Most of this week’s content has already been sent. In case you missed it:

• Amazon, Cloudflare (part 1) and Disney Earnings Reviews

• Uber Earnings Review

• Alphabet and AMD Earnings Reviews

• PayPal Earnings Review

• Palantir Earnings Review

• My Updated Holdings & Performance

And other reviews sent so far this season:

• Meta, Tesla & Starbucks Earnings Reviews + DeepSeek News & Implications

• Microsoft & Apple Earnings Reviews

• ServiceNow Earnings Review (section 2)

Next week’s coverage will include earnings reviews on Shopify, The Trade Desk, Datadog, DraftKings, Airbnb, Palo Alto and Robinhood. My catch-up review on Chipotle will be published with Shopify on Tuesday morning. I also am planning snapshots on AppLovin, Coinbase and Upstart. Finally, I will cover several interviews from the Goldman Investor conference. Peak busy season rolls on…

Table of Contents

• 1. Earnings Snapshots

  • a. Pinterest (PINS) Earnings Snapshot

  • b. Roblox (RBLX) Earnings Snapshot

  • c. Affirm (AFRM) Earnings Snapshot

• 2. Cloudflare (NET) – Conference Call Q&A

• 3. Spotify (SPOT) – Earnings Review

  • a. Key Points

  • b. Demand

  • c. Profits & Margins

  • d. Balance Sheet

  • e. Guidance & Valuation

  • f. Call & Release

  • g. Take

• 4. Celsius (CELH) – Weak Nielsen Data & Quick Thou …

• 5. Lemonade (LMND) — Synthetic Agent Extension

• 6. Market Headlines

• 7. Macro

1. Earnings Snapshots

a. Pinterest (PINS) Earnings Snapshot

Results:

• Beat revenue estimates by 0.8% & beat guidance by 1.3%.

• Beat EBITDA estimates by 6%.

• Beat GAAP EBIT estimates by 6%. Beat OpEx guidance by 4%.

• Beat FCF estimates by 1%.

Guidance & Valuation:

• Q1 revenue guidance beat by 1.2%.

• Q1 EBITDA guidance beat by 18%.

• Slower pace of margin expansion in 2025 as expected.

Pins trades for 21x forward EPS. EPS is expected to grow by 45% this year and by 20% next year. Estimates materially rose following this report.

b. Roblox (RBLX) Earnings Snapshot

Results:

• Missed bookings estimates by 0.7% & beat bookings guidance by 0.8%.

• Beat revenue guidance by 4.4%.

• Beat $20M EBITDA guidance by $35M. Estimate data not comparable following accounting change.

• FCF doubled $108M guidance.

• Missed daily active user (DAU) estimates by 3.5%.

• Beat -$0.45 GAAP EPS estimates by $0.12.

Balance Sheet:

• $2.4B in cash & equivalents; $1.61B in long-term investments.

• $1B in long-term debt.

• Diluted share count rose by 5.4% Y/Y.

Guidance & Valuation:

• Annual bookings guidance slightly missed estimates. Q1 bookings guidance met estimates.

• EBITDA estimate data is not comparable to the new EBITDA disclosure format for RBLX. Backing out newly excluded items and making a best guess, it was roughly in line. Furthermore, annual estimates did modestly rise following this report.

• It expects $830 million in 2025 FCF, which missed $835M estimates.

• It also expects a $1.03 billion net loss for the year, which roughly met estimates.

Roblox trades for 11x forward gross profit. Gross profit is expected to rise by 22% this year and by 19% next year.

c. Affirm (AFRM) Earnings Snapshot

Results:

• Beat gross merchandise value (GMV) guidance by 6%.

• Beat revenue estimates by 7.2% & beat guidance by 9.7%.

• Beat 45.4% transaction margin estimates by 420 bps & beat guidance by 440 bps.

• Beat 22% EBIT margin estimates by 540 basis points (bps; 1 basis point = 0.01%).

Balance Sheet:

• $1.20B in cash & equivalents; $666M in securities available for sale at fair value.

• $363M allowance for credit losses vs. $350M Q/Q.

• $1.15B in convertible senior notes.

• $2.17B in funding debt.

• Diluted share count rose by 12.2%; basic share count rose by 4.7%.

Guidance:

• Raised annual GMV guidance by 3.1%.

• Set concrete annual revenue guidance of $3.16B, which implies a raise and beat estimates by 1.6%.

• Set concrete annual 45.4% transaction margin guidance, which implies a raise and beat over estimates of 44%.

• Raised annual EBIT margin guidance from 20% to 23%., which beat estimates.

Affirm trades for 12x forward gross (or transaction) profit. Gross profit is expected to grow by 46% this year and by about 25% next year.

2. Cloudflare (NET) – Conference Call Q&A

This is a review of the call Q&A. Coverage of everything else from this report can be found here.

More on DeepSeek & Efficiency:

Cloudflare thinks models are racing to open source and commoditization, and it sees innovation out of companies like Meta and DeepSeek as the real tipping point for that process. That’s entirely “good for Cloudflare.” Founder/CEO Matthew Prince thinks recent developments “demonstrate that there is room for efficiency” and that spending trillions is not the only way to win here. 

And as Prince reminded us, “Cloudflare is extremely good at wringing out as much efficiency as possible.” It has made software-based optimizations of compute infrastructure a prominent part of its value proposition, and that is paying off. It envisions the same opportunities in inference efficiency that DeepSeek delivered in training; the company welcomes the conversation and focus shifting to productivity and post-training inference. This means two things: more demand for inference, where Cloudflare specializes, and more focus on cost and performance leadership, which NET delivers in droves. It’s a good spot to be in.

How does Cloudflare deliver superior cost dynamics beyond constant hardware optimizations? Its pay-as-you-go model does not require companies to agree to large, upfront commitments before they know what they’re going to use. Conversely, as Prince put it, hyperscalers generally rent out a virtual machine (VM) to customers and let them figure out the optimization work. They make you opt into more volume and time to secure desired discounts, when that generally just leads to a lot of waste outside of peak hours. This leads to capacity utilization rates that routinely range from 5%-10%. With Cloudflare, they average 70% utilization capacity for CPUs and are already seeing a clear path to 70% for GPUs too. This means it can “effectively get 7x more work out of $1 in CapEx spent.” That’s why its developer platform (Workers and Workers AI) is enjoying such explosive growth, as traffic always follows relative cost advantages within high-demand markets.

AI App Development Maturity:

NET provided great examples of what apps customers are building with the Workers platform. I think that’s important, considering most companies are still working on turning conceptual GenAI and agentic AI ideas into tangible financial value creation. A finance company is using it to automate M&A due diligence; another customer built an app to surface potential client information to improve salesforce interactions; a media firm is using it to handle legal inquiries (that’s trust); Cloudflare built an app internally for incident management to cut about 5 hours of labor per day. For now, augmenting productivity is really what all of these apps are getting at. Down the road, GenAI and training chatbots will morph into agentic AI, heavier reliance on inference workloads, and goal-oriented AI. You won’t just be able to ask… are bananas good for me? You’ll be able to say “make sure bananas are good for me and, if so, find the best prices online and order them for delivery tomorrow morning.” That’s where we are headed, and again, NET’s inference niche ideally positions it to capitalize.

A Bit More Color on Go-To-Market:

FedRAMP High Authorization:

Cloudflare is now gunning for FedRAMP High authorization. This makes them eligible to bid for and potentially secure the most sensitive of government contracts. This has intentionally been a slower process for it than others. It didn’t want a piece by piece authorization and instead patiently positioned itself to gain full platform authorization. The company now seems poised to secure it, which should mean it can enjoy public sector growth without siloing its product suite or jeopardizing network performance. Hyperscalers and other cloud service providers have specific government clouds, while NET has one cohesive platform.

3. Spotify (SPOT) – Earnings Review

a. Key Points

• More elite execution and a bright view of 2025.

• Compelling product launches are building immediate traction & more subscription tiering flexibility.

• The advertising overhaul is ongoing. They need more time to really scale this.

• Push into education is off to a good early start.

b. Demand

• Revenue beat estimates by 2.1% & beat guidance by 5.8%.

  • This was helped by a 160 basis point (bps; 1 basis point = 0.01%) foreign exchange (FX) headwind vs. its guide calling for a 350 bps headwind. Without this help, revenue would have been slightly ahead.

• Premium revenue beat estimates by 1.5%.

  • 19% Y/Y FX neutral (FXN) premium revenue growth.

  • Average revenue per user (ARPU) rose 5% Y/Y & 7% Y/Y FXN.

• Ad-supported revenue beat estimates by 7.4%.

  • 6% Y/Y FXN ad revenue growth.

• Monthly active users (MAUs) beat estimates by 1.5%; added 35M vs. 25M guided to.

• Premium subscribers beat estimates by 1%; added 11M vs. 8M guided to.

c. Profits & Margins

• Beat 32% gross profit margin (GPM) estimates by 20 basis points (bps; 1 basis point = 0.01%).

• Beat EBIT estimates by 2%. Missed guidance by 0.9%. This was due to €96M in social charges related to higher payroll taxes from its stock price rising so much. It guided to €16M in these charges. If the actual headwind was €16M, EBIT would have been 16% ahead.

• Beat FCF estimates by 33%.

• EPS rose from -$0.36 to $1.76 Y/Y.

Content cost favorability was the largest source of GPM expansion this quarter. For premium GPM, audiobooks and music were also tailwinds in addition to content costs. This is the 2nd straight quarter where its budding audiobooks business was cited as a tailwind. For ad-supported, music and podcasts also drove leverage, although a real estate impairment charge held some of the margin expansion back. Most of the company’s operating leverage also continues to come from developed markets. It’s highly confident in ample leverage across the globe eventually, but remains more in growth and product-market fit mode in its newer markets.

Operating expenses (OpEx) fell by 16% Y/Y. FX and social charges added 9 points to Y/Y OpEx growth. Lapping efficiency charges from last year reduced OpEx growth by 13 points. Taken together, normalized OpEx fell by 12% Y/Y.

d. Balance Sheet

• €7.4B in cash & equivalents.

• €1.54B in exchangeable notes. 

• No traditional debt.

• Diluted share count rose by 6.6%. Basic share count rose by 3.5%.

e. Guidance & Valuation

• Revenue guidance beat by 0.5%. This includes a 90 bps headwind.

• 31.5% GPM guidance beat 31% estimates.

• EBIT guidance beat estimates by 20%. Guidance assumes €18M in social charges.

• MAU guidance met; premium subscriber guidance beat by 2%.

Finally, it expects to add 2M subscribers and 3M MAUs Q/Q. Q4 benefitted from favorable competitive dynamics where a competitor exited a developing market geography. This also helped Q4 MAU growth, although the beat would’ve still been large without the boost. It was able to accelerate MAU growth to a certain extent because of this. It’s “not prioritizing retention of the recent influx,” as it views these as somewhat lower-quality users vs. the rest of the base. This should amplify Q/Q MAU seasonality a tad. At the same time, it expects to add about the same number of MAUs in 2025 that it has in each of the last four years (meaning about 75M). This represents about 14% Y/Y MAU growth, which is stellar at its current scale.

Spotify’s recently explosive net profit and EBIT inflections mean gross profit yields the only valuable valuation chart. Also note that public equities will routinely get higher gross profit multiples if they’re actually making good money, like Spotify now is. Estimates should continue to rise following this report.

For 2025, it expects continued solid growth and more margin expansion. It expects a lower degree of leverage than it enjoyed in 2024 (which was massive for both GPM and EBIT). Sell-side estimates also call for solid, yet slowing leverage. 2024 was its “year of efficiency,” with the focus now tilting back towards growth from a far healthier profit starting point.

f. Call & Release

2025: The Year of…

While 2024 was the year of monetization, 2025 will be Spotify’s “year of accelerated execution.” The company thinks its last two years have been wildly successful not just due to cost cuts, but also a relentless focus on product iteration. It obsessively toys with and split tests every single variable on its app. Not just prominent items like discovery algorithms, but subtle tweaks like page color and button shape too. Everything. It’s all in an effort to observe exactly what consumers like and to build accordingly. By the time it broadly rolls out a new feature, it already knows it will work because it has structural data to support that opinion. For those of you who follow the name, this is a very similar model to what has made Duolingo so successful.

SPOT wants to move even faster with product improvements. As Founder/CEO Daniel Ek put it, “the landscape is shifting constantly and they want to set the pace, not play follow the leader.” The Spotify Wrapped campaign in Q4 was a good example of its ability to move rapidly. It deepened its partnership with Google for the launch to infuse more AI-prowess and granular context into its annual marketing campaign. They “spun this up in a few weeks at massive scale” and delivered 10% engagement growth for the year. Engagement was called especially “impressive” in important growth markets like Brazil. Looking to next year, it does think it can do even more to enable user creativity as they share yearly musical tastes with their communities. There’s more to come here, but the 2025 campaign was still called “a big win.” That helped drive significant outperformance in user growth.

Aside from moving more quickly, Spotify plans to “go all in on its core music experiences.” This will entail more investments in its newer music video push, while its teased ultra-premium subscription should become reality in 2025. This will give superfans special access to events, goods and artists. Spotify is closely collaborating with record labels on this launch to ensure their incentives, artist incentives and Spotify’s incentives remain aligned.

Finally, it will speed up innovation and improve its core offering while maintaining a strict and disciplined approach to spending. Like the team talked about last quarter, they’re not abandoning all of their company efficiency work to pursue faster growth. They’re simply balancing the scale a bit more evenly.

Education:

Monetization always follows rising engagement and adding new compelling products always helps engagement. It’s extremely early in Spotify’s education entrance, but it remains encouraged by the large opportunity. The company was essentially pulled into this space by creators turning podcasts into virtual tutoring sessions, and so it’s working on supporting this use case with more official plumbing and eventually go-to-market.

Video Products & Monetization:

In November, Spotify debuted ad-free Video Podcasts for its premium subscribers. As part of this, it rebranded and expanded its “Spotify for Podcasters” program into “Spotify for Creators” (SFC). SFC is the company’s toolkit for creators to help build their businesses, with the “Spotify Partner Program” (SPP) a key piece of this effort. Specifically, SPP is what helps podcasters get paid. It has been a relied-on source of income for audio podcasters for quite some time. Now, with this augmentation, it helps creators monetize via ad-based and ad-free video podcasts too. 70% of eligible shows have already opted into this new payment format. Video podcasts are exploding in popularity, with nearly half of its total MAU base already having streamed one to date; this should merely build on that momentum by creating more successful publishers and a better customer experience.

Advertising Trends:

Spotify’s user base is growing more quickly than expected and its engagement trends are uniformly positive. So why isn’t ad revenue growth a lot faster? Why does premium continue to vastly outperform this segment? Brand marketing demand was called weak, but I don’t think that’s the main culprit.

Spotify is still in the process of modernizing its advertising tech stack. To date, most of its efforts here have been via direct external sales. It’s now investing heavily in its automated sales channels, with two key products to review. Spotify Ad Network (SPAN) is the company’s conduit product between buyers and platform publishers. It allows companies to tap into impressions at their leisure and track results of their spend. Spotify Ad Exchange (SAX) is the newer and perhaps more exciting product. This is a dedicated supply-side platform to unlock fully biddable programmatic demand. Fully biddable means more precise identification and targeting, and so naturally uplifts the value of Spotify’s ad impressions. 

That should be a great offset to the weak ad pricing environment Spotify has cited for the last several quarters. If impressions generate more revenue… buyers will profitably and happily pay more for those impressions. As it continues to demonstrate fantastic customer engagement and gives ad buyers tools to more seamlessly purchase its impressions, this business should find better results. Spotify has now completed the technical construction of SAX, and it sounds like this product will begin to build real momentum through 2025. It expects large scaling to ramp as we enter 2026. The Trade Desk has been its initial buy-side partner for this product, and it sounds like Spotify will look to build that partner roster this year as well.

AI:

Spotify expects to benefit from AI in a few ways. First, like everyone else, it sees clear ways to create more efficient and profitable operations through this technology. And cheaper costs don’t just mean better margins, but an ability to rationally deepen the product suite. For example, AI is how Spotify launched comments for podcasts. It could not afford the time and money to manually moderate discussions, but AI algorithms can do so easily. Lastly, through AI DJ’s more personal playlist recommendation engine and other product launches, it knows it can create even more personal and engaging experiences for its 600M+ users. It’s simply impossible to do that manually as effectively as a company can with automated workflows.

More Notes on Core Product & Product Expansion:

• Soft-launched custom playlist covers for users to design their own playlist art on the app.

• Debuted offline backups so that premium subs can access content without any internet and without pre-downloading. 

• Chief Business Officer Alex Norström and Chief Product/Technology Officer Gustav Söderström will begin contributing to earnings calls following their promotions to co-presidents.

• Spotify gave us a behind-the-curtains view of its organizational structure and approach that I found interesting. Groups report to one single team. These reporters routinely pitch ideas or “Bets” to executives, where executives will rank these bets to prioritize what they want to experiment with going forward.

g. Take

Another phenomenal performance from an emerging fundamental darling. For the last few years, this company has aggressively controlled costs to deliver a needed margin explosion. And? Growth did not suffer one bit. That’s not normal. That’s special.

This goes to show how loyal and sticky their products and user bases both are. That’s despite competing with three mega-cap tech names with somewhat similar, yet lighter, offerings. There’s a secret sauce here. Is it luck? No. It’s intricate, detailed iterating to hone in on what works best one small tweak at a time.. This is why all of their launches work and why the product is best-in-class. And while they already move very quickly… they want to move even faster.

Spotify has deeply impressed me for several quarters and there’s nothing to say about this report except job well done. Some may want to pick on advertising growth, but to me that’s a future tailwind to look forward to. Their partnership with The Trade Desk and SAX should position them very well to enjoy higher value impressions and more demand over time. That’s a future growth accelerant for a company that does not need future growth accelerants.

4. Celsius (CELH) – Weak Nielsen Data & Quick Thoughts

For the 4 weeks ending January 11th, Celsius drink volume fell 0.7% Y/Y with a 1% price increase. This marks an intensification of the slowing trend we’ve seen over the last several months. I try not to pay too much attention to monthly data, this is turning into yearly data and prompts me to move back to the sidelines on this one and pause accumulating shares. If you recall, I added a bit to this name late last year for the first time since starting the position and have not touched it since.

There is a reason why I’ve kept this near the very bottom of my portfolio after starting the position during the 2nd half of last year. Consumer brands fizzle out constantly and only a select few survive taste, preference and economic cycles. Celsius has not yet proven they can survive these cycles following its explosion onto the beverage scene over the last few years. I would much prefer to add shares following a good quarter and upbeat commentary than I would right now. While it’s quite tempting from a valuation standpoint, I think forward estimates are probably inaccurate. They’re either way too high or way too low. If they do prove themselves, there is massive upside here and I don’t need to own a lot to materially capture that. If they don’t prove themselves? This will continue to be a falling knife. I’m cautiously optimistic enough to hold a small piece. I do still think weak store traffic and the Pepsi inventory resets have been the main reasons for their sharp slowdown. But I am not convinced enough amid continued weak 3rd party data to accumulate into this share price decline. I’m also not trimming.

5. Lemonade (LMND) — Synthetic Agent Extension

Lemonade extended its growth spend financing (“synthetic agent”) agreement with General Catalyst (GC) through 2026. The new agreement comes with the same 16% internal rate of return (IRR) paid for GC and an ability for Lemonade have up to 80% of its growth spend funded by them too. Interestingly, Lemonade plans to step up the maximum amount of money it can borrow in 2026 from $200M to $140M Y/Y, hinting at it continuing to spend more on growth.

I don’t mind this for now. 2026 should be the year when the company starts to generate meaningful cash flow and positive EBITDA. Beyond those eventual inflections, I would love to see them cut this agreement and fund the growth engine directly with their own balance sheet. I would think that’s the plan.

6. Market Headlines

Bill Ackman’s fund built a multi-billion dollar stake in Uber throughout the last two months.

Ohio is potentially planning on raising its sports gambling tax rate from 20% to 40% in 2026. I recently wrote a piece about this when Maryland decided raised their own tax. That can be found here (section 6).

Meta will supposedly cut more jobs on Monday per The Information.

Starbucks union workers withdrew their lawsuits. 

Robinhood was quickly forced to stop its sports gambling that recently debuted by the  Commodity Futures Trading Commission (CFTC). They’re going to try to debut this again in the future.

Oppenheimer remains confident in SentinelOne’s net new ARR acceleration this year. I am too.

Oppenheimer is also confident in “solid growth” for Lululemon in the quarters ahead. It sees Lululemon having a great chance to beat depressed consensus estimates. Smart firm.

RBC expects a solid Trade Desk quarter next week.

Baird downgraded CrowdStrike to neutral. Despite still owning a small piece, I find this very fair. It’s very expensive right now and we are not through contractual concessions offered in response to the July outage. Expectations seem too high. I’d love to see it pull back so I can resume adding.

7. Macro

The theme of the week was output resilience with some modest labor market weakening. Fed futures continue to price in a more than 90% chance of rates being held steady at the next meeting. Rate cut probabilities for the rest of the year range from 25% to 36%. Most continue to expect 1-2 cuts this year.

Output Data:

• The Manufacturing Purchasing Managers Index (PMI) for January was 51.2 vs. 50.1 expected and 49.4 last month.

• The Institute for Supply Management (ISM) Manufacturing PMI for January was 50.9 vs. 49.3 expected and 49.2 last month.

• The S&P Global Composite PMI for January was 52.7 vs. 52.4 expected and 55.4 last month.

• The Services PMI for January was 52.9 vs. 52.8 expected and 56.8 last month.

• The ISM Non-Manufacturing PMI for January was 52.8 vs. 54.2 expected and 54.0 last month.

Inflation Data:

• Unit Labor Costs Q/Q in Q4 rose by 3% vs. 3.4% expected and 0.5% last quarter.

• Average Hourly Earnings for January rose by 0.5% M/M vs. 0.3% expected and 0.3% last month.

• ISM Manufacturing Prices for January came in at 54.9 vs. 52.6 expected and 52.5 last month.

• Michigan 1-year inflation expectations were 4.3% vs. 3.3% expected. This was actually quite a political reading this month. When splitting by party affiliations, conservatives expect basically zero inflation and liberals expect well over 4.3% inflation. The survey skewed left. Worth noting.

• Michigan 5-year inflation expectations were 3.3% vs. 3.2% expected.

Consumer & Employment Data:

• JOLTs Job Opening for December came in at 7.6M vs. 8M expected and 8.16M last month.

• ADP Nonfarm Employment Change for January was 183,000 vs. 148,000 expected and 176,000 last month.

• Initial Jobless Claims were 219,000 vs. 214,000 expected and 208,000 last report.

• Nonfarm Payrolls for January came in at 143,000 vs. 169,000 expected and 307,000 last month. Payroll growth was revised lower by more than 800,000 jobs.

• The Labor Force Participation Rate was 62.6% vs. 62.5% expected.

• The Unemployment Rate for January came in at 4% vs. 4.1% expected and 4.1% last month.

• Michigan Consumer Expectations for February came in at 67.3 vs. 70 expected and 69.3 last month.

• Michigan Consumer Sentiment for February came in at 67.8 vs. 71.9 expected and 71.1 last month.