Various Earning Reviews
Nebius, Tower Semi, Cisco, Venture Global, EOSE, Alibaba, Sea limited, JD.com, Hims and On Running, plus investing consequences
As this Substack is now a premium service, I have to divide this review in two parts. A free portion going over the earnings in detail, and an investing portion going over their investing implications.
I’ll also take a minute to remind you that there is a launch discount for those interested in the premium content. A 30% discount for the yearly Founding Member plan, giving you access to all current and future services, at a fixed price.
The promotion will end on June 13th.
Now, let’s dig into what matters: earnings!
AI & Compute
Nebius dropped another banger, without surprises after the last months’ news - their Meta partnership and a new $2B financing round from Nvidia, which made me buy back into the stock after my terrible selling mistake.
The cherry on top for this quarter was the above-expectation EBITDA, which means not only their compute service is growing rapidly but it also is generating cash, and this is what sets Nebius apart from most of its competition: its financial efficiency and balance sheet - which was the largest part of the bull case even back in early 2025.
We also learnt that they honored their commitments to both Microsoft and Meta - which is important as their contract with them and their potential expansions depends on deliveries and timings.
This financial position comes from their history but their cash generation comes from their focus on efficiency and vertical integration, confirming once that optimization of the entire compute chain is key. I write the same thing every week now…
Our platform is most efficient when we own the full stack... from bare metal to multi-tenancy to inference to agentic and more.
Then come the classic comments about supply constraints and clients fighting for any compute they can get which means pricing power, at least outside of their core clients which usually come at preferential/fixed rates. Nothing new.
The demand is broadening across industries. Today, we typically see several customers competing for every GPU we bring online.
Strong market demand is translating into pricing gains in our latest deals.
As for the source of demand? inference, with two new contracts with Revolut and Monday this quarter - big players.
Inference is the fastest-growing segment, new segment, in our stack... Token Factory is our primary inference product now.
I could go further on how excellent the quarter was but I don’t think I need to. The bottom line is that everything is either great or better than great and that demand for compute is through the roof, which means there is a need for more of it - you heard that a lot lately. More compute also means more infrastructures, which means more datacenters, more hardware and more energy - we talked about this a few days ago.
Raise our 2026 CapEx guidance to between $20 billion and $25 billion, which is up from our prior range of $16 billion-$20 billion.
Contracted capacity already exceeds 3.5 GW, far surpassing the goal of 3 GW we set for the end of the year. Our execution gives us the confidence to raise our contracted power guidance to more than 4 GW by year-end. We have now secured two gigawatt-scale sites in the US. We broke ground at our Missouri location yesterday; today, we are announcing a new site in Pennsylvania where we have secured power for a deployment of up to 1.2 GW. Owned capacity now accounts for more than 75% of our contracted power. We expect capacity added in Q3 to significantly expand our footprint. We continue to expect 800MW to 1GW of connected power by year-end.
We build very efficiently... what we do around creative use, you know, interesting technological ways of heat reuse.
The difference between contracted and connected power is what is online today and what they plan to bring online in the medium term. Management is telling you they plan to triple/quadruple their online capacities in the next years. And every other hyperscalers/neoclouds said the same.
We’ll see on the premium part the investing implications, and they are as big as a bull could have expected in terms of hardware demand - but not only.
I made a mistake on Nebius. I corrected it and called the stock an obvious buy on the $110 retest. This turned out to be a great decision as this purchase is now up 100% in two months. I hope you guys are still in, and killed it with this trade.
I continue to believe that Nebius is the best neocloud on the market and has room to go much higher in terms of stock price as long as balance sheet and EBITDA margins remain healthy. As long as they can prove they will generate cash from their business, the stock can climb, and is worth holding.
Tower Semi
The photonic fab pure play did great, this is excellent for us and our Global Foundries position which is still considered to be #2 by the market but still comes with massive capacity within a rapidly growing demand.
There are no doubts on the actual demand for optics, what is interesting is the most demanded product which isn’t what social media believes to be - as hinted at by Arista Network and AsteraLabs last week.
We do see extra dense pluggable optics, XPO, being led by Arista with the aim to extend the served generations of pluggables. Forum panel presentation and near package optics, eventually also co-package optics, emerging and coexisting with pluggables for the next several years.
We are already seeing strong demand for NPO products in 2027. Given this strong customer traction, it's our expectation that Tower SiPho will continue to lead in these new optical form factors. NPO is likely to ramp over the next several years and precede a significant ramp in CPO for our primary customers.
Pluggables are not going away at all. Pluggables will stay extremely strong at least through the 2030.
I understand the massive traction behind CPOs, but the real traction should be behind optics globally. Sure, it is almost the same, but not exactly, and it changes our stock picking as some CPO names are key to optics, others are key to CPOs. That’s a big difference in which to buy and which to give time to, despites the hype.
Either way, demand for optics is accelerating, requiring fabs expansions financed in part by clients’ early commitments - which highlights their confidence in their need.
We continue to strengthen our alignment and partnerships with our photonics customers through the execution of long-term customer commitments, contractually representing $1.3 billion revenue in 2027, with significantly larger valued contracts for 2028, backed by approximately $290 million in prepayments already received from our largest SiPho customers.
This is really the only important take-away of Tower: optics demand is growing.
Cisco
I won’t go over the entire quarter but it is important to talk about the resurgence of the 2000’s bubble king who’s finally adapting to AI. This was probably just a matter of time, but it finally is happening.
Given the strong demand, we now expect to take AI infrastructure orders of approximately $9 billion from hyperscalers in FY '26... we've had just probably more design wins and more success than we expected at the beginning of the year.
The overall take-away is positive: it means that buildouts continue and that one more player is necessary when it comes to rack networking connectivity, that the market is so large that there is enough room for multi-20%+ growth players.
Energy & Batteries
Venture Global delivered what I expected in today’s environment: a double beat, a massive 59% YoY growth and an accelerating demand for U.S. LNG as the commodity is disrupted with the Strait of Hormuz blockage.
The real signal is that this disruption isn’t just changing short term dynamics, it is changing long-term dynamics as clients know that this situation could/will repeat and secure 5-year long contracts from U.S. providers, and therefore Venture Global.
Venture is taking advantage of the situation, selling its future capacity at a premium to clients with high demand for safe and regular production over the next years. The cost of a disruption like today is higher than a higher price point for the commodity, so it’s all beneficial for both parties - at least from today’s point of view.
This led VG to raise FY26 guidance from $5.2–$5.8B to $8.2–$8.5B of EBITDA, showing the market that growth leads to cash generation, and the market loves that.
So, all is great - except for Europeans.
On the battery side, EOSE gave two “positive” signals this quarter.
First, they secured financing. When you generate $57M revenues for a gross loss of $44M and burn ~$150M in a quarter, you kinda need financing, especially to please the market. Their problem is lack of scale, as batteries are expensive to produce and require factories to do so, and investing in factories is also expensive.
That’s why they set up a joint venture called Frontier Power USA with Cerberus, a private equity firm which signed a 2GWh order for EOSE’s batteries.
Second, this financial agreement implies that Cerberus has a final buyer for this capacity, they wouldn’t put their equity and cash on the table to own part of EOSE through a joint venture and order for 2GWh of batteries without a client. As to who that is - or if they really have it, we have no idea. This is where speculation starts, the bet is that they have AI data center demand - as the order is for their Turbine-X product. That order would start in 2027 for a three-year length. For a bit more perspective, this deal is for 2GWh over the next 3-years while EOSE’s total production capacities are ~2GWh in 2025.
I stand by my conclusion on EOSE and others that I shared on my detailed review on datacenters' infrastructures.
Intuitive Machines
The stock ran a lot in anticipation of the earnings, now up ~45% since entry was shared a month ago. There were no surprises on these earnings, with all new contracts already announced, including one yesterday with the U.S. force for space surveillance.
Like Firefly, they subtly announced that they weren’t expecting new NASA contracts right now, but also confirmed the agency’s wish to accelerate missions’ pace - which is what matters. They also confirmed that IM-2 was on track and that IM-3/4 are 90% complete, no delays expected, and shared a record $850M backlog. Lots of positives with the confirmation that both hardware/communications are now generating healthy revenue stream, which is a great bonus.
The global space narrative is pushing higher, as expected, on the continuous need to control this new region for resource and geopolitical reasons. I see no reasons for this to slow down in the near term, meaning I see every reasons for contracts to continue flowing and holding our positions, at least for now.
China & Asia
Alibaba’s reports wasn’t that bad but I will hold onto my previous opinion as to why I sold my position.
My thesis was simple: AI revenues would rapidly increase as Alibaba is a vertically integrated provider - the only equal to Google, within one of the most populated countries of the world and its politics are trying to shift towards consumerism. One can see the bull case rapidly here, use consumption and advertising cash generation of your core business to fuel and accelerate AI spending.
But e-commerce in China became a competitive nightmare and Alibaba was forced to invest in its retail platforms to maintain growth. Sure, AI services revenues are rapidly growing and generating cash but in the meantime, global cash generation is falling off a the cliff and potentially slowing AI investments.
Now, don’t get me wrong. I believe Alibaba is an excellent company and maybe an excellent opportunity. But the market is punishing every stock with lower cash generation, I don’t see it rewarded a Chinese name with decreasing cash generation. I think my current positions all have a much higher upside than Alibaba short/medium term, so I’d rather buy more of those.
The potential is still here. But we’ll have more opportunities if Alibaba were to really become Google’s equal and trigger comparable returns. There’s no rush for now.
I’ll also rapidly comment on both Sea and JD as I posted my view on Sea and it made lots of people unhappy.
The bottom line, as sad as it is, is that every e-commerce/fintech or “everything app” player is investing in their growth while consumption is not trending up which means the market is doubtful on the return on those investments.
The only one this quarter who did well and increased its margins was JD, proving that past investment increased margins and cash generation. Guess what happened? Stock went up. Still wouldn’t touch a stock within an extremely weak sector, but the reaction tells you what the market wants, as usual: increased cash generation potential.
You can use every metric you want, from revenues growth to low multiples compared to historical ones, the conclusion remains the same. Today and for the short/medium-term, those companies will be spending, reducing margin and cash generation, for a return that is impossible to anticipate. This situation is comparable to SaaS - who aren’t spending but on who the market doubts future profitability.
That’s all it is. We are officially in a stock picking market, where everything doesn’t go up anymore and if you pick uncertain cash generation names with no immediate tailwinds, you’ll get bitten. You can of course accumulate and believe it will work out long term, you’ll probably be right when it comes to those two. It’s just not what I do nor would want to do.
To each our methods.
Other Interesting Earnings
I also want to rapidly talk about Hims and On Running.
Hims is finally showing what I was concerned about ~9 months ago when I closed my position. The issue with hypergrowth stocks is that it is very easy to look back and assume the future will be like the past, which is what so many did. The future isn’t the past.
Not gonna be hiding, this is a “I told you so” commentary. It doesn’t really matter what we believe, when the data goes against our thesis, we get out. This is how we invest and how we avoid becoming bag holders. You have no value added building a community of diamond hand that end up losing money.
Hims will be an example I will use for years, having lived through the up and down and all the stages of this stock. The company will continue to operate and is legit, not going against that - at least until proven to the contrary. As for the stock, there’s nothing for us there anymore. Hims was a GLP-1 company. Not sure it can transform itself into something else, only time will tell.
On Running is just a guilty pleasure as I love the company and their products. We’re looking at a very healthy company with declining growth, logically as those products aren’t the most appealing to consumers lately. Sure, On is a premium brand but premium buyers aren’t accelerating their purchases…
Hopefully, a time will come when those products will be in high demand again but as for many other sectors lately, we’re better off far away from them. Focusing on what works, on strength, but still keeping an eye on great companies.
Now, let’s pass to the premium part and the comments on how we can use these information to our advantage in terms of investing.
