user itself.

For Developers and Technology Companies:

If you're building any product or service that needs to move, store, or programme dollars on the internet, USDC is essentially the default choice. It operates across 32 blockchain networks, more than any other stablecoin, making it the most portable and interoperable digital dollar available. Circle provides SDKs, APIs, smart contract templates, and programmable wallets that allow developers to embed dollar-denominated financial functionality into their products without needing to build banking infrastructure from scratch.

This is a massive unlock. A startup in Southeast Asia building a remittance app doesn't need to negotiate with correspondent banks, obtain money transmission licences in every jurisdiction, or build settlement infrastructure. They can integrate USDC and plug into a globally available, near-instant, near-free payment rail that already has deep liquidity. The same applies to AI developers who need their agents to make and receive micro-payments, e-commerce platforms that want to offer stablecoin checkout, or capital markets firms building tokenised products that need a cash settlement layer.

Importantly, most of these integrations happen without any commercial relationship with Circle. Tens of thousands of products and services use USDC today, and the vast majority simply build on the open protocol. This organic, developer-driven adoption is what creates the utility network effect and makes USDC’s position so hard to displace.

For Financial Institutions:

This is the cohort that I believe will drive the next phase of Circle's growth, and where the value proposition is most compelling relative to the legacy system.

To understand this, we have to give an analogy of what cross-border money movement looks like today. A business in Portugal sending payment to a supplier in Brazil goes through multiple correspondent banks, each taking a cut, with settlement that can take days, requires pre-funded nostro/vostro accounts, and involves significant FX spread on top.

The capital tied up in these intermediary positions is enormous. For instance, JPMorgan alone moves north of $10 trillion per day in gross money settlement.

Stablecoins collapse this entire chain as settlement happens in seconds. There's no pre-funding requirement because the value moves atomically. The capital efficiency gain is what’s driving major institutions to Circle’s doorstep. Firms like Fiserv, FIS, Corpay, and Matera, infrastructure providers that serve tens of thousands of banks, have all announced integrations with Circle's technology. Visa and Mastercard have launched products around USDC settlement. Even G-SIBs are leaning in to improve their own international money movement using stablecoin rails.

What Circle offers these institutions is not just the stablecoin itself, but the trust infrastructure around it. Circle holds regulatory licenses across 49 U.S. states plus dozens of international jurisdictions. It also has elite reserve transparency (BlackRock-managed Treasuries, audited monthly) and conditional approval for a National Trust Bank charter. No other stablecoin issuer comes close on this dimension.

For Enterprises and Corporates:

Large enterprises that operate across geographies face constant friction in treasury management, collecting revenue in multiple currencies, repatriating funds, managing FX exposure, dealing with settlement windows and bank cut-off times. USDC offers a way to unify treasury operations onto a single, programmable rail. We're seeing adoption from firms like Brex, Deel, and Gusto for payroll and corporate payments, and from companies that want to move money across subsidiaries without waiting for SWIFT to process.

For Dollar-Hungry Populations:

This is perhaps the most under-appreciated use case. In countries with high inflation, capital controls, or unstable banking systems, holding dollars is not really an investment, but a priority for survival. USDC provides a way for individuals and businesses in these markets to access, hold, and transact in dollars without needing a U.S. bank account.

Allaire has spoken about this as a continuation of American monetary policy goals. For instance, the GENIUS Act itself was partly motivated by the strategic value of extending dollar reach globally through digital means.

3. Business Model

At a high level, Circle's business model today is very simple. The target is to grow the amount of USDC in circulation, earn yield on the reserve assets backing it, and re-investing a portion of that yield into distribution partnerships and platform expansion to grow circulation further. A perfect flywheel.

However, it isn’t that simple of course. There are important nuances around distribution economics, margin structure, and the emerging revenue lines that will determine whether Circle can evolve from a one-dimensional reserve income business into a multi-revenue platform.

Reserve Income (The Core Engine)

Circle holds cash-equivalent assets, primarily short-term US treasuries and repurchase agreements managed by BlackRock to back every USDC in circulation. It earns the prevailing short-term interest rate on these reserves. In Q4 2025, the reserve return rate was 3.81%, down 68 basis points year-over-year as SOFR declined.

This is the business in its simplest form. More USDC in circulation x the risk-free rate = more revenue. In Q4 2025, total revenue and reserve income was $770 million, up 77% year-over-year, driven overwhelmingly by the growth in average USDC circulation (which ended the year at $75.3 billion, up 72% YoY) partially offset by the lower reserve rate.

The obvious bull case here is volume growth. Circle's own internal model assumes a 40% CAGR in USDC circulation, which they describe as their "conservative" base case. Third-party research CAGRs range from 25% at the low end to 90%+ at the high end, with a median around 60%.

The equally obvious risk is interest rate sensitivity. If the Fed cuts aggressively and short-term rates fall to, say, 2%, Circle's revenue per dollar of USDC roughly halves. This is the single biggest vulnerability in the current model and the reason why diversifying into non-rate-dependent revenue is strategically critical.

Distribution Costs (The Coinbase Question)

This is where the P&L gets complicated and where I think most investors should spend their time.

Circle doesn't acquire most of its USDC circulation directly. It grows distribution through partnerships with exchanges, wallets, neobanks, payment companies, and other financial institutions. Many of these partnerships involve revenue-sharing arrangements where Circle pays a portion of reserve income to the partner as an incentive to hold and distribute USDC on their platform.

The largest and most scrutinised of these is the Coinbase relationship. Coinbase took an equity stake in Circle and is the co-creator of the original Centre Consortium. Under their agreement, Coinbase receives a share of reserve income on USDC held on its platform. As Coinbase holds a significant portion of total USDC circulation, this is a material cost line. In Q4 2025, total distribution, transaction, and other costs were $461 million (roughly 60% of gross revenue).

The resulting metric that matters is RLDC margin (Revenue Less Distribution Costs). In Q4 2025, RLDC margin was 40.1%, up modestly quarter-over-quarter. For FY 2025, RLDC margin was 39.4%, exceeding the company's guidance of approximately 38%.

There are two ways to think about this. The bear case and the bull case.

The bear case is that RLDC margins stay compressed or get worse as Circle has to pay more partners to drive growth, essentially giving away the economics to grow a network it doesn't fully control. This is a structural disadvantage that Circle faces due to its position of dependency.

The bull case is that three tailwinds provide structural support to RLDC margin over time. First, growing network effects mean that as USDC becomes more dominant, new partners integrate it organically without needing incentive deals. Many products are built and launched using USDC without any commercial relationship with Circle. The stronger the network, the less Circle has to pay to grow it. Second, growth in on-platform USDC (i.e., dollars held within Circle's own infrastructure rather than on partner platforms) that carries better economics. On-platform USDC grew 5.6x YoY to $12.5 billion at year-end, representing 17% of total circulation, up from roughly 3% a year prior. Third, growth in other revenue (covered next) adds high-margin dollars on top of the reserve income base, improving blended margins.

Other Revenue (The Emerging Layer)

Circle has begun monetising transaction flows and network infrastructure beyond pure reserve income. In FY 2025, other revenue reached $110 million, exceeding their guidance of $90-$100 million. These revenues come from two buckets.

Subscription and services revenue is primarily from blockchain network partnerships. When Circle deploys USDC onto a new blockchain, it often receives both upfront integration fees and ongoing recurring revenue. Circle added 12 new chains in 2025. This revenue stream is relatively “lumpy” because of the upfront component, although the recurring base is growing steadily underneath.

Transaction revenue comes from blockchain rewards (Circle runs validator infrastructure, including a super validator on the Canton Network), USYC redemption fees, and emerging payments-related fees. The Canton Coin trading launch drove an outsized Q4 contribution.

What matters most about this revenue segment is not the dollar amount ($110M). Rather, it is that these revenue streams are high margin and scale with network adoption and transaction volume rather than interest rates. For FY 2026, Circle guided other revenue of $140-$160 million, implying 27-45% growth. I think this is conservative given the pipeline of new products (CPN monetisation, Arc Mainnet fees, StableFX), but the base is still small relative to reserve income. This segment needs to scale meaningfully before it moves the needle.

4. Product Offerings

Circle's products span four core areas today, with two emerging platform layers that are pre-revenue but strategically important to the thesis.

USDC (The Core)

This is very much the core revenue driver for the business. USDC is a fully reserved digital dollar that operates across 32 blockchain networks. Every token is backed 1:1 by cash-equivalent assets, primarily short-term U.S. Treasuries and repurchase agreements managed by BlackRock. 96% of total revenues in 2025 came from reserve income, tied directly to stablecoins, of which USDC is the largest driver by far.

The question is, what gives USDC a moat? Why can’t other players simply enter with their own stablecoins and take share?

The beauty of USDC lies with the infrastructure stack built around it.

1. Circle Mint provides enterprise-grade minting and redemption, the primary market where institutions can create or destroy USDC by depositing or withdrawing dollars through Circle's banking infrastructure.

2. Circle has facilitated over $1 trillion in mint/redeem volume since 2018, and in Q4 2025 alone, mint/redeem volume was $163 billion. This primary liquidity, backed by relationships with systemically important banks globally, is one of Circle's deepest moats.

3. CCTP (Cross-Chain Transfer Protocol) is another critical piece of USDC infrastructure. It enables native burning and minting of USDC across blockchains, eliminating the need for "wrapped" or "bridged" versions that introduce counterparty risk. CCTP volume grew approximately 640% year-over-year in Q3 2025 to $31.3 billion. By Q4, CCTP represented over 50% of all bridged volume across all assets and all bridge providers, not just USDC.

EURC (Euro Stablecoin)

EURC is the largest regulated euro-denominated stablecoin, with €310 million in circulation at year-end 2025, up 3.8x year-over-year. This is still small in absolute terms, especially when compared to USDC.

As CPN scales cross-border payments, having native stablecoin pairs for on-chain FX (dollar-to-euro, dollar-to-other currencies) becomes a building block for payments infrastructure. Circle was the first stablecoin issuer to register as an Electronic Money Institution under MiCA in the EU, which gives EURC a regulatory head start in Europe.

I’m skeptical on the take-up rate of non-USD stablecoins in an environment where even European, Asian and South American users typically use USDC/USDT.

USYC (Tokenised Money Market Fund)

USYC is a tokenised U.S. Treasury and money market product that Circle acquired through its purchase of Hashnote in January 2025. It grew to approximately $1.7 billion and became the second-largest tokenised money market fund in the world. USYC is designed to serve as yield-bearing collateral in digital asset markets.

Institutions can hold USYC to earn yield and seamlessly swap into USDC when they need cash for trading or settlement. The integration with Binance to accept USYC as collateral in June 2025 was seen as a significant milestone. Circle's long-term vision is that the architecture of "yield-bearing collateral + digital cash" will become the standard for capital markets, on both crypto-native and traditional exchanges.

Personally, I’m not convinced that either EURC or USYC will be significant contributors. I think investors have to view both of these as call options and not ascribe any value to it. For the foreseeable future, USDC is and will remain the core driver for reserve income.

Circle Payments Network (CPN)

CPN is an application layer for cross-border money movement built on top of the stablecoin network. It is essentially the SWIFT of the stablecoin world.

As of February 2026, CPN had 55 enrolled financial institutions (up from 29 in Q3 2025), with 74 more in eligibility reviews and a pipeline of over 500. It was live in 14 markets with 11 more planned. Annualised payment processing volume (PPV) reached $5.7 billion, up 68% since the prior quarter.

The initial use cases for CPN are B2B cross-border merchant settlement (businesses exportign from Asia and importing into emerging and developed markets), along with south-to-south and north-to-south remittance applications.

What makes CPN architecturally different from Visa or SWIFT is that it's an open, extensible network. Third-party developers can deploy modules onto CPN. The first third-party apps are already launching, including a trade receivable credit module. Circle has built a refund protocol (transaction reversibility) and a companion insurance protocol for underwriting reversals. These are composable building blocks that don’t exist in closed payment networks.

CPN is still not monetised yet. Circle is currently focused on growing the network and its flows, with monetisation expected to follow as scale develops. I think this is the right call strategically.

Arc (Layer 1 Blockchain)

This is Circle’s most ambitious and speculative product. Arc is a new Layer 1 blockchain purpose-built for regulated financial activity. Layer 1s are notoriously competitive. Thousands of Layer 1s have been built in the past, but as of today, only a handful have succeeded. Arc’s angle here is to include sub-second deterministic settlement finality, low-cost USDC-denominated gas fees, and configurable privacy controls with opt-in confidential transfers. To put it in layman terms, it means to be very quick, very cheap, payable in USDC for zero complexity, and to allow for privacy.

Arc launched into public testnet in Q4 2025 with over 100 companies participating including Goldman Sachs, Deutsche Bank, Visa, Mastercard, Apollo, AWS, BlackRock, HSBC, and Standard Chartered. The testnet achieved near-100% uptime, half-second settlement finality, and over 166 million total transactions. Mainnet launch is planned for 2026.

Circle is also exploring a native token for Arc to drive utility, incentives, and governance. This hasn't been confirmed, but if launched, it could represent meaningful additional value for Circle, though it also introduces complexity around token economics and regulatory considerations.

The truth is that Arc remains entirely pre-revenue and is a speculative project. It could be a potentially transformative new business segment, but I do not expect it to be a needle-mover anytime soon. I will discuss the bull and bear case for this in later segments.

Developer Tools & Infrastructure

Apart from these consumer-facing products, Circle also provides a full stack of services for developers from programmable wallets, a smart contract platform, Circle Gateway for cross-chain USDC activities, and xReserve for supporting USDC expansion across blockchain ecosystems.

These are underrated tools that help to make the rest of the product stack usable for enterprises, especially those that have never touched blockchains before. These tools are not monetised and therefore won’t show up in financial statements, but are essential to the platform strategy.

5. Moats & Differentiation

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S&P 500: +9.30%
NASDAQ: +14.30%

April was, in many ways, the mirror image of March. Both the S&P 500 and the Nasdaq just posted their best monthly performance since 2020. The S&P 500 closed the month at 7,209.01, a fresh all-time high and its first ever close above the 7,200 threshold. The Nasdaq notched 24,892.31, also a new record. The MAG7 gained over 16% on the month, semiconductors rallied an extraordinary 37%, and communication services led all sectors with an 18.4% gain.

The pivot point was April 7th-8th, when President Trump announced a two-week ceasefire with Iran. As I discussed in previous portfolio reviews, the silver lining in this crisis is the fact that these events could all be erased by a singular individual.

Interestingly, in the final two days of April, the war premium was creeping back in. Brent briefly touched $126 per barrel on April 30th, the highest level since 2022, as US-Iran negotiations stalled, the Strait of Hormuz remained functionally closed, and Trump signalled an extended blockade. Stocks and Oil are up at the same time, which makes it even more confusing. I would not be surprised to see another bout of volatility if the ceasefire formally breaks down.

But as I have done in previous months, my decision in geopolitical uncertainty is always to buy businesses that do well regardless.

Portfolio Performance (Since Inception)

(Portfolio Inception Date: 27th October 2023)

Portfolio: +163.05%

S&P 500: +72.48% (Outperformance: +90.57%)

NASDAQ: +99.49% (Outperformance: +63.56%)

Portfolio Performance (YTD)

Portfolio: -11.50%

S&P 500: +4.24% (Underperformance: -15.74%)

NASDAQ: +6.34% (Underperformance: -17.84%)

Portfolio reviews are exclusively for paid subscribers. If you would like to gain access to my portfolio holdings, deep dives, and tons of other articles, do consider subscribing.

I post several articles per month, ranging from extensive 50-60 pager deep dives on the most interesting businesses I can find, to shorter articles on valuations, market musings and specific verticals/geographies.

In the past month, I’ve shared these articles with subscribers:

Free subscribers get access to posts too, of course, with free earnings reviews and occasional articles.

In the next few segments, I discuss my general thoughts on the market, portfolio companies, performance, portfolio allocation and portfolio changes.

General Thoughts on the Market & Performance

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At the time, the stock traded at $77. The stock went on a strong run from then till September 2025, with the most recent high at $199.30. In the past 8 months, the stock has seen an incredible drawdown, trading as low as $77 (again) in late March, down over 61% from 52-week highs.

In this piece, I will give an update on my view of Sea Limited today and my plans for the stock moving forward.

Quick Summary of Initial Sea Limited Thesis

This was my initial thesis for Sea Limited in September 2024 when I published the write-up. Today, I believe the points remain.

Summary Update

In the past quarter, there have been several events and updates worth discussing. Let’s break it down below.

FY 2025 Financials:

This was, by almost all metrics, the best year in Sea’s history. FY 2025 revenue grew 36.4% YoY to $22.9B, while gross profit grew 42.2% to $10.2B, and net income reached $1.6B versus just $447.8M in 2024. Adjusted EBITDA was up 75.2% to $3.4B.

Shopee delivered $16.6B in revenue (+33.4% YoY) and $880.6M in Adjusted EBITDA, up from just $155.8M in 2024. Management shared that Shopee now serves 400 million active buyers and 20 million sellers, with FY 2025 GMV reaching $127B.

Monee was the standout segment in 2025. Revenue grew 60.1% YoY to $3.8B, with Adjusted EBITDA crossing $1B for the first time. The loan book reached $9.2B, up 80.4% YoY, while NPL90+ stayed disciplined at 1.1%. Over 20M unique first-time borrowers were added during the year, reaching a total of 37M active credit users.

Garena also had its best year since 2021, with bookings up 37% YoY to $2.9B and Adjusted EBITDA of $1.7B. There were over 100 million daily active users on average across the entire year.

Capital Allocation:

Management announced a $1B share buyback in November 2025, the first material capital return in Sea's history. I thought this was a significant signal that the company has crossed into a "mature compounder" phase rather than just a hyper-growth story. Cash and equivalents continued growing to over $11B.

2026 Guidance:

Management guided for Shopee GMV to grow ~25% YoY in 2026, which was generally a beat on consensus estimates. They also guided for Monee loan book to grow meaningfully faster than Shopee’s GMV. Garena bookings to grow double digits. Group-level adjusted EBITDA guided to be “at least flat” versus 2025.

Why Is The Stock Down?

Let’s address the elephant in the room. The sell-off, in my view, is a combination of three forces hitting Sea simultaneously.

1. 2026 EBITDA guidance disappointed

I believe the market had priced in continued operating leverage, which would have required growing Adj. EBITDA numbers in 2026. By guiding for “at least flat” EBITDA on top-line growth of 25%, it meant an EBITDA margin of ~0.7% of GMV this year, versus the Street’s prior expectations of ~1.2%.

2. Competition from TikTok Shop

Adding to the fear, TikTok Shop’s growth in the past few years have been nothing short of staggering, leading to fears that it could be wrestling market share from Shopee. J&T Express, the main logistics partner of TikTok Shop has seen an acceleration in growth over the past year or so. The market has largely viewed Shopee’s investment in its VIP program, logistics investment and AI capabilities as an act of desperation to defend market share.

3. Geopolitical Worries + Oil Concerns

The Iran-U.S. war which ultimately led to the SoH closure has hit Southeast Asia with over two-thirds of the region’s crude oil imports transiting through the SoH. About 90% of the oil and 83% of the liquefied natural gas that normally pass through the Strait of Hormuz are bound for Asia. This has led to fears of a slowdown in general consumption across the region.

These headwinds are real and could persist. However, none of these headwinds change the core thesis, as I will discuss below.

Addressing the Concerns

Let me address each of these one by one, because I believe the market is significantly mis-pricing the situation.

On 2026 EBITDA Guidance

The core bear thesis and fear that has shrouded the business due to the weak EBITDA guidance is that the margin compression is structural and permanent. It assumes Shopee is being forced into permanent reinvestment to fend off TikTok Shop and that terminal margins might be closer to 1% of GMV rather than the 3% or higher that bulls had hoped for.

This cannot be further from the truth. When we look at the e-commerce space and where terminal margins might be heading, it’s hard to avoid China, where the space is intensely competitive and probably 5-10 years ahead of Southeast Asia. There are 4 main players in the region, Alibaba, JD, PDD and ByteDance. Despite the fierce competition, it is notable that during the period of competition between 2022 to 2024, they ran at 2.5%, 1.1%* and 1.9% EBITDA/GMV.

*JD’s 1.1% here is an outlier due to its focus on 1P, electronics and home appliances focus where margins are materially lower.

Shopee as a 3P marketplace with a much higher mix of apparel, beauty and long-tail SKUs which carry far higher take rates and margins, should be compared to Alibaba and PDD. As long as TikTok Shop remains rational in pricing and competitiveness, we should see Shopee’s margins trend towards 2% or higher in the coming years. (More on this later)

On TikTok Shop Competition

This is probably the largest concern for investors today, and is directly tied to the above point. Let’s look at what the data says.

Alternative data (Yipit) suggests that TikTok Shop's GMV growth in Southeast Asia has decelerated materially over the past few quarters, from ~70% YoY in Q2 2025 down to ~30% YoY by late 2025. That's only modestly above Shopee's own ~25% YoY growth. More importantly, TikTok's relative market share versus Shopee in Indonesia, the region's largest market, has effectively flat-lined over the past year. (This can be seen in Momentum Works’ report too)

Of course, this data could be wrong. So let’s look at another key tell. TikTok Shop has been raising fees in the past year, following Shopee’s footsteps within days. This is a sign of stabilising competition, not one of an aggressive competitor trying to capture share at all costs. This was also corroborated by management’s comments in Q3 2025 and Q4 2025’s earnings calls where they specifically mentioned:

“What we see is a relatively stable competitive landscape. I think as you can probably observe as well from your own sources, we didn’t see any particular market behaving differently from another. The trends in competitive intensity and behaviour have been fairly consistent across Southeast Asia.”

- Sea Limited Q3 2025 Earnings Call

When we look at absolute numbers, the picture isn’t as scary as the headlines suggest too. TikTok Shop did ~$45B in GMV last year versus Shopee at ~$127B. Internal targets at TikTok Shop reportedly point to ~50% growth for TikTok Shop in 2026, while Shopee is targeting ~25% growth. If both of these targets play out, TikTok would add ~$22B in GMV as compared to Shopee’s ~$32B. Shopee is still growing faster in absolute terms and increasing their competitive lead in terms of logistics.

There is also a more nuanced point worth making here. Most of TikTok Shop's growth is coming from rural areas and Tier 2/3 cities, consumers who are entirely new to e-commerce. Many of these are impulse buys triggered by watching livestreams. Crucially, this is a segment of the population that Shopee had never been able to acquire due to the higher relative shipping costs, lower discretionary income and lower purchase frequency. In this way, TikTok Shop is likely expanding the overall e-commerce TAM and pie, rather than eating Shopee’s lunch directly. As these consumers mature into savvier shoppers, many will inevitably find their way onto Shopee too.

What about J&T’s growth in parcel volume share within SEA, with TikTok Shop being the major contributor?

The most common pushback, which I myself have highlighted, is around J&T Express’ reported parcel volume growth of ~74% YoY in Q4 2025. Let’s break down the growth here:

• Underlying SEA e-commerce parcel market growth: If J&T had simply held share flat at 27% (2024 levels), it would have grown 39% just by riding the tide.

• Per J&T's own 1H25 prospectus filings, its market share rose from 28.6% in 2024 to 34.4% in 2025. That's another ~28% of growth from share gains alone.

• Non-Platform Parcels: J&T's non-platform parcel business has grown materially in the past year and possibly accounts for ~5-10% of growth.

When we put all these together, you can see why J&T’s headline growth number is a misleading proxy for TikTok Shop’s underlying performance. Adding the numbers up, it reconciles pretty well, without requiring TikTok Shop to be growing at a scary rate that the headline implies.

The SEA logistics market is consolidating around J&T as smaller players exit, and J&T is leveraging its scale to expand into adjacent non-platform business lines. Neither of these is a Shopee bear signal.

If anything, the competitive backdrop appears to be improving, not deteriorating. And if that is correct, then Shopee’s current reinvestment cycle could be an offensive choice to widen the moat while competitors are seeing slowing growth, rather than a defensive scramble to stay alive.

On Geopolitics & Oil

The Iran-U.S. conflict and the SoH disruption are real, and it's affecting consumer sentiment across the region. With ~2/3 of SEA's crude oil imports transiting through the SoH, a slowdown in regional consumption is a legitimate near-term concern.

That said, two things are worth keeping in mind. Firstly, this is a macro headwind that affects all consumer-facing businesses across the region. It is not Sea-specific, and Sea is no more exposed than any other consumer business in SEA. If anything, e-commerce tends to be more resilient than offline retail in downturns due to its discount-led value proposition.

Secondly, my thesis on Sea is decade-long. I've said before that I believe Sea will be the first SEA-headquartered trillion dollar business. That trajectory is built on the structural digital adoption of 600M+ people, not on whether oil prices spike for a few quarters. If the macro environment remains weak, Sea will face short-term revenue and credit risks at Monee. But the long-term opportunity is unchanged, and a weaker macro environment historically favours the strongest players in any market, which Sea undeniably is in SEA.

Valuation Today

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In this piece, I wanted to cover something slightly different from usual.

While I often share deep dive research reports, I thought it might be helpful for some of you if I were to document my own research process too.

Here’s my no-nonsense approach to research as a long-term minded investor.

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Step 1: Always start with the business

Before I look into valuation, stock prices, sentiment etc…

I always ask these 5 simple questions:

1. What problem does this company solve?

This sounds basic, but you'd be surprised how many investors can't articulate this clearly for stocks they own. If I can't explain the problem the company solves to a 10-year-old, I probably don't understand the business well enough to invest in it.

The best businesses solve painful, recurring problems that customers can't easily ignore. The more painful and unavoidable the problem, the more durable the business tends to be.

2. How does it truly make money?

Revenue composition is massively important for me. I want to understand the actual mechanics of monetisation. Is it a subscription model with predictable recurring revenue? A transactional model where revenue scales with volume? A platform model that takes a cut of every transaction? An advertising model dependent on eyeballs? Each model has very different characteristics in terms of predictability, scalability, and resilience during downturns.

I dig into the revenue breakdown by segment, geography, and customer type. I want to know if 40% of revenue comes from a single client (a major red flag) or if it's diversified across thousands of customers. I also look at how the company prices its product (per seat, per transaction, usage-based), because pricing power is one of the clearest indicators of a strong competitive position.

3. Why do customers choose this business over other alternatives?

This is where I start thinking about differentiation. I compare the business to its competitors, look through NPS scores, GlassDoor ratings, and more. I also look at churn rates and net revenue retention rates, if existing customers are spending more each year, it is a good indicator that they love the product.

4. What is the company’s moat?

The company’s moat determines how long it maintains its competitive advantage. As a long-term investor, this is possibly the most important question to ask.

I focus on the 5 main moats, network effects, switching costs, intangible assets, cost advantages and efficient scale. There is a 6th that isn’t a traditional moat, but one that I view to be the greatest moat of them all, and that is innovation. The 5 main moats are static moats that have been built in the past. Innovation makes a business a moving target.

The best businesses have multiple moats that are widening over time. I pay close attention to this distinction as a business with a large but narrowing moat is more often that not, a value trap.

5. What would kill this business permanently?

As Charlie Munger said: “Invert, always Invert”. Rather than focus on what can go right, it is sometimes more important to focus on what can go wrong. This question forces myself to imagine a scenario where the stock goes to zero and working backwards from there.

What would have to happen? Regulatory action that bans the product? A technological shift that makes it obsolete? A competitor that offers the same thing for free? Customer behaviour shifting away entirely?

The key word here is “permanently”. Every business goes through cycles of temporary uncertainty, be it recessions, bad quarters, PR crises etc. This question focuses on existential risks. If the only scenarios I can construct for permanent destruction are extremely low-probability events, that's a good sign. If I can easily imagine a realistic path to obsolescence within 5-10 years, that's a dealbreaker for me.

Oftentimes, just answering these 5 questions, gives me a very good understanding of whether to proceed with my analysis. For instance, if a business has no moat, or makes money in a non-sustainable manner, it would make the decision very easy for me. I simply move onto the next.

Step 2: Company History

The next step for me would be to look deeper into the history of the business.

It is my belief that truly understanding the current context of the business and structure of the company is only possible after learning about how the business got to this stage.

In the past, this would include tons of google searches, reading biographies, wikipedia pages, company filings and even books.

However, with LLMs today, it all begins with a prompt. This is what I like to use:

“Give me a comprehensive, chronological company history of [Company Name] from its founding to the present day [Insert today’s date]. I want this to be extremely thorough and detailed, written at the level of a professional investment research report or business case study, not a short summary.

Include and clearly explain the founding story, key founders and early executives, evolution of each business segment, major strategic decisions and pivots, important product launches, capital markets events, crises and downturns, key partnerships and acquisitions, as well as recent strategic direction.

Do not omit uncomfortable details. Treat this as a complete history chapter for an investor who will challenge missing years, unclear leadership changes, and vague claims. Use high-quality primary sources wherever possible (SEC filings, annual reports, earnings call transcripts) and provide citations for important claims.”

Importantly, this is just the starting point for my research. Once I find a thread I can pull on, I then re-prompt to find out more details regarding that specific event and/or individual for instance.

What I’m actually looking for in the company history includes:

• Founder-Market Fit

  • Did the founders start this company because they deeply understood the problem, or was it a pivot from something unrelated? Companies born from genuine domain expertise tend to make better long-term strategic decisions.

• Capital Allocation Track Record

  • How has the company deployed capital over time? Were acquisitions value-accretive or dilutive? Did they buy back stock at good prices or at the top? Did they invest in R&D consistently or slash it during downturns? A 10-20 year track record of capital allocation tells me more about management quality than any single earnings call.

• Crisis Behaviour

  • How did the company navigate past recessions, competitive threats, or operational failures? Companies that emerge from crises stronger, through management decisions like cutting costs intelligently, gaining market share through short-term pain, or making opportunistic acquisitions for instance, tend to be run by exceptional management teams.

• Strategic Consistency

  • Has the company stayed true to its core mission, or has it chased trends? Some pivots have been brilliant (Netflix from DVDs to streaming), but most diversification efforts destroy value. Businesses must have a coherent strategy that ensures they stay the course.

I often feed this prompt into multiple LLMs as they tend to come up with differing approaches and results. Regarding deep research, my favourite* LLMs in order are ChatGPT, Claude, Grok, followed by Gemini.

*Note that this changes often as LLMs update their models and this is as of today’s post.

Step 3: Industry Landscape

Once I’ve grounded myself in the company’s core business and historical evolution, I shift my focus onto the broader ecosystem it operates within.

This is absolutely crucial in contextualising the company’s position.

After all, even a great business can falter if it operates in a shrinking market or gets out-competed by younger, hungrier competitors.

These are the key questions I ask:

1. What’s the total addressable market and the growth trajectory of this industry?

I want to understand both the current market size and, more importantly, the direction. A $50 billion market growing at 15% annually is a very different investment proposition than a $500 billion market growing at 2%. Both can produce great investments, but they require very different frameworks. Personally, as a growth investor, I look for large and growing markets. Another important point is penetration rate; specifically, how much of the TAM has been captured? Early-stage markets with low penetration rates offer the most explosive growth potential, but they also carry more uncertainty.

2. Who are the key players, and how do they stack up against each other?

Here, I map out the competitive landscape in detail. Market share data, growth rates relative to competitors, profitability comparisons, and product differentiation. I want to understand the industry structure. Is it a winner-takes-all market, a duopoly, or a fragmented market that is set for consolidation? Each structure implies different competitive dynamics and margin trajectories.

3. Are there regulatory tailwinds or headwinds?

Regulation can make or break an industry. Some regulations create barriers to entry that protect incumbents (banking, healthcare). Others can disrupt entire business models (data privacy laws impacting ad-tech). I pay particular attention to regulatory direction. Is the trend towards more or less regulation, and how does the company I’m researching stand to benefit or suffer? (Also take note that different geographies have very different regulations by sector)

4. What could potentially disrupt the industry?

I think about this from a first-principles perspective. What underlying technology, consumer behaviour, or economic shift could fundamentally change how this industry works? For example, AI is currently disrupting software per-seat businesses, electric vehicles are disrupting traditional ICE automakers, digital payments are disrupting traditional banks and legacy payments rails, and quick commerce is set to disrupt traditional grocery models and physical retail to a further extent. The key here is to understand whether the company I'm researching is the disruptor, the disrupted, or relatively insulated.

To gather this, I start with high-level overviews from sources like McKinsey reports, Grand View Research reports, industry associations, slide decks from the company or competitors. I also utilise LLMs, with a prompt like this:

“Provide a detailed analysis of the [Industry Name] as of [today’s date], including market size, growth projections (CAGR over 5-10 years), key trends, regulatory environment, and major competitive forces using the most suitable framework. Focus on [Company Name]’s position within it, comparing it to top competitors like [list 3-5 relevant peers]. Use data from primary sources such as Gartner, IDC, SEC filings, earnings reports, commentary and call transcripts, and recent analyst reports, with citations.”

With this data in hand, I begin to gain a much better understanding of the business model, competitive advantage of the particular company, and whether there is a case to be had for investing.

Step 4: Financials

Numbers aren’t everything, but they play a large part, especially with regard to valuation. Also, management and analysts may lie, but numbers don’t lie.

I dive into the financials. My favourite tool here is Fiscal AI. There are of course sources where you can access company financials for free such as Yahoo Finance, Morningstar, etc…

Personally, I use Fiscal AI as they provide up to 20 years of data in a very standardised and easy to use format. I highly recommend using them if you aren’t already doing so.

For those interested, I have an affiliate link that gives you 15% off the subscription pricing. Or, simply use the free version which works great too.

Here, I review the last 5-10 years of the 3 core financial statements (Income Statement, Balance Sheet, Cash Flow Statement). I focus particularly on top-line growth rate, which I utilise to judge which part of the business life cycle it is in.

My favourite businesses to invest in lie within self funding and operating leverage. These are typically businesses that are inflecting towards profitability or are at the early stages of operating leverage in the business.

Another key focus is with regard to margins. For industry disruptors, I would compare to industry heavyweights to get a gauge of where the optimal margin profile would be. This will be very helpful in the valuation stage of the analysis.

Other key areas of focus:

• Revenues: Are they recurring or one-off? Is there geographic diversity? Is there significant customer concentration?

• Profitability: Have margins expanded over time? What is the optimal margin profile for the business? Is there room for operating leverage?

• Efficiency & Returns: This goes more for businesses that are in Stage 4 and 5 of the life cycle chart above. I focus on ROIC/ROE, working capital cycles. For tech businesses, I look at R&D/CAPEX as % of revenue.

• Balance Sheet: How much cash does the business have? Are their debt levels elevated? Is it a business that requires enormous leverage?

• Cash Flows: Especially if the business is unprofitable, I want to ensure they are free cash flow positive or reaching there imminently.

• Stock Based Compensation: Is it egregious? How is management compensated, is it based on top or bottom-line or stock price performance?

This step takes the longest, but is non-negotiable for me. I’ve avoided many losses by spotting eroding fundamentals early.

Step 5: Management

Of course, numbers only tell one side of the story. Management is arguably the most important for me.

Think of all the successful businesses over the years. Each of them have been run either by extraordinary entrepreneurs or ruthless executioners. Think Apple, Microsoft, Tesla, Google, Nvidia. Each of these businesses are closely tied to one or two individuals who have been the face for decades.

Ultimately, businesses are people-driven, so I scrutinise the stewards of capital very closely.

I profile the C-suite and board:

• Is the founding team still in-charge?

• Read as many news reports, especially if they are first-hand interview transcripts.

• Watch as many interviews of the C-suite/Board as possible, going back 10-20 years if possible. Understand how their views have changed over time. Are they trustworthy people?

• Is the board filled with “Yes Men”? Or do they constantly challenge decisions? I want a board that is intellectually honest and willing to be contrarian.

• Does the C-suite have skin in the game? Is the company stock the majority of their net worth?

• How do they handle tough questions? Do they give direct, thoughtful answers, or do they deflect, ramble and redirect to pre-planned talking points?

• Do they under-promise and over-deliver, or vice-versa? I go back through old earnings call transcripts and compare forward guidance to actual results.

• How do they discuss failures? Every company has bad quarters, failed products, or strategic missteps. Leaders who own these mistakes openly and explain what they learned earn my trust. Those who blame macro conditions, one-time events, or "transitory" factors for repeated misses do not.

Step 6: Valuation & Scenario Modelling

The final decision to invest, often comes down to valuation. More specifically, investors should warrant a margin of safety when investing.

Valuation isn’t precise, but is often probabilistic. There are a huge variety of different methods to value a business, but I do believe that every business has an optimal way of being valued.

For instance, diversified conglomerates like Sea Limited and Mercado Libre, in my view, should be valued through a Sum-of-the-Parts valuation model. DCFs are generally one of my favourite methods and is considered by many to be the gold standard. Multiples is another method to value, through P/E, P/S, EV/EBITDA and other various ratios.

Valuation often determines the amount of size I deploy into a stock, and I think it is absolutely key to nail this down.

Choosing the Right Valuation Method:

Discounted Cash Flow (DCF):

The DCF is generally one of my favourite methods and is considered by many to be the gold standard. The core premise is simple: a business is worth the sum of all its future cash flows, discounted back to present value. However, this is a very subjective process and that is where numbers tend to differ.

My approach to building a DCF:

• Revenue projections: I start with the company’s own guidance, then cross-reference with industry growth rates, competitive dynamics, and historical trends. I build a 10-year explicit forecast period, with revenue growth rates that gradually decelerate towards the industry’s long-term growth rate. The key is to temper expectations and never assume hyper-growth persists indefinitely.

• Margin assumptions: I project margin expansion (or contraction) based on the operating leverage analysis from Step 4, benchmarked against mature peers. In certain cases, where I expect a disruption in the business model, terminal margins could be higher than

• Discount rate: I use WACC (weighted average cost of capital) as my discount rate. For most established companies, this falls in the 8-12% range. For higher-risk growth companies, I use a higher rate (12-15%) to account for the additional uncertainty. Some investors use a flat 10% as a simplification. I don’t disagree with this approach as long as you’re consistent.

• Terminal value: This is the most important and most dangerous part of the DCF, as it typically drives 60-80% of the total valuation. I use both an exit multiple approach and a perpetual growth rate approach, and I check them against each other. I never use a terminal growth rate above 3-4% (roughly in line with nominal GDP growth), and I sanity-check the implied exit multiple to make sure it’s reasonable relative to the company’s peer group.

Multiples-Based Valuation:

Multiples is another method to value businesses, through P/E, P/S, EV/EBITDA, and other various ratios. While simpler than a DCF, multiples can be misleading if used sloppily. The key is selecting the right multiple for the right type of business:

• P/E works well for mature, profitable companies with stable earnings.

• EV/EBITDA is better for companies with varying capital structures, as it strips out the effects of debt and taxes.

• P/S (price-to-sales) is useful for high-growth companies that aren’t yet profitable, but should always be used alongside a clear path-to-profitability analysis.

• P/FCF (price-to-free cash flow) is my preferred multiple for companies that are already generating meaningful cash flow as it cuts through accounting noise.

I personally always compare multiples to historical averages and peer comparisons. For instance, where has the stock traded over the last 5-10 years? How does this compare to similar companies in the space? A stock trading at 30x earnings might look expensive in a vacuum but could be cheap if the company is growing twice as fast as peers trading at 25x.

Sum-of-the-Parts (SOTP):

For diversified conglomerates like Sea Limited and Mercado Libre, I believe SOTP is the most appropriate approach. These companies have distinct business segments with very different growth profiles, margin structures, and comparable companies. Valuing them on a blended multiple obscures the true value of each piece. I value each segment independently using the most appropriate methodology (DCF or multiples), sum the values, subtract net debt, and divide by shares outstanding.

Valuation often determines the amount of size I deploy into a stock, and I think it is absolutely key to nail this down.

Step 7: GabGrowth Quality Score

I use a checklist scoring system to rate stocks. The best investments have common, durable traits. I’ve used what I found over many years to come up with this and enables me to separate the good from great businesses.

I’ve written a full piece (FREE) on this that you can view below.

Step 8: Portfolio Fit & Final Decision

Ultimately, the final decision comes down to this step. While I’m not against investing a huge portion of my portfolio into a particular sector if I believe there are significant tailwinds going for it, I do need to compare the new company I’m adding to others that are already in the portfolio.

Every dollar I allocate to a new position is a dollar I'm not adding to an existing holding. So the new company doesn't just need to be "good", it needs to be better than adding to my current highest-conviction positions.

Regarding position sizing, I use a tiered approach based on conviction level and risk profile. For a high-conviction idea with a high margin of safety, I’m willing to size it at over 5% of the portfolio to start and letting it compound from there. I also tend to size up over time as the business proves itself through strong earnings beats. Each quarterly report is an opportunity to test the thesis. If the company is executing as expected or better, I'll add to the position on pullbacks. If the thesis is deteriorating (for e.g., slowing growth, compressing margins, poor management decisions), I’ll reduce or exit regardless of what the stock price is doing.

I will let my positions grow over time and am not afraid for a single name to become a substantial portion of my holdings. However, I will typically try to limit any one holding to around 30% of total portfolio size. Beyond that, the position-specific risk becomes too large regardless of conviction. If a position naturally grows past 30% through price appreciation, that's when I start trimming.

Final Thoughts

I hope this sharing is helpful for some of you who would like to get into the habit of researching stocks. I’ve always believed in the Peter Lynch saying:

“The person that turns over the most rocks wins the game”

This process is tedious and extremely tiring, but also very rewarding. A thorough analysis takes me anywhere from a few days to several weeks, depending on the complexity of the business. But rushing through it defeats the purpose entirely. The whole point is to build conviction, as it is the only way to hold through volatility, add on weakness and ignore the noise.

A large part of my investing success has been putting in the hours to study businesses. Less than 10% are investable ideas, but every single one has lessons to be learned. The companies I pass on sharpen my pattern recognition for the companies I eventually invest in.

Thank you for reading!

-Gab

These are not banks, nor PayPal clones, and definitely not crypto projects.

Instead, they are ecosystems that began as ride-hailing apps or e-commerce platforms with the ultimate goal of becoming the primary financial institution for hundreds of millions of people who have never had a bank account to start with.

The scale of the opportunity is massive. More than 70% of Southeast Asia’s adult population remains either unbanked or underbanked, lacking access to credit, insurance, investments and even basic savings products.

The companies who recognised this earliest have now built substantial businesses off the back of this, compounding at extraordinary rates.

Monee, Sea Limited’s FinTech arm, grew its loan book by over 80% in 2025 to reach $9.2 billion. GrabFin, Grab’s FinTech arm ended the year with a loan portfolio larger than $1 billion. GCash has over 90 million registered users in the Philippines, a country of 115 million people. MoMo in Vietnam has over 40 million users while Indonesia has a flourishing FinTech landscape with Monee (owned by Sea Limited), GoPay (owned by Gojek), Dana and OVO (owned by Grab) sharing the spoils.

In this piece, we will discuss the Southeast Asian FinTech landscape. Specifically:

• Who the players are

• How they differ structurally

• Where the competitive edge is being built

We will then move from the macro context down to individual company profiles, and close with a framework for thinking about this space as an investor.

Why This Market Is Different

Most Western fintech narratives are about convenience. The winners are typically players that make it slightly easier to move money that people already have access to.

However, in Southeast Asia, it’s a different story. It is more about access than convenience. For a delivery driver in Jakarta or a market vendor in Ho Chi Minh, a digital wallet is not just a better version of what they already have, but rather the only formal financial product they have ever used, or have access to.

To make this clear, here’s an example. In the West, companies like PayPal, Block or Apple have succeeded by making it slightly easier or cheaper to move money that people already had sitting inside the banking system.

In Southeast Asia, most consumers did not have bank accounts, credit histories, or even reliable ways to store money digitally.

That is why companies like Sea Limited, Grab and GCash did not start by competing with banks. They started by solving everyday problems such as ride-hailing, food delivery or e-commerce. Only after they had millions of users transacting on their platforms did they begin layering financial services on top.

Why does this distinction matter so much?

When a company acquires a customer in an underserved market, the switching costs are high because there is no alternative. There is often no incumbent to displace (the incumbent is cash).

Because these platforms often provide the first credit record a user has ever generated, the data moat compounds with every transaction. Every loan taken and repaid, wallet top-up, and transaction taken slowly builds a credit profile that traditional banks have no access to and competitors find difficult to replicate.

The regulatory environment has been much more constructive than many probably expect. While Southeast Asia is much less developed than most countries globally, many of the governments (Indonesia, the Philippines, Singapore, Vietnam, Malaysia) have all introduced digital banking license frameworks in recent years that give ecosystem players like Grab and Sea a regulated pathway into deposits and lending without having to acquire legacy banks.

This has allowed SuperApps like Grab and Sea to formalise their financial operations, fund their loan books at lower cost, and access interbank liquidity, dramatically improving the unit economics of lending over time.

The Players

There are several players in this space, some of which operate in individual countries while others dominate across the region’s key markets. Each of these companies have a different anchor product, value proposition and competitive moat. In this section, I intend to breakdown the differences between each of them.

Monee (Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam, Taiwan, Brazil)

We have to start with Monee. It is by almost any measure, the most advanced digital financial services operation in the region. Monee began as AirPay, a simple top-up feature for Garena and subsequently ShopeePay, a wallet bolted onto Shopee’s e-commerce platform. However, it has since evolved into a full-fledged consumer and SME credit business, which is now Sea’s fastest-growing division and perhaps the most strategically important one.

Sea runs 3 main divisions. The largest, Shopee is the leading e-commerce business in the region with over 400 million active buyers. The most profitable division is Garena, their gaming unit that is responsible for the most played mobile game in the world, Free Fire. Monee is the newest segment and the fastest growing.

Since 2016, Monee has grown its revenues at a 105% CAGR, roughly doubling each year. Last year, it brought in $3.8B in revenues, with a 25.6% operating margin on a segment basis. This meant it accounted for nearly half of Sea’s entire EBIT for 2025.

At the end of 2025, Sea disclosed that it had over 37 million credit users on its platform. Importantly, despite the massive user base, there is still much room for growth. Shopee has 400 million active buyers and 20 million sellers that generate a continuous stream of target users for the business.

Apart from this, this massive user base also generates a constant stream of behavioural data that is likely to be immensely useful for Monee. For instance, purchase frequency, basket size, repayment history on Shopee PayLater, merchant cash flow patterns, which Monee can use to underwrite credit at a scale and accuracy that no traditional lender can match.

Sea now has a loan book in excess of $9.2 billion, while growing at 80% YoY. Despite the high growth rates, Sea maintains a very healthy 90-day non-performing loan (NPL) ratio of just 1.1%. This is a signal that the credit model is working even as the platform pushes into broader applicant pools and non-Shopee channels. It also has a deposit base of $3.8B, up 40% YoY from the previous year’s $2.7B.

A notable strategic shift in 2025 was the move from an invite-only lending model to an "all can apply" approach. Management opened the doors to everyone, and default rates did not move. They attribute this to Shopee's transaction data feeding AI underwriting models that process purchase patterns, return behaviour, payment timing, and browsing history through transformer-based models trained on long-sequence behavioural data.

This represents a 46% deposit-to-loan ratio which means nearly half of the on-book loan portfolio is being funded by deposits that probably cost Monee somewhere in the 1-3% range. The other 54% is funded out of Sea’s $11B cash pile or other sources, capital that could otherwise be earning a return elsewhere.

Management also noted on the most recent Q4 2025 earnings call that AI-assisted underwriting is enabling expansion to borrower profiles that were previously considered too risky.

Of note, in terms of risk, is that the $9.2B is largely on-book loans, which means a relatively capital-intensive structure. Just $1B of that $9.2B reflects a capital-light structure where Monee originates and services loans while offloading credit risk to third-party investors.

The off-Shopee expansion is worth watching closely. Off-Shopee SPayLater loans surged over 300% year-on-year in Q4 2025 and now make up more than 15% of the portfolio, with roughly 30% usage penetration in Malaysia. This is the key metric for whether Monee eventually gets valued as an independent fintech or remains tethered to Shopee's GMV growth rate. The BCL (Buy-Consume-Later) product for offline retail and direct consumer financial products are the vectors for this expansion.

One area that deserves attention is credit loss provisions, which surged 76.7% to $1.4 billion in FY2025. This outpaced even the 80% loan book growth, which is why Adjusted EBITDA grew only 40% on 60% revenue growth. The NPL ratio is stable, but the provision amount has gone up massively. This has not been stress-tested by a severe regional macroeconomic downturn or rapid FX deterioration. The loan book is largely unsecured consumer credit across emerging markets (Southeast Asia and Brazil), and it is approaching $10 billion in scale. As long as the NPL ratio holds, the provision build is just the cost of growth. If it does not hold, the capital intensity of the on-book model could become a vulnerability.

Long-term, the ideal scenario would be for Monee to become a marketplace for credit, growing the off-book ratio (currently just $1.0 billion of the $9.2 billion total) and enabling it to improve return on equity as the book scales. Management has guided for Shopee GMV growth of 25% in 2026, with Adj EBITDA no lower than 2025 in absolute terms. This implies Shopee margin compression as subsidies ramp, but Monee's continued scaling should partially offset that at the group level.

GrabFin (Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam)

The second largest player that also operates on a regional basis is GrabFin, a subsidiary of Grab. Grab is the leading ride-hailing and deliveries player in the region with over 50 million monthly transacting users on its platform. It commands nearly 60% market share in both categories and is a household name.

Grab's financial services strategy is structurally different from Monee's in that it is deliberately multi-entity. Rather than building everything under a single fintech brand, Grab operates a layered system. GrabFin handles lending to its ecosystem partners (drivers, merchants, users), while GXS Bank (Singapore, with Singtel) and GX Bank (Malaysia) operate as fully licensed digital banks, and Superbank (Indonesia, 37.88% effective equity stake) handles deposits and credit locally.

Grab ended 2025 with a gross loan portfolio of $1.3 billion, with a net loan portfolio of $1.18 billion after provisions, up 120% year-on-year. Customer deposits across GXS Bank and GX Bank grew to an all-time high of $1.6 billion at end-Q4, up from $1.2 billion a year earlier. Notably, deposits dipped to $1.31 billion in Q3 2025 from $1.54 billion in Q2 as Grab proactively cut promotional deposit rates to manage funding costs. The Q4 recovery to $1.6 billion on the back of customer growth rather than rate competition is a healthier trajectory.

The deposit base now serves 7.4 million customers across the three banks. Importantly, there is a very clear cross-sell efficiency here. 76% of GXS Singapore depositors, 93% of GX Bank Malaysia depositors, and 60% of Superbank Indonesia depositors were already existing Grab users. This means Grab is converting super-app engagement into banking relationships with minimal incremental customer acquisition cost.

Revenues have grown at a 75.6% CAGR since 2022. However, Grab’s financial services segment remains unprofitable with a FY2025 adjusted EBITDA of -$110M. This is in comparison to Monee’s FY2025 adjusted EBITDA of $1.02B.

There are several reasons for this disparity.

Firstly, Monee had a five-year head start. Sea started building AirPay in 2014 for Garena top-ups. By 2019, they rebranded to ShopeePay and began embedding credit directly into checkout flows. By the time Grab got its Singapore banking license in 2022, Monee already had a multi-billion dollar loan book across seven markets.

Secondly, Monee is not just a bank that happens to be connected to an app. It has designed itself to be a financial layer embedded inside Shopee where credit exists to drive more Shopee transactions. SPayLater increases the basket size and purchase frequency, and seller loans keep inventory flowing. Therefore, every Shopee user (buyer and seller) is a potential Monee customer without any incremental customer acquisition cost.

GXS is structurally a standalone digital bank that happens to be owned by Grab and Singtel. It can be accessed through the Grab app and uses Grab’s data for underwriting. However, the banking product doesn’t exactly drive more rides or food deliveries the way that SPayLater for instance drives more Shopee orders. There is no closed-loop commerce flywheel to drive deposits and loans. Hence, GXS has to compete for deposits against the likes of traditional banks like DBS, UOB and OCBC in Singapore by offering promotional rates which is a traditional banking acquisition strategy, not an ecosystem play like Monee.

Thirdly, Shopee processes 13.9 billion orders a year across 400 million active buyers and 20 million sellers. Each of these transactions generate SKU-level purchasing data, repayment behaviour on SPayLater, seller cash flow patterns etc… that provide granular data that is then used to map to creditworthiness.

Grab also has extremely useful data such as how often rides are taken, food order sizes, discretionary spend, but it is fundamentally consumption data on a much smaller scale. This can be seen in GMV. Shopee generated $127B in GMV compared to Grab’s total on-demand GMV of $22B in 2025. That is nearly 6x difference and explains why the FinTech gap is so wide.

GCash (Philippines)

GCash is the leading digital wallet in the Philippines. It is backed by Globe Telecom and Ant Group (Alibaba’s Financial Arm), and has over 90 million registered users, in a country of 115 million people. They are effectively a national payments infrastructure.

It was first launched in 2004 as a SMS-based money transfer service under Globe Telecom. This was a critical service at the time with ~80% of Filipinos being unbanked. They employed a very simple model where users could convert cash to e-money via sari-sari stores (think small, neighbourhood retail stores) for a transaction fee of about ₱1 (about 1-2 cents in USD).

It expanded into online payments in 2006, relaunched as a fuller mobile wallet in 2009, and partnered with Western Union in 2010 for inbound international remittances (a big deal given the massive Overseas Filipino Worker economy).

The strategic inflection came in 2015 when Mynt was established as a joint venture between Globe, Ayala Corporation, and Ant Financial (now Ant Group). The Ant partnership brought the Alipay playbook to the Philippines. By 2017, GCash launched the country's first mobile money QR payment system, and by 2018 it had surpassed 10 million users. In 2019, GCash evolved from a payments tool into a nascent SuperApp with GSave (savings via CIMB Bank), GCredit (revolving credit), and GInvest (investments).

The COVID pandemic was GCash’s defining moment. Usage surged as millions of Filipinos used GCash to pay for goods and services online and to send/receive money. GCash also partnered with the Philippine government to distribute pandemic financial aid which was massive for user acquisition.

In November 2021, Mynt raised $300M at a $2B valuation, making it the first double unicorn in the Philippines. In August 2024, GCash secured additional funding from Ayala Corporation and MUFG pushing its valuation up to $5B.

Today, 8 in 10 Filipinos use GCash, with 6 million merchants and social sellers accepting payments. In 2025, GCash disbursed ₱323 billion (USD $5.4B) in loans to 10.2 million unique borrowers, a 73% increase year-on-year. GSave serves 15.3 million users, GFunds has 8.6 million, and GCrypto enables 4.4 million to trade digital assets.

GCash is targeting an IPO in the second half of 2026, delayed from an earlier timeline due to the Philippine stock market's weakness and the company is aiming to raise $1 to $1.5 billion, which would make it the largest IPO in Philippine history.

GCash is basically the closest analog to Alipay in Southeast Asia, though it is only present in the Philippines. The real challenge facing GCash now, is whether it can sustain its lending growth and ARPU expansion as it moves from payments (low-margin, high-volume) to financial services (higher-margin, credit risk).

Maya (Philippines)

Maya is perhaps the most under-appreciated player in this landscape. It is backed by PLDT (the Philippines’ largest telco), Tencent, KKR and the IFC (Private arm of World Bank Group). Rather than building financial services on top of an existing SuperApp, Maya obtained a full digital banking license from the central bank of the Philippines in Sept 2021 and converted from a payments wallet (PayMaya) into a regulated digital bank in 2022. It is perhaps the only player in this piece that is a bank first and a platform second.

What makes Maya worth watching closely is the pace of their financial ramp in recent years. Maya Bank launched in 2022 and disbursed just ₱3.1 billion (USD $52M) in loans that year. In 2023, disbursements jumped to ₱21.5 billion (USD $358M). In 2024, ₱68 billion (USD $1.1B). In 2025, approximately ₱164 billion (USD $2.7B), bringing cumulative disbursements since launch to ₱256 billion (USD $4.3B) across 3 million borrowers. That is roughly 141% annual growth in disbursement volume, to a borrower base that grew 95% year-on-year.

The deposit base has tracked a similar trajectory: ₱25 billion (USD $417M) at end-2023, ₱39 billion (USD $650M) at end-2024, and ₱68 billion (USD $1.1B) at end-2025, a 72% increase over the year. The bank doubled its customer base to 10.7 million in 2025. The loan-to-deposit ratio reached 51.1% in Q1 2025, which signals disciplined capital deployment, and the net interest margin widened to 18.9% from 13.9% a year earlier (as of September 2025). That NIM figure is extraordinary by any global standard, and speaks to the spread available in a market where the borrower base has historically had no access to formal credit at all.

It is important to distinguish between disbursements and the outstanding loan book. Maya's cumulative disbursements of ₱256 billion (USD $4.3B) reflect total loans ever made. The outstanding loan book, the actual on-book credit exposure at any point in time, stood at ₱27 billion (USD $450M) as of September 2025, up 59% year-on-year. Most of Maya's lending is short-duration consumer credit (Pay in 4, Flexi Loan, Personal Loan up to ₱250,000 / ~USD $4,200) that turns over quickly, which is why the outstanding balance is a fraction of cumulative volume.

Credit quality is the one area that needs honest scrutiny. In Q1 2025, Maya reported an NPL ratio of 3.8%, comfortably below the Philippine digital banking industry average. By end-2025, that ratio had climbed to 6.1%. That is a meaningful deterioration over the course of a single year and reflects the reality of pushing into broader, riskier borrower pools. It is still not alarming in context. 59% of Maya's borrowers had never accessed formal credit before using the platform, which means there is no prior credit history to underwrite against. The company is building credit profiles from scratch using AI-driven scoring on transaction data. But the direction of the NPL trend matters, and if it continues rising as lending scales into auto loans, housing loans, and supply chain financing (all of which management has flagged as 2026 priorities), that will be the metric to watch.

Maya posted ₱1.7 billion (~USD $28M) in net income in 2025, its first full year of profitability. It booked ₱1.6 billion (~USD $27M) of that in the first nine months. Revenue growth exceeded 100% year-on-year in 2024, and the Q1 2025 top-line accelerated further. This came just three years after the bank launched, which is a remarkably fast path to profitability for a digital bank operating in an emerging market.

On the payments side, Maya processed over ₱1 trillion (~USD $16.7B) in merchant payments in 2024, making it the largest merchant acquirer among Philippine digital banks. Visa has recognised Maya as the top acquirer for merchant transaction volume in the Philippines. The merchant acceptance infrastructure, built initially through the Maya Center agent network (formerly Smart Padala, which reaches deep into provincial and rural areas), gives Maya physical distribution that pure digital players struggle to replicate. 70% of Maya's customers live outside Metro Manila, and regional loan drawdowns surged 137% year-on-year in 2024.

The competitive dynamic between Maya and GCash is extremely tight, no doubt fuelled by the backing of Ant Group and Tencent. GCash has the user base and dominates peer-to-peer transfers and bill payments, while Maya has the banking license and deposit franchise, winning on deposit growth and credit product depth. Each product launched by one forces a response from the other, which has resulted in the Philippines leading the region on digital financial inclusion metrics.

Maya intends to IPO in 2026, targeting a dual listing, first in the US and then on the PSE in the second half of the year. If Maya lists at anything close to the multiples that Southeast Asian FinTech names have attracted in recent years, it would be the largest Philippine-origin tech IPO in history and would create a direct public market comp for GCash ahead of its own expected listing.

MoMo (Vietnam)

MoMo is Vietnam's dominant digital wallet, with over 40 million registered users in a country of 98 million people. It is a rare case of a Southeast Asian fintech that built scale without a SuperApp anchor.

MoMo grew as a standalone financial super-app, aggregating payments, lending, insurance, and investment services under a single brand without the benefit of a ride-hailing or e-commerce parent.

The company was founded in 2007 (as M_Service) and launched as an e-wallet in 2010. It has raised $434 million across five rounds, with the most recent being a $200 million Series E in December 2021 led by Mizuho, which valued the company at $2 billion. The cap table includes Warburg Pincus, Mizuho, Standard Chartered, Goldman Sachs, Goodwater Capital, and Kora Management.

MoMo’s current chairman is Anthony Thomas, the former CEO of GCash, which gives MoMo a direct connection to the operational playbook of one of the region's most successful digital wallets.

MoMo turned profitable for the first time on a full-year basis in 2024, with revenue growing 27% year-on-year. Revenue had grown from approximately VND 6 trillion (~USD $240M) in 2020 to VND 8.5 trillion (~USD $340M) by 2022, and the 2024 figure is likely north of VND 11 trillion (~USD $440M) based on the growth trajectory.

The company partners with over 50,000 businesses and more than 70 banks and financial institutions, with 300,000+ payment acceptance points nationwide. Its QR code infrastructure reaches into rural markets and traditional wet markets that international platforms have not penetrated.

In October 2024, MoMo repositioned itself from an e-wallet to an "AI-Powered Financial Assistant," signalling a strategic shift toward higher-margin financial services. The platform now offers micro-loans (through bank partnerships), insurance, investment products, stock trading, and BNPL with up to 45 days deferred payment. However, MoMo does not hold a banking licence and does not take deposits directly, which is a meaningful structural limitation compared to Maya or GXS. Its lending is intermediated through partner banks, meaning MoMo earns origination and servicing fees rather than net interest income.

The competitive landscape in Vietnam is more fragmented than in the Philippines or Indonesia. MoMo leads with an estimated 47-56% share of e-wallet users depending on the measure, but faces competition from ZaloPay (backed by VNG, Vietnam's largest tech company), ShopeePay (Sea Limited), VNPay (which dominates QR merchant acquisition for banks), and ViettelPay (backed by the military-owned telecom Viettel). The government's VietQR interoperability mandate, which has unified QR payments across 2.1 million merchants, has been a structural tailwind for adoption but also reduces the switching cost advantage that any single wallet player can build.

OVO (Indonesia)

OVO is arguably the most structurally interesting e-wallet in Indonesia. It was originally launched by the Lippo group (one of the largest real-estate conglomerates in Indonesia). It was then adopted by Grab as its Indonesian payments wallet in 2018 after Grab was unable to secure its own e-wallet license from Bank Indonesia.

In 2018, Grab invested in OVO, garnering roughly 40% share in the business. In 2021, it increased its stake to over 90% by purchasing shares from PT Tokopedia and Lippo Group.

OVO’s strategic significance lies in its integration with Superbank, the Indonesian digital bank backed by Grab, Emtek, Singtel and KakaoBank. In May 2025, OVO launched OVO Nabung by Superbank, a product that embeds a regulated bank savings account inside the OVO e-wallet. Users earn 5% annual interest on their balances with no minimum or fees, and can seamlessly use those balances for daily transactions. The product crossed one million users within five months of launch. Users who upgraded to OVO Nabung saw their average balances double and transaction frequency increase by 60%. One in three Grab driver-partners now uses OVO Nabung as their primary wallet and savings tool.

OVO Nabung creates a closed loop where OVO wallet users earn bank-level yield on their balances while Superbank gets sticky deposits with minimal acquisition cost, which it can then lend against. Superbank itself turned profitable for the first time in FY2025 (net income of 99.7 billion rupiah / ~$5.9M), with loans growing 50%, NIM of 10.64%, and gross NPL of just 2.6%. The cost-to-income ratio collapsed from 139% to 70.5% in a single year.

By end-2025, OVO had reached 121 million downloads and 3 million QRIS merchants across more than 800 cities and regencies. Over 40 million QRIS transactions were processed through the Grab ecosystem in 2025, with QRIS adoption growing 61% year-on-year across OVO's merchant base. More than 700,000 SME merchants saw transaction volumes increase by 35% through digital adoption.

Indonesia's QRIS system has been a structural tailwind for the entire wallet ecosystem. Bank Indonesia data shows QRIS is now used by nearly 60 million users across more than 40 million merchants (mostly SMEs), with transaction volumes growing 162.7% year-on-year as of July 2025. Gen Z accounts for 28% and millennials for 26% of total QRIS users.

The key question for OVO is whether the Superbank integration can scale fast enough to establish a deposit-funded lending flywheel before competitors catch up. GoPay is integrated with Bank Jago (GoTo's digital banking partner). ShopeePay has Monee behind it. Dana has the Sinar Mas banking relationship.

Indonesia's 277-million person market is large enough to support multiple winners, but the wallet that converts the most users into depositors and borrowers first will have the most defensible position. OVO's early traction with OVO Nabung suggests it is ahead on this metric but I believe this race is far from over.

GoPay (Indonesia)

GoPay is the fintech arm of GoTo Group, formed from the merger of Gojek and Tokopedia in 2021. It is the most direct competitor to OVO in Indonesia, and alongside ShopeePay, one of three wallets with a captive SuperApp ecosystem in the country.

GoPay launched in 2016 as a payments solution for Gojek users and driver-partners. It has since spun out into a standalone app (launched 2023) designed to reduce data usage and reach mass-market users with less powerful phones.

The standalone GoPay app has seen a growth inflection point, monthly transacting users reached 24.2 million in Q3 2025, up 29% year-on-year, and GoTo surpassed 500 million transactions in a single month for the first time in September 2025. By Q4 2025, digital payments volume hit IDR 120 trillion (~$7.5B) for the quarter.

It also has a relatively large lending business. GoTo Financial's consumer loan book expanded rapidly through 2025, reaching IDR 7.6 trillion (~USD $457M) by Q3 2025, up 76% year-on-year, with management guiding to exceed IDR 8 trillion (~USD $480M) by year-end. For the full year, GoPay's Fintech segment achieved Adjusted EBITDA of IDR 497 billion (~USD $30M), its first full year of profitability. Lending revenue grew 130% year-on-year to IDR 879 billion (~USD $53M) in Q2, and 84% year-on-year to IDR 1.0 trillion (~USD $60M) in Q3. Roughly 60% of loans outstanding originate through the GoPay and Gojek apps, with those in-ecosystem channels growing faster than third-party platforms.

The TikTok partnership has added an unexpected distribution channel. After TikTok acquired 75.01% of Tokopedia in late 2023, GoPay became embedded in the TikTok Shop checkout flow. GoTo launched GoPay Pinjam (instant cash loans) directly within TikTok Shop in 2025, making it the first platform in Indonesia to offer cash lending inside the TikTok ecosystem. BNPL on TikTok Shop and Tokopedia has shown strong momentum, and the partnership with Telkomsel (Telkomsel Wallet by GoPay, embedded in the MyTelkomsel app) further extends distribution.

GoTo holds a 22% stake in Bank Jago, an Indonesian digital bank that serves as GoPay's banking partner. The GoPay Tabungan by Jago product, launched in late 2023, embeds a Bank Jago savings account inside the GoPay and Gojek apps, mirroring the OVO Nabung by Superbank model. Users can open an account in two minutes, earn interest on balances, and use them seamlessly for payments across the GoTo ecosystem and all QRIS merchants. GoTo has also launched GoPay Asuransi (insurance), GoPay Simpanan (investments), and GoPay Pinjam BPKB (collateral-backed loans) on the consumer app, progressively building a full financial services stack.

GoPay turned profitable on an Adjusted EBITDA basis for the first time in FY2025, reaching IDR 497 billion (~USD $30M) for the full year. Financial services revenue nearly doubled in 2024 to IDR 3.7 trillion (~USD $230M). GoTo itself posted its first pre-tax profit in Q3 2025 (IDR 62 billion / ~USD $3.4M) and raised its FY2025 Adjusted EBITDA guidance to IDR 1.8-1.9 trillion.

GoTo's fintech segment is arguably the most under-followed listed fintech asset in the region, given that most international investor attention goes to Sea Limited and Grab. Unfortunately, I do not think GoTo as a whole is investable, due to the declining ride-hailing and food delivery business that makes up a large majority of group revenues.

DANA (Indonesia)

DANA is a digital financial services business based in Indonesia that was founded in 2017 as a joint venture between Emtek (one of Indonesia’s largest media conglomerates) and API Investment Limited, an investment arm of Ant Group. It launched in 2018, later than competitors such as GoPay and OVO but has since built scale.

It first got its start through being deeply integrated with Bukalapak (Emtek-backed Indonesian e-commerce player) and Lazada (Alibaba-owned). In 2022, Lazada purchased $304.5M of DANA shares from Emtek and Sinar Mas Group invested a further $225M to make it one of the largest shareholders.

DANA claims to have over 200M registered users today and as of 2023, processed an average of 10M transactions each day. DANA’s structural challenge is that it lacks a captive ecosystem. GoPay has GoTo (Gojek + Tokopedia) while OVO has Grab, and ShopeePay has Shopee. DANA’s e-commerce partners have either shut down or are not exclusively tied to it. This makes DANA the most exposed of each of Indonesia’s major wallets to the commoditising effect of Indonesia’s QRIS interoperability mandate, which requires all wallets to accept a unified QR standard across over 40 million merchants. (When every wallet works everywhere, wallets with the weakest ecosystem lock-in will be the most vulnerable)

That said, the Ant Group and Sinar Mas backing gives DANA optionality. For instance, if DANA can integrate with Bank Sinarmas for deposit-funded lending (similar to the OVO-Superbank model), it could transition from a pure-play payments wallet into an embedded finance player.

Competitive Landscape

Looking across these players, I believe there is a clear distinction between some of them. The most useful lens to view them is not by country or product vertical as these can easily change overnight, rather I believe it is best viewed through structural origin.

Where these companies originated and their backers, determines the data they have access to, the distribution they can leverage and ultimately what kind of moat they can build.

When comparing across this list, there are a few insights that I believe we can takeaway.

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