Consumer lending is becoming a much larger priority for the group. In FY2028, Grab expects GFin to make up ~30% of total Adj. EBITDA. Groceries and retail are receiving more investment, and management increasingly sees financial services as the end-game.

Atome makes a lot of sense from a strategic fit perspective. In terms of pricing, I think we simply do not have enough information to make a determination on whether this acquisition is cheap or not.

I have some contrarian thoughts on what I think about Grab now given the amount of information that was shared in the Atome presentation.

After going through the investor update and management’s Q&A, here are my 8 main takeaways:

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1. Grab has decided Financial Services is the end-game

Grab specifically described financial services as the next unlock. I personally believe this acquisition, and Stash, proves Grab is not simply seeing it as the next unlock, but instead the primary bet.

Much of this is down to necessity. While Grab dominates mobility and to a smaller extent deliveries in the region, both are commodity-type businesses. They compete primarily on price and convenience, with low switching cost. In Singapore, most consumers will have at least 3 or even 4 ride-hailing apps downloaded for instance. The experience may differ slightly, but if the aim is to get from point A to B, the primary consideration is about price.

Financial Services gives Grab another way to monetise its ecosystem. Using existing customer relationships and proprietary transaction data, they are able to acquire and underwrite borrowers more efficiently. If those advantages translate into lower acquisition costs and better credit outcomes, it would then support durable lending profits that competitors cannot replicate simply by matching the product or interest rate.

One more thing of note, is that within mobility and deliveries, we are seeing greater scrutiny by governments in the region. (Most recently, Indonesia with its commission caps)

Southeast Asia remains one of the most underbanked regions in the world and this is a massive opportunity for Grab.

2. Grab has identified Consumer Lending as the gap and they hope Atome is the solution

Grab shared the slide above that showed the weakness in consumer cash and consumer BNPL. Management also shared that only 1% of its 138M annual transacting users currently borrowed from Grab.

That is an astonishingly low number for a business of Grab’s size. For context, Sea’s Monee has over 40M active credit users, which if we were to compare to their annual transacting users on Shopee, equates to about 10%.

In other words, management's claims that they can 10x is certainly not hyperbole, it is very possible.

That said, it speaks to how much Grab has struggled to convert its delivery and mobility users into active credit borrowers.

In my view, there is a fundamental mismatch in the ticket sizes and type of transaction that has resulted in this situation. E-commerce has proven to be a fantastic customer acquisition tool for financial services, but not so much yet for Grab.

Atome should bridge that gap to an extent for Grab, but Grab has to also do much better at conversion.

3. Grab is deliberately investing more in affordability, groceries and retail

As part of the Atome acquisition, Grab increased its 2028 group Adj. EBITDA target from $1.5B to $1.7B. From the face of it, it would be easy to interpret the $200M increase as the profit Grab is buying through Atome.

However, the actual bridge is far different:

Firstly, the additions of FP Taiwan and Atome contribute $360M before the planned $160M investment in affordability, groceries and retail.

Secondly, Atome’s actual profit contribution was not shared as it was bundled with Superbank, which if you recall, was consolidated into Grab in May this year.

On the $160M investment, CFO Peter Oey discussed during the call that they intend to deploy this capital into deepening affordability across the platform, and specifically highlighted groceries (which is growing 2x faster than food), as a focus area.

The reason for the sudden change is the Atome acquisition. Peter mentioned that it will give them access to a new user base, enabling cross-sell opportunities, not to mention, the 30,000 merchants that Atome works with across travel, fashion, e-commerce etc.

Personally, I believe this will be a huge boost for their advertising segment.

The large majority of current advertisers are restaurants. Atome expands the advertiser base beyond restaurants, potentially attracting larger retail marketing budgets.

4. The merchant network on Atome could be as strategically valuable as the $1B loan book

Atome has over 30,000 unique brands across categories including travel, electronics, fashion, beauty and home products.

These merchants sit at different points on the spending spectrum from Grab’s core F&B network. Some sell higher-value items, some have less frequent purchases, and some benefit more directly from instalment financing.

Management shared that they see opportunities to bring more merchant relationships into Grab’s marketplace and offer additional services.

Personally, I see several potential avenues:

• Atome merchants becoming customers for Grab’s advertising and payment services.

• Suitable retailers joining Grab’s commerce offerings.

• Atome distributing credit products through Grab’s existing merchant network.

• More purchasing activity giving the group additional information about customer needs and repayment behaviour.

These are opportunities for Grab, but not necessarily automatic outcomes. There is lots to execute too.

5. Grab has been extremely unsuccessful in consumer lending

One startling fact from the presentation was Grab sharing that only 1% of its annual transacting users were borrowing from them. For comparison, Sea Limited’s Monee has 40M active borrowers, while Shopee has 400M active annual buyers. That equates to a 10% rate.

Two things we can learn from this:

1. Grab’s claim of >10x potential growth is not hyperbole, it is very possible

2. Grab has been incredibly poor at converting its users to credit borrowers

On the 2nd point, Grab’s BNPL product has been around since 2019, so it cannot be blamed on a lack of time to execute. My friend wrote about this in a post on X. I largely agree with his views, do check it out.

I think the fundamental reason behind this is that mobility/deliveries with its small ticket sizes are a mismatch for BNPL.

6. This feels like a desperate move from Grab, and not from a position of strength

I know this might be a controversial take, but it is how I feel.

Management sharing that only ~1% of its 138M annual transacting users borrowing from Grab after years of investment in broader consumer lending raises an uncomfortable question: If Grab’s ecosystem advantages are so powerful, why has converting its users into borrowers been so difficult?

The investment case has long been that Grab already has the customers, distribution and transaction data to build a substantial lending business. Yet broader consumer lending remains underdeveloped, and Grab is now paying heavily to acquire the capabilities needed to accelerate it.

I see Atome, at least partly, as an expensive response to disappointing internal progress. Once the deal is completed, it will most likely come in the $2.5-$3B range for Grab, which is a substantial part of its cash pile. This means Grab is essentially betting half of its cash on this acquisition.

Management argues that building Atome’s capabilities internally would take years. Yet, Atome was started in the same year Grab launched its BNPL service. This is therefore an indictment on management’s failure to execute on its consumer lending segment in general.

On Atome’s side, my suspicion is that joining a larger platform was always an attractive potential outcome. A standalone lender has to secure funding, acquire customers and maintain engagement, while a broader ecosystem can support those activities through existing relationships. In that way, joining Grab was always going to be the ideal outcome.

Yet, the disclosed terms do not make it obvious that Grab secured a bargain from a seller with limited alternatives. Grab is paying a substantial initial amount, with further consideration linked to Atome’s subsequent performance. The remaining 40% appears to be a deal protecting the sellers, with a floor of $2B and ceiling of $4.5B.

I believe this is an acquisition driven partly by impatience with the pace of Grab’s own progress. It could still work, and the strategic fit is evident. However, the burden is on management to prove that this is the right decision.

Conclusion

Overall, I see the strategic logic behind Atome. It gives Grab the consumer lending capabilities, merchant relationships and higher-ticket transaction data that it has struggled to build internally. If management executes well, this could become a major growth driver across lending, advertising and commerce.

However, this is also an expensive admission that Grab’s existing ecosystem has not translated into consumer lending success. It is difficult to ascertain with the information on hand whether the purchase price is cheap or expensive, but Grab is committing a substantial portion of its cash to make this work. It is a massive bet.

I remain constructive on $GRAB, and it is still one of my higher-conviction businesses. However, the facts have changed, and my view has to change with them. The burden is now on management to prove that Atome can generate returns commensurate with the price paid, rather than simply buying the growth that Grab was unable to build itself.

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The reason behind this, is that the most you can lose on a stock is 100%, while the upside is theoretically unlimited. A stock that compounds at 20% a year for 20 years becomes almost 40 times larger. Selling a winner too early, could therefore equate to losing money on multiple stocks.

Many great investors talk about this, Peter Lynch, who averaged 29.2% annual returns from 1977 to 1990 for example:

What Constitutes the Long Term?

My counter-argument is that this assumes you are an exceptional stock picker, with the unique capability to pick stocks that outperform in the long term.

Now what constitutes the long term?

Everyone’s answer will differ, but I think a useful data point is to look at this chart:

Over a 10 year period, the S&P500 was higher 93% of the time.

Over a 20 year period, the S&P500 was higher 100% of the time.

To be extremely safe, let’s pick 20 years as the long term benchmark. Holding stocks for 20 years, would therefore mean stock pickers shouldn’t lose money, right?

Not quite.

The reason is pretty simple. The index constitutes 500 stocks, that are adjusted on a quarterly basis. Therefore, these 500 stocks today are not the same 500 stocks from 1, 3, or 5 years ago. When you buy the S&P 500, you are buying a portfolio that constantly evolves. Companies shrink, disappear, get acquired or are removed from the index. New winners enter. Existing winners become larger weights.

The index does the selection for you over time, while a stock picker doesn’t quite have that luxury.

The Market’s Odds are NOT our Odds

It is perfectly reasonable to look at the chart above and conclude that time is the friend of the investor. However, the truth is that time is not necessarily the friend of every individual stock.

Hendrik Bessembinder's research on individual companies makes this distinction very clear.

Earlier work by Bessembinder found that just 4% of listed US companies accounted for the entire net wealth creation of the US stock market since 1926, while the remaining 96% collectively did no better than one-month Treasury bills.

Globally, the evidence is similar. Research covering more than 64,000 stocks found that just 2.4% of companies accounted for all $75.7 trillion of net global stock-market wealth creation between 1990 and 2020.

The advice to "let your winners run" exists precisely because stock-market returns are so positively skewed. Missing one Amazon, Microsoft or Nvidia can matter far more than avoiding dozens of mediocre investments.

However, this creates another problem:

How do you know if you own an Amazon, or a mediocre business?

We Identify Winners Retrospectively

If a stock goes up 3x in 5 years, it is easy to tell ourselves that we were right and that the correct decision is simply to keep holding.

However, a rising share price does not necessarily mean the company will continue compounding for the next decade. Likewise, a stock that has fallen 50% is not automatically a loser.

Sometimes the business is progressing exactly as expected while the market has simply changed what it is willing to pay for it. (Multiple compression)

This is where survivorship bias creeps in. We study companies like Amazon, Apple Nvidia, Microsoft and conclude that the lesson was to never sell your winners.

The issue is that we are focusing on a small number of companies that survived, adapted and compounded for decades. There were many other winners who won for 10 years and suddenly stopped winning, either by stagnating, being disrupted or simply becoming too expensive.

In fact, the duration of winners that have continued winning have shrank considerably in the past century, no doubt due to the advancement of technology, which rapidly accelerates both the upward and downward trajectory of businesses.

In 1958, the average tenure of a company in the S&P 500 index was 61 years. Today, it is just 15 years. Interestingly, this is not even as long as the long term we determined earlier on.

We spend enormous amounts of time studying the businesses that successfully navigated multiple technological cycles, competitive threats, recessions, management transitions and valuation bubbles.

We spend far less time studying the companies that looked equally dominant at some point and then stopped winning.

There have been plenty of these, as judged by the stats above. This can be due to market leadership changes, industries maturing, technology shifts, regulatory changes and management teams changing or simply losing their edge.

In just 26 years, the top 10 has evolved massively. Of the 10 largest US companies in the world in 2000, only 1 remains in the list. That is Microsoft, which has been overtaken by 3 businesses who were not even near the top of the list 26 years ago.

Today’s dominant companies are not guaranteed to remain tomorrow’s dominant companies.

These are not just any 10 random businesses, they were the most dominant businesses in their time, and yet, they have fallen behind.

The counterpoint is that, while these businesses have not remained at the top, perhaps they have still done incredibly well, but been outdone by recent winners.

I looked at the top 10 US companies in 2000, mapped out their annual returns and compared it to the S&P 500. Here are the results:

Even the top 10 US companies, who would be deemed as “winners”, failed to beat the the overall index. Of the 10 on the list, only Microsoft and ExxonMobil have had market-beating returns, while the likes of General Electric, Citigroup and Cisco have struggled.

Key Takeaways

The data we just looked at tells us two things:

1. We want to own the tiny number of extraordinary winners

Since stock returns are so positively skewed, selling a genuine long-term compounder too early can be one of the most expensive mistakes an investor makes.

Yet,

2. Most individual companies will NOT become those extraordinary winners

This means that simply holding onto winners and hoping they remain winners is not a suitable strategy.

That is the paradox of the “letting your winners” run advice.

We want to hold onto great companies long enough to capture the extreme right tail of returns, but in real time, we will not know with certainty which companies are going to remain in that right tail.

It sounds obvious when phrased this way, however in practice, this is incredibly difficult.

Let’s walk through a practical example.

Imagine you bought a company at $10.

5 years later, it trades at $50.

The business performed brilliantly, your thesis was right and you made 5x your money.

Now, imagine that I discovered that same company for the first time today.

The stock trades at $50. Would I buy it?

This is actually the same question existing shareholders should ask themselves, but often avoid.

The only thing that matters at this point is:

What return can this business plausibly generate from $50 onwards?

I think this thought experiment is incredibly useful because ownership creates psychological baggage. When we have made a lot of money in something, we naturally become attached to the investment.

It becomes our winner, and selling feels like abandoning something that has worked. There is also the fear that it keeps going up after we sell, which creates one of the most painful forms of investment regret.

The correct benchmark we should be gauging it against, is opportunity cost.

Capital has an opportunity cost.

Suppose you own a fantastic business trading at a valuation that you believe implies a 7% annual return over the next five years. You also identify another business where you believe the expected return is 15%.

If you decide to keep the existing winner, you are effectively choosing 7% over 15% expected returns. Of course, expected returns are uncertain, and the forecasts may simply be wrong. Incumbent businesses often continue to surprise positively too.

Re-underwriting the winner.

If you had to take away just one thing from this article, I think it would be to continually ask if your stocks are still winners (not from a stock price standpoint, but from a fundamental business standpoint)

The real skill is not holding our winners blindly, but consistently evaluating these businesses, re-underwriting them as they become larger positions and being ready to take profits when the situation changes.

Thanks for reading!

-Gab

P.S. This is a very different piece from my typical article, but I felt compelled to write this, and I hope this is helpful for you if you read through this short piece.

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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.

There have been some worries that this is similar to the investment cycle in late-2023 which resulted in profitability going negative after an aggressive cost-cutting cycle in 2022 and early 2023 that saw it make its first ever profit.

So far, there hasn’t been any evidence of it. Sea has been consistently profitable for 9 quarters so far with no signs that it would go back into negative territory.

A major factor for why Sea have embarked on yet another investment cycle is related to ShopeeVIP, their own membership program. This is similar to Amazon Prime, Coupang WOW, MELI+ and Alibaba’s 88VIP program.

Hence, this launch was not necessarily a surprise. Rather, an inevitability. What has been surprising is the progress and traction of ShopeeVIP just over a year into the rollout.

ShopeeVIP first rolled out to Indonesia in Q1 2025, reaching 2M members by Q2 2025 as it rolled out across other SEA countries throughout the rest of the year. By Q4 2025, it reached 7M members and by Q2 2026, it has reached 15M members with Brazil the latest market it has rolled out to.

However, this does not necessarily imply it was a success, as it could very easily have been heavily subsidised and operated at a loss. (More on this later)

There are 2 reasons why I believe this has been a success:

1. ShopeeVIP has managed extremely high retention rates thanks to the presence of Monee’s credit cards. In Q2 2026, management revealed that average monthly retention remained stable at ~80%.

2. In Q2 2026, VIP members contributed 24% of total GMV across Asia. This is despite VIP members making up ~3.75% of Shopee’s total active user base (400M). This implies that ShopeeVIP members are spending over ~8x more than their non-VIP counterparts.

Given these figures, it would be in the shareholders’ best interest for Shopee to continue doubling down on its efforts to acquire as many ShopeeVIP members as possible.

ShopeeVIP Membership

Every country has slightly different membership perks and costs. Some screenshots below:

ShopeeVIP Unit Economics

To get the weighted average cost of each membership and therefore determine Shopee’s revenue from ShopeeVIP, I’ll take the contribution of each country to total GMV and multiply by the US$ price after converting through a fixed FX rate.

Doing so, we get to a weighted average price of $1.44 per month, which would imply ShopeeVIP currently generates $21.6M in monthly membership fees, or $260M yearly.

ShopeeVIP generated 24% of Shopee’s GMV in Q2 2026, which implies ~$9.2B from members alone. If we assume a cost-to-serve of ~2-3%, it equates to between $184-$276M quarterly. Offsetting membership fees, it comes down to $119-211M. On an annualised basis, Shopee is spending between $480M to $840M on this program. In 2025, Shopee generated Adj. EBITDA of $880M. Therefore, this is a substantial investment by management.

Unit economics may seem bleak if we were to view it from this lens, but it must be noted that this treats the entire cost of serving ShopeeVIP members as an incremental expense. In reality, the purpose of ShopeeVIP is to change user behaviour by increasing purchase frequency and improving retention. It also serves to consolidate Monee wallet share and ultimately increases the lifetime value of its users.

Hiking Membership Fees

This is the obvious area that would dramatically reduce cost-to-serve and generate more revenue for the business. Currently a weighted average of $1.44 ranks among the cheapest subscription programmes for e-commerce across the world.

A good comparison would be the Coupang WOW program in South Korea. Coupang WOW was first launched in early 2019 and membership fees were ₩2,900 per month ($2.12). They then hiked prices about 3 years in when penetration reached ~50% of active users by 72% to ₩4,990 ($3.65) in Dec 2021. Another price hike was introduced in April 2024, with prices raised by 58% to ₩7,890 ($5.77). This equates to a cumulative price hike of 172% while it also expanded its subscriber base.

Shopee is still early on in its phase, with <4% of active users having subscribed to the program. That said, due to ShopeeVIP’s 80% monthly retention rate, I believe it is very plausible that we could see Shopee introduce price hikes much earlier than 3 years in.

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Voucher Optimisation

Another way that Shopee could reduce its overall cost-to-serve, would be by optimising its voucher strategy, increasing minimum spending thresholds and thereby encouraging larger basket sizes.

Increasing the minimum spending requirement would enable Shopee to lower the effective discount rate per order and, larger baskets would reduce logistics cost per dollar of GMV, improving the unit economics of ShopeeVIP.

ShopeeVIP Unit Economics Improvement

Let’s assume that ShopeeVIP has a similar path to Coupang WOW, and hikes membership prices by 172% over the next 3-5 years to $3.91. That would rank it among the middle in the above chart which I think is plausible. Then, let’s also assume that the cost-to-serve falls from 3% to 2.5%.

Under the same assumptions of GMV and membership numbers as Q2 2026, the ShopeeVIP program would be able to reduce the total cost-to-serve from $211M per quarter to $54M per quarter, a massive 74% saving.

The bigger point is that the ShopeeVIP membership fees are a formality, and should not be of material value to Shopee’s bottom-line in the long run. Instead, it would be great if Shopee could run their program at a minimal loss, enabling customer LTV to expand and creating more customer lock-in.

GMV Growth & Logistics

One more thing to note is that ShopeeVIP and SPX Express investments are moving toward the same goal. SPX Express now moves more than 30 million parcels a day across Southeast Asia, Taiwan and Brazil (as of Q4 2025), and that scale is what enables free shipping perks for ShopeeVIP.

Density is ultimately what decides last-mile economics. Logistics being one of the key strengths of Shopee in its battle against TikTok Shop, has to double down and increase their advantage. For instance, a courier who drops six parcels on one street covers his route cost faster than one who drops two. ShopeeVIP is able to manufacture density by increasing order counts, enabling cost per order to fall. Some examples that prove this:

• Buyer purchase frequency rose about 12% year on year in Q1 2026

• Shopee also shared in Q2 2026 that fulfilment order volumes were up >20% QoQ, while >60% of fulfilled parcels arrive the next day in some markets

• Instant service in Indonesia can deliver in as fast as 1 hour; instant delivery

  order volumes grew ~80% YoY, with cost-per-order falling ~20% YoY

Conclusion

One thing to note, is that Shopee has likely already gotten their most engaged users signed up for the VIP program. Therefore, the 8x stat will likely continue going downwards. That said, having members spend 3x, even 2x more than non-members would be a win regardless.

There are a few key metrics to look out for to observe how the membership is going. The % of GMV that ShopeeVIP members spend is an obvious start. Monthly retention is also important. Currently it lands at about 80%. If we see it fall to 70% or lower while membership continues climbing, it could indicate that Shopee is buying users who leave and the cost-to-serve becomes a subscription to churn.

If the first price rise from $1.44 produces a visible drop in members, we would have to re-think whether ShopeeVIP’s perks are sufficient to make this membership as successful as Coupang’s, for example. Currently, the perks are largely built around vouchers and other perks such as free ChatGPT trials, Duolingo memberships etc. I’m not sure if that is enough to convert the longer tail of users.

Regardless, I think ShopeeVIP is a key part of Sea Limited’s story moving forward, and an important step ahead. What gives me confidence is that Shopee has proven over the years to have incredible execution. I think this will be no different.

As always, I will be monitoring this closely, with updates in every future earnings review.

Thank you for reading!

-Gab

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The charts are courtesy of Fiscal AI.

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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: +4.26%
S&P 500: +2.62%
NASDAQ: +3.99%

August was a strong month for the indexes, reversing a poor June to July stretch where the market had back to back red months. Yet, it was not a great month for all sectors and stocks. There was yet more bifurcation within the MAG7 with NVDA, MSFT and TSLA leading the pack while GOOGLE and AMZN struggled.

We saw a strong rebound in the AI trade in the first half of the month with stocks like MU, SKHY, NBIS, CRWV going up 30-50% in that period. Of course, this happened after the Leopold forced-selling that we discussed last month. Another sector that was incredibly strong was healthcare. Personally, I like that we are seeing healthy rotations on a consistent basis in the bull run that has now gone on for over 3 years.

It must be noted that September has historically been the weakest month for the markets over the past 20 years, with -0.6% monthly returns on average. It was only higher 45% of the time.

Portfolio Performance (Since Inception)

(Portfolio Inception Date: 27th October 2023)

Portfolio: +222.14%

S&P 500: +85.78% (Outperformance: +136.36%)

NASDAQ: +113.66% (Outperformance: +108.48%)

Portfolio Performance (YTD)

Portfolio: +8.38%

S&P 500: +12.28% (Underperformance: -3.90%)

NASDAQ: +13.90% (Underperformance: -5.52%)

Personal Thoughts on the Market & Performance

One worry that has been constant in this bull market is inflation. That’s been led by 2 things: ongoing conflicts and AI bottlenecks.

1. The ongoing conflict in the Middle East and disruptions involving the Strait of Hormuz, have kept crude oil and fuel prices elevated, increasing transport and manufacturing costs globally.

2. The second has been the bottleneck in the AI supply chain, with the relentless demand for compute pushing up prices for core products.

As I discussed in the previous portfolio review:

Treasury yields have followed oil higher again, as we saw it make a new high for the year again, hitting 4.804% as I write this. This has very direct implications on stocks, as higher yields make risk-free government bonds more attractive than equities, drive up corporate borrowing costs and reduce the present value of future corporate profits.

This is exacerbated for high-growth stocks for a simple reason, a high discount rate shrinks large future numbers much faster than small current earnings. Since high-growth companies promise big profits years from now, not today, we often see a much larger decline in prices investors are willing to pay.

My Positioning

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The objective behind this is to concentrate my capital on the highest-conviction ideas rather than watering down performance with a bunch of mediocre holdings. This is best summed up by 2 quotes from Warren Buffett:

More than the total number of holdings, I’m more concerned that many are at small single-digit percentages, which make it difficult to move the needle for the portfolio.

In this article, I’ll be sharing my portfolio plans for the next few months, which stocks I’m looking to trim, cut entirely, and how I intend to allocate the excess cash.

In case you missed the most recent article (linked above), I discussed all 15 holdings in my portfolio, ranking them by conviction, quality, risk and valuation.

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Revenue: $399.7M v $369M est. (+56% YoY, +69% FX-Neutral) 🟢

Diluted EPS: $0.18 v $0.19 est. (+87% YoY, +7% QoQ) 🔴

Selected Key Metrics

dLocal saw continued YoY and QoQ growth across all 6 key metrics. Revenue hit $400M for the first time, driven by TPV growth that came in at 92%. The turnaround in TPV growth within the past 8 quarters have been nothing short of extraordinary.

The glaring issue, of course is that while TPV grew 92%, net income growth came in at just 28%. There are a few layers between that, but there is no doubt that take rates is the main culprit behind that gap.

• TPV: $17.7B (+92% YoY) ✅

• Revenue: $400M (+56% YoY) ✅

• Gross Profit: $127M (+29% YoY) ✅

• Operating Profit: $64M (+15% YoY) ✅

• Net Income: $55M (+28% YoY) ✅

• Adj. FCF: $69M (+41% YoY) ✅

Management also announced that they re-purchased 6.9M shares for $86.1M under their $300M share buyback program and have secured a new $150M senior unsecured facility at Term SOFR + 2%.

Table of Contents

1. Introduction

2. Financials

3. Guidance

4. Product Development

5. Management Commentary

6. Concluding Thoughts

1. Introduction

dLocal is a Latin American-based company that facilitates payment flows for businesses ranging from small startups to large conglomerates on a B2B basis, specifically targeting underserved emerging markets.

It thrives in complex payment environments, which are currently a huge tailwind for the business. Effectively, dLocal is a capital-light “toll bridge” business.

dLocal was first pitched to subscribers in July 2025 at $10.98. It has seen volatile stock price performance since but remains a positive returner at this stage.

2. Financials

As I always state in my discussion for dLocal, there are really 2 key guiding metrics for the business.

Firstly, total payment volume (TPV). This tracks the total monetary value of all transactions processed through a company’s platform.

Secondly, net take rates. This determines the amount of gross profit generated from TPV, which ultimately affects profitability of the business.

When we multiply these 2 numbers, we get gross profit, which I personally perceive as the true top-line metric for the business.

Total Payment Volume

TPV was up 92% YoY and 26% QoQ, marking the 8th successive quarter of acceleration in TPV. TPV is now at $17.7B and judging by the trajectory, we are likely to see TPV reach ~$25B by Q4 this year.

Net Take Rates (Gross Profit/TPV)

Net take rates are the true share of money that dLocal keeps after paying direct costs like local partner networks, payment rails, processing fees, etc.

This quarter, net take rates fell to 0.72%, less than a quarter of the net take rates 6 years ago this quarter. This is par for the course for any payments business, and especially one like dLocal that serves large enterprise merchants, and hence should not come as a surprise.

Notably, CEO Pedro Arnt said during the call:

Gross Profit

dLocal’s true top-line in my view, is gross profit. That was up 28.4% YoY, the weakest since Q4 2024. As Pedro shared during the call, this was due to the ramp up of a singular ride hailing merchant.

I would personally like to see this number grow at 30%+, and it was disappointing to see it dip below this quarter.

3. Guidance

Management updated guidance for FY2026, guiding for 60-70% TPV growth for 2026. With the first 2 quarters coming in at 74% and 92% respectively, this probably is still a sandbagged target. Gross profit guidance was also slightly raised, although only 2.5% at the low and high end. Operating profit was unchanged, and this is perhaps surprising to some.

Management elaborated, stating that this is due to the prior-year tax adjustment, that would otherwise have operating profit come in at the higher end of the range. They have also been very consistent in their guidance. For instance, in Q4 2025, they stated that the new OPEX baseline introduced post-2025 investment cycle would temporarily pressure 1H26 margins but drive operating leverage improvements in 2H26. (I believe this is where the opportunity for investors lie and I will elaborate later)

Operating profit growth was 15% YoY in both Q1 2026 and Q2 2026. As such, we should see numbers closer to 45% YoY growth in H2 2026 in order to bring numbers in line with management’s guidance.

4. Product Development

dLocal has continued to prioritise expanding coverage. In Q2 2026, they added 7 new APMs, reaching 217 APMs across 39 markets. Every additional market and payment method makes dLocal more valuable to existing and new merchants alike. For example, a business like Spotify having to decide between a provider that services 12 markets and 50 payment methods versus dLocal that services 39 markets and 217 payment methods. Even if Spotify only needs access to 10 countries today, they will still favour dLocal as it gives them optionality when expanding into other markets. Hence, this is a crucial customer acquisition and retention metric.

dLocal also shared that their optimisation suite can deliver up to 10 percentage points of conversion uplift for localised payments. This is huge for dLocal as it changes them from just a generic payment processor into a revenue optimisation product. Take for instance, a generic PSP approves 80% of payment attempts, while dLocal approves 85%. If Uber sends $1B of payment attempts, that extra 5% is $50M of additional completed transactions for Uber.

dMore is also a very important addition in the context of take rate pressure that, as we discussed, is the biggest worry for investors. Currently, dLocal’s primary revenue source is earning a fraction of TPV. Through dMore, it could capture economics across a much larger service stack. For example, if dLocal processes $100 worth of transactions, it keeps about $0.72 today in gross profit.

With dMore, that same $100 transaction enables dLocal to handle FX, tax administration, invoicing, compliance and eventually provide additional merchant services on top. As dLocal matures, this will be a key part of its business.

dLocal also highlighted the use of AI with ~60% of code autonomously written and ~10% in headcount equivalent savings through automation. This is all great news but I would expect it.

5. Management Commentary

1. Existing merchant wallet-share gains are materially exceeding expectations

dLocal’s growth is coming from existing global merchants giving dLocal more volume every quarter. This is corroborated by the 188% TPV retention, and 92% TPV growth. It means just 4% of TPV growth is from new merchants.

2. The wallet-share opportunity remains large

This quote was with regard to the ride-hailing business that largely led to doubling of volumes running through the dLocal platform QoQ. The one obvious concern after this doubling of volume of course is, doesn’t this mean dLocal has already earned most of its business?

Management is clearly saying no and stating that the extraordinary Q2 ramp was heavily concentrated in LATAM, and more gains can be had by expanding that relationship to Africa, the Middle East and Asia.

This means that even a merchant which has already generated enormous incremental TPV can theoretically remain a significant future growth source.

3. Pedro reiterated what is really most important to dLocal

The eventual aim of dLocal is to maximise shareholder value, and that comes by generating more dollars every quarter. Management is essentially telling investors that gross profit dollars matter more than take rate percentages, and I have stated this too in the past.

4. dLocal is prioritising scale for a reason

TPV growth can create a moat, and is not simply a means of stemming the take-rate decline. Scale gives dLocal better bargaining power with processors/acquirers, better FX liquidity and more payment data.

5. Management expects automation to structurally reduce middle and back-office hiring intensity

In the latest Q, dLocal added just 4 employees, compared to 27, 60 and 55 in the previous 3 quarters. As dLocal’s investment cycle comes to a close, I believe we should see similar numbers in the next few quarters as the one in Q2. This will bode very well for dLocal’s FCF per share generation as I will elaborate on later as part of my thesis moving forward.

6. Mexico was a disappointment due to dLocal’s failure to control costs

This is certainly one of Pedro’s strong points, acknowledging the mistakes they’ve made and seeking to correct them. He is one of the most excellent communicators and is always transparent.

6. Conclusion

Overall, this was a rather mixed quarter. TPV growth coming in at 92% is incredible, and I continue to be amazed at how Pedro has turned this around since becoming co-CEO and now sole CEO.

Margins continue to be an overhang, but I remain very optimistic.

If we look at the next few quarters, I really like the setup of dLocal. Gross profit growth is in the 30% range, they are extremely capital light, and taking market share. The investment cycle has just ended, headcount is now flat moving into H2 and AI efficiencies are expected to cut costs. We are seeing operating leverage in real-time. Combined with buybacks, I think we are about to see FCF/share growth go vertical soon, and valuation will look ridiculously cheap if the stock remains range-bound.

Below, I will write about what I plan to do with the stock:

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EPS: $0.70 v $0.79 🔴

Sea Limited reported earnings on 11th August before the market open.

The stock closed the day up 15%.

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Selected Key Metrics

Total Gross Profit: $3.55B (+47.3% YoY)
Operating Income: $650.3M (+33.3% YoY)
Total Net Income: $458.1M (+10.6% YoY)
Total Adjusted EBITDA: $917.2M (+10.6% YoY)
Provision for Credit Losses: $555.2M (+71.5% YoY)
GAAP Diluted EPS: $0.70 (vs $0.65 in Q2 2025)
Cash & Cash Equivalents: $10.3B (down from $10.6B in Q2 2025)

E-Commerce (Shopee)

Gross Orders: 4.3B (+27.5% YoY)
GMV: $38.3B (+28.4% YoY)
Revenue: $5.6B (+48.2% YoY)
Adjusted EBITDA: $255.4M (+12.2% YoY)

Digital Financial Services (Monee)

Consumer & SME Loans Outstanding: $11.1B (+62.5% YoY)
Revenue: $1.4B (+58.9% YoY)
Adjusted EBITDA: $288.0M (+12.8% YoY)
90-Day NPL Ratio: 1.0% (down from 1.1% in prior Q)

Digital Entertainment (Garena)

Bookings: $763.5M (+15.5% YoY)
Revenue: $746.6M (+33.5% YoY)
Adjusted EBITDA: $429.8M (+16.7% YoY), 56.3% of bookings
Quarterly Active Users: 666.3M (roughly flat YoY)
Quarterly Paying Users: 68.1M (+10.2% YoY)
Paying User Ratio: 10.2% (vs 9.3% in Q2 2025)
Average Bookings Per User: $1.15 (vs $0.99)

Share Repurchase Program

Repurchased 4.7M shares for an aggregate of $417M = $88.72 per share

Sea Limited continued its top-line acceleration, this time to 48%. This is an incredible rate of growth for a business now run-rating at $30B annual revenue. The bottom-line missed estimates which is to be expected with the business very much still in re-investment mode (although management did suggest it could be coming to an end).

All 3 segments are firing on all cylinders and I continue to believe Sea is one of the most underrated businesses out there. This is potentially the most important business in all of Southeast Asia and $70B for it, appears cheap.

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 hit another all-time high in GMV and gross orders, and saw its 8th consecutive quarter of sequential growth. Management reiterated their target for 25% full-year GMV growth, which I believe is very achievable.

They also re-affirmed their target of at least $1B in Shopee Adj. EBITDA for FY2026.

Core marketplace revenue was up 65.6% YoY, more than double the pace of GMV growth and is a clear indicator of monetisation inflecting in real-time.

Take-rates also increased, climbing to 14.6%, up from 13.7% in Q1. It is also notable that management addressed this specific point in the call:

Profitability

Another key point that was one of the reasons SE fell in the past 8 months is the question of Shopee’s profitability.

Management had guided to “at least flat” EBITDA in 2026. For context, Shopee EBITDA in 2025 was $880M. The market took it to mean that EBITDA margins would fall from 0.7% to 0.55%, with the assumption of 25% GMV growth.

This quarter put those fears to bed. Adj. EBITDA margin inflected upwards to 0.67%, and management shared that Adj. EBITDA would come in above $1B, which would mean EBITDA margins will come closer to 0.7% than 0.55%, satisfying the market.

ShopeeVIP

We also saw continued ShopeeVIP member growth, one of the primary reasons management is sacrificing near-term profits.

• 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)

• Q2 2026: 15M members (+45% QoQ)

Management shared that these 15M members, which represent about 3.75% of the Shopee user base of 400M people, make up 24% of GMV spend. It is simply a no brainer to sign up as many people as possible. At current growth rates, we are likely to see ShopeeVIP member numbers end closer to 30M at the end of the year, which is simply incredible, and would likely make it one of the most used subscription services in Southeast Asia.

Management also shared that there was ~80% average monthly retention, a number that would have been impossible to imagine half a decade ago. Monee has been crucial to this. The majority of users in Southeast Asia do not have access to credit cards, which makes a subscription system simply unfeasible.

Chris Feng alluded to this in the Q4 2025 earnings call:

Also, a reminder that ShopeeVIP was only introduced to Brazil in April and as of end June had over 1M members. MELI’s own subscription program, MELI+ is estimated to have about 30M members in the region, majority of which originate from Brazil. I think it is not a crazy shout to suggest Shopee can convert over 10M members in Brazil alone.

Shopee Logistics (SPX Express)

Shopee has continued to invest in its logistics capabilities, which is now a key cornerstone of their moat within the business. Instant service in Indonesia can now deliver as quickly as 1 hour, with instant delivery order volumes growing ~80% YoY and cost-per-order falling ~20% YoY in Q2 2026.

Fulfilment order volumes are also up > 20% QoQ, with >60% of SPX-fulfilled parcels arriving the next day in some markets.

Other Interesting Stats

• Shopee orders through Facebook increased by >85% QoQ, largely driven by Reels

• Extended IG collab to all 8 core markets, promising early results from ID (1st launch market)

• Orders from livestreaming and short-form video up >50% YoY, now accounts for >25% of physical good orders in SEA

• Avg. monthly new active buyers up 35% YoY, acceleration from previous Q's

2. Monee (Digital Financial Services)

Monee continued its hyper-growth, delivering another record quarter for the loan book, up 62.5% YoY to $11.1B, while the NPL ratio fell from 1.1% to 1.0%. Active credit users grew around 34% YoY to more than 40 million while ~5.3 million first-time borrowers were added in the quarter.

Management also shared that average loans outstanding per user grew around 20%, and the Philippines became the 5th market to cross $1B in loan book volume.

A large part of this is increasingly the introduction of AI tooling. Management shared that their latest underwriting models are pre-trained on behavioural and transactional data across the ecosystem, using transformer architectures similar to modern large language models.

This has led to approval rates growing by 10% while maintaining similar levels of risk. Sea has also deployed AI to verify user-submitted income documents across markets and languages, cutting review time by about 95%. These are all low-hanging fruit, and I believe AI has a long way to go to benefitting businesses that are open to it.

GAAP revenue for the quarter came in at $1.4B while Adj. EBITDA climbed to $288M. As I’ve highlighted in the past few quarters, one of the key items to watch within Monee is the expansion of credit use cases beyond Shopee.

Management disclosed that off-Shopee loans accounted for >20% of the total SPayLater portfolio as of end-June, and were as high as 35% in some markets. The standalone ShopeePay app which is currently live in Indonesia, Thailand, Malaysia and Vietnam, saw monthly transacting users more than double YoY in 2Q26. The app is set to be launched in Brazil soon.

3. Garena (Digital Entertainment)

Garena had yet another steady, good quarter like we have to come expect. One of the points bears keep raising is with regard to the sustainability of Free Fire, and how Sea would be in trouble if Garena stopped printing cash.

The truth is that is simply outdated. Yes, Garena continues to print cash, over $400M in Adj. EBITDA this quarter which is not a small amount. However, Shopee is now generating $250M a quarter in Adj. EBITDA while Monee is generating nearly $300M a quarter. More importantly, these 2 businesses are far from optimal profitability, with management continually re-investing excess profits back for more growth.

At 3% Adj. EBITDA margin, which management has acknowledged is a very clear and realistic target for Shopee, it alone would be printing north of $1B in Adj. EBITDA per quarter, dwarfing Garena.

Garena also announced 2 new mobile games this quarter, built on globally-recognised IP. First, Palword Online, an open-world multiplayer survival adventure game, developed and published by Garena under license from Pocketpair. Secondly, Monster Hunter Outlanders: a survival hunting action game developed by Tencent based on Capcom’s iconic franchise. These are 2 exciting titles that could potentially diversify the Garena revenue base away from just Free Fire.

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.

1. Shopee's investments are already producing better unit economics.

In short, management is saying that the investments currently suppressing Shopee's reported margins are not necessarily permanent expenses. They are being deliberate and systematic in their spend. This backs up my point that they are doubling down on re-investments because they see strong ROI.

2. Management thinks the move towards 2-3% Shopee EBITDA margins is relatively straightforward.

Management is giving the margin bridge pretty clearly here and I think this is the most colour they've given to this. My belief is that this gave the market a lot of confidence which contributed to the 15% move post-earnings.

3. Shopee still sees meaningful room to increase overall take rates.

One concern coming into the call was, especially with the incredible take rate trajectory over the past few years, would Shopee be able to maintain that moving forward? They answered this question pretty directly.

4. Shopee VIP is crucial and has scaled very quickly.

Shopee VIP was always inevitable and should fuel the next growth leg. The strategic value is not just about subscription revenue, though it will surely help. However, the key is retention, higher frequency and more spending which creates higher customer LTV.

5. Shopee Brazil is growing faster than the market, and is Shopee's fastest-growing market.

6. AI is materially improving Monee's underwriting models.

AI beneficiaries are everywhere, but nobody talks about e-commerce businesses. I continue to believe that they will be one of the biggest beneficiaries, firstly from simple tasks like customer service, next in logistics and finally in fulfilment.

5. Concluding Thoughts

The past few months have been much better for Sea stock, after several months of getting hammered.

Throughout this period, what has stayed constant is Sea’s consistently strong earnings results. I remain a huge believer in what management is doing, and the proof of their execution has been clear to see. Yes, the stock will remain volatile, but I believe this is a long-term compounder and the story is still in the early stages. If Sea continues to be ignored by the market, management will simply ramp up buybacks again, returning value to shareholders.

On any reasonable sum-of-the-parts or conservative discounted cash flow, the current price still does not reflect what these three segments are worth, and hence I remain a buyer on any dips.

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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.

So instead, I will look to do a quick review of each company’s earnings here in one post. I will also detail what I intend to do with each position: add/trim/hold (actually just added to one of them yesterday).

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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.

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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

Read more

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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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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