In case you missed it from this week:

In case you missed it from this earnings season:

Sea Limited is a Southeast Asian commerce giant, with a digital marketplace called “Shopee.” It complements this business with sizable financial service and entertainment offerings. The model is quite similar to Mercado Libre in Latin America.

Sea Limited missed revenue estimates by 1.0%. Its 26.2% 2-year revenue compounded annual growth rate (CAGR) compares to 19.8% Q/Q & 17.1% 2 quarters ago.

The company “remains confident” in 20% Y/Y GMV growth in 2025 “with improving profitability.”

“Our strong start to the year gives us more confidence to achieve our full-year guidance.”

Founder/CEO Forrest Li

“We have not seen a material impact on our Shopee growth from the macro side… Our cross-border business has been a relatively small percentage of our entire businesses. So the cross-border trade impact from any aspect will not impact our overall business materially.”

Founder/CEO Forrest Li

SE trades for 27x forward EBITDA. EBITDA is expected to grow by 61% this year and by 31% next year. 

Advertising:

Ads continue to be a wonderful source of operating leverage for this business model. Like other marketplaces, this revenue is quite margin-accretive. SE has already built the brand awareness and traffic needed to turn on this monetization lever. Now it’s time to get paid. Ad revenue rose 50% Y/Y as marketplace sellers using an ad product rose 22% Y/Y and spend per average merchant rose 28% Y/Y. Going forward, it continues to round out the ad-tech suite. For example, its newer “GMV Max” tool makes it easier to more thoughtfully target relevant eyeballs and optimize for incremental GMV growth.

Shopee:

Just like other online marketplaces around the globe, success is the result of hard work on assortment and logistics service, as well as more tightly integrating entertainment and live-streaming with actionable commerce opportunities. This helped drive 20% of physical orders from content-driven sources like YouTube and 20.5% Y/Y gross order growth overall. That marks a modest acceleration compared to 20.1% Y/Y gross order growth last quarter. Content-driven business also continues to improve overall company marketing efficiency, boost advertising adoption and raise average basket size. It’s an important endeavor.

Pricing competitiveness is also supporting successful expansion. That’s why logistics investments to localize fulfillment, bring goods closer to customers and find layers of automation wherever possible are so important. And it’s working. Per Qualtrics, SE was ranked first in “offering good prices” across both Asia and Brazil (newer expansion market). This is partially why it has seen zero impact on consumer buying behaviors amid recent geopolitical tensions.

In Brazil, improving economies of scale and service scores helped user growth outpace the market average. I’d expect that to be the case, given the relatively young business there, but still good to hear. When asked about the launch of TikTok Shop in that market, they said there was no change to the competitive environment. That’s likely because of how low overall e-commerce penetration is in the highly compelling country. The runway is massive and physical commerce displacement is by far the largest opportunity.

More on the Logistics Network Driving Shopee Success:

Cost efficiencies are paving the way for this attractive positioning, as cost per order fell 6% Y/Y in Asia and 21% Y/Y in Brazil. This happened while on-time delivery rates improved and Brazil delivery times overall fell by “2 to 3 days Y/Y. That’s how you take care of the customer, pass unique savings onto them and profitably supply lower-priced goods like everyday essentials. That, along with broader assortment generally speaking, is a powerful tailwind for driving more top-of-funnel buyer growth. And this quarter, that buyer growth was again above 15% Y/Y.

Loyalty Program:

Sea Limited is testing a Shopee paid membership program in Indonesia. It comes with free shipping and deeper discounts. Adoption so far was called “encouraging;” it had 1 million subscribers as of Q1’s end. As hoped for, member buyer frequency and spend levels are 3x and 4x higher than non-members.

Financial Services – rebranded from SeaMoney to “Monee” this quarter:

Sea Limited thinks “Monee” is more synergistic with “Shopee” and that the name change will drive more cross-selling awareness. That should build on already strong momentum, including 50%+ Y/Y revenue and EBITDA growth for the year.

Vitally, considering that growth was powered by 77% Y/Y loan growth, “asset quality was stable” during the quarter. Specifically, non-performing loan (NPL) rate across small merchant and consumer loans was stable Q/Q at 1.1%. Really good to see as their credit book rapidly grows despite adding 4 million new borrowers during the quarter. They’re “confident in maintaining resilient Monee growth across cycles and also confident in loan growth guidance for the year.

“We are moving beyond payments and credit to every aspect of people’s lives relating to money, such as banking, investment and insurance.”

Founder/CEO Forrest Li

Li on Approach to Funding the Credit Business:

“Instead of using our cash in the short-term, even though it may make more economic sense, we would rather build up a more sustainable and healthy source of funding. We would rather collaborate with 3rd-party financial institutions and explore different sources of funding.”

Founder/ CEO Forrest Li

Entertainment:

The entertainment business continued its post-pandemic recovery in what leadership calls “its best quarter since 2021.” This was again driven by success for the video game Free Fire and an interesting collaboration with a Japanese show called “Naruto.”  This combination generated 300M impressions and led to DAUs in Q1 finally re-approaching the peak pandemic rate. It also drove 51% Y/Y bookings growth, 11% active user growth and 32% active pay growth for the quarter, while bookings per user rose 36% Y/Y to $1.17.

Great quarter. Another convincing Q1 Y/Y growth acceleration and more explosive operating leverage is not a combination that should be overlooked. SE is showing that its growth is not solely a byproduct of how much it spent on marketing. Its user base is seemingly a lot stickier than that, and I can’t help but think that’s a direct effect of their strong logistics service improvements, obsessive focus on marketplace health, and increasingly powerful cross-selling engine. I think ads, rising product breadth and a continued focus on efficient growth all mean the margin ceiling is not close to being reached.

This business looks a lot like Coupang in Korea, Mercado Libre in LatAm and the non-AWS Amazon business across the globe. I say that in an extremely complimentary way and think bulls should be uniformly pleased with these results.

Cava is a quick-service restaurant chain that sells Mediterranean food, with a focus on strong value, quality ingredients and a warm, in-store ambiance.

My Cava Deep Dive can be found here.

Food, beverage and packaging was 29.3% of revenue vs. 28.2% Y/Y. This was, as expected, again driven by last year’s steak launch. Cava continues to expect comps to normalize in June and for the overall 2025 impact to be about 100 bps.

Labor and related costs were 25.7% of revenue vs. 26.0% Y/Y thanks to modest revenue outperformance. Leverage was partially offset by 3% wage inflation. Occupancy & related costs were 7.4% of sales vs. 8.0% Y/Y – again thanks to fixed cost leverage stemming from strong revenue generation. Overall, general and administrative expenses ex-stock comp were 10.5% of revenue vs. 11.1% Y/Y. All of this enabled 35% Y/Y EBITDA growth.

“Our guidance reflects both the evolving macroeconomic landscape and the strength we're seeing in our business. Our consumer remains resilient and we believe that momentum is appropriately captured in our outlook.”

CFO Tricia Tolivar

Cava trades for 72x forward EBITDA. EBITDA is expected to grow by 27% in each of the next two years.

Macro:

Cava’s results are not the byproduct of an overly confident consumer. Quite the opposite. We’ve heard countless competitors talk about ramping consumer anxiety and weakness in some markets and the lunch daypart specifically. Cava called the backdrop uncertain and fluid, but its strong execution and value proposition are simply cutting through that fragility. Great food and a commitment to great omni-channel service are both helping a lot.

“Despite broader uncertainty, we sustained momentum and delivered strong results, including positive traffic and expanded our reach, reinforcing our ability to capture the substantial white space opportunity in front of us.”

CEO Brett Schulman

I think their motivation to control pricing is also helping mightily in this backdrop. People still need to eat when macro anxiety strikes. But? They’ll naturally gravitate towards the good-tasting, relatively healthy food that optimizes bang for their buck. Chipotle is a great example of this and so is Cava. Since 2019, Cava’s menu inflation has trailed the sector and the overall CPI by 8 full points. Its 1.7% price hike this year simply continues a trend of trying to amplify consumer value whenever possible. Clearly, it’s working; Cava maintained 7%+ same-store traffic growth while other sector participants struggled to stay above 0%.

Simply put, Cava is seeing zero changes in consumer basket size, order frequency or buying habits overall. There’s no weakness to be found in its lunch daypart like for Sweetgreen and others. All premium add-on items and its steak protein are enjoying strong attach rates across all income cohorts. All of the markets it operates in, including Washington D.C., with the DOGE headwind, are performing very well. The modest macro caution it baked into its guidance seems to be entirely preemptive, rather than based on observed trends. Impressive business.

In terms of tariff exposure, while Sweetgreen blamed the policy for its somewhat weak results, Cava sees its exposure as limited, with easy ways to further limit it.

New Stores & Store Trends:

Expansion into Indiana, the Greater Miami area and Lafayette, Louisiana is going very well. It still plans to enter Detroit and Pittsburgh this year and is committed to reaching 1,000+ stores by 2032 for a 15% CAGR from now to then.

Rapid store growth is not a byproduct of hoping and praying. It’s a response to excellent trends observed across its new vintages. As a reminder, last quarter CAVA raised its average unit volume (AUV) for new stores from $2.1M to $2.3M for year 1 and from $2.3M to $2.5M for year 2. Cava also boosted year 2 RLM expectations from 20% to 22% and cash-on-cash return projections from 35%+ to 40%+. All of this not only means more profit per store in the near-term, but fringe markets suddenly becoming rational to pursue. It expands the total addressable market. And in terms of how productive these stores can get, there’s fortunately no ceiling in view. 

Lower AUV stores are tightly correlated with newer stores with steady AUV ramps taking place. Its top 25% of stores have AUVs over $4M with 30%+ RLMs. And? No region in its portfolio is below $2.6M in AUV. There will be a natural drag for this metric as it rapidly builds the footprint and has a larger proportion of stores that are newer. As the portfolio matures however, there’s every reason to believe it can approach $4M AUV and 30%+ RLM.

“We are pleased with our new restaurant openings, which are exceeding expectations in both top line and margin performance.”

CFO Tricia Tolivar

Inviting In-Store Experience:

Its Project Soul initiative, with softer seating, in-store greenery and a warm ambiance, helped Cava secure the #1 ranking in Fast Company’s most innovative restaurants, dining and food service providers.

Marketing Campaigns & the Loyalty Program:

Cava’s Spice World marketing campaign went well. They launched their hot harissa pita chips and two chef-inspired bowls as part of this and introduced a new Pita Chip mascot during National Pita Day. This directly led to record-setting app traffic and more than 2x the rewards redemptions they were expecting.

Cava’s most targeted marketing outlet, like for many of its peers, continues to be the loyalty program. They used the National Pita Day testing to glean valuable data from consumers and are confident they can keep quickly learning on the fly while also delivering great results and experiences. For this test, the team observed a boost in lower-frequency customer engagement and they are excited to borrow those learnings for other growth opportunities. That will include a phase two of its loyalty program re-launch later this year, with more granular rewards that augment the customer experience.

In the meantime, the phase one relaunch is going very well. Loyalty transactions rose 340 bps as a percent of total since it reintroduced (phase one of) the loyalty program with capabilities like this one. Total membership is now nearing 8 million people and rapid growth should be the theme going forward.

Food & Culture

Cava’s chicken shawarma test in Texas and California is going very well. As a reminder, the company doesn’t guess and hope when it comes to menu introductions or any other facet of its business. Its carefully built microservices foundation relies on first-party data to learn & iterate (and is how it built its own loyalty program from scratch). It pairs this foundation with an elite and disciplined leadership team that utilizes stage-gate testing for everything they do. When they introduce a new menu item or a new perk or a new store layout, it’s because they already know it will work. 

Consistent Execution & Service:

Cava’s new labor deployment model continues to boost worker productivity across all day parts. It’s minimizing the frequency of employees needing to “frantically” move to other jobs during peak hours to avoid service degradation and just makes everything run more smoothly.

Its Connected Kitchen initiative and the Kitchen Display System (KDS) are also progressing nicely. It’s now in 42 stores and is fostering “higher guest satisfaction and digital accuracy, as well as more proactive guest communication in all of them.” The screens are helping with triaging of orders and the ability to flex up or down capacity on the fly. This test will expand from 42 stores to 250 this year. Finally, new AI video technology initiatives are expected to help employees on quantity and cadence of ingredient replenishment. It’s always trying to balance excellent human-centric service with technology and automation to augment their efficiency.

Very good quarter – both overall, and compared to the rest of the sector. The company’s team is world-class, which is arguably as important in quick-service food as any other sector. They’re competing with countless similar business models and consistently winning against all of them. Thank you, Brett Schulman. The runway for new stores is long and the levers to pull to make existing stores even better are abundant. This is an obvious profitable compounder.

The issue? Its valuation is sky-high. That’s why it is currently my smallest position and why I’m not adding into the modest decline. I’d love to be able to get shares closer to 40x-50x EBITDA instead of 70x. That could come from a meaningful correction or simply via the stock chopping around for a while as they keep winning. I’m forcing myself to wait to build out this position, as I do think it needs to get materially cheaper. I’m comfortable with making the biggest risk here not owning as much as I want to if it keeps moving higher.

Palpable Tech Platform Momentum:

This 30-minute conversation yielded more tangible color on the tech platform pipeline than we’ve gotten in a very long time. It was hard to hear anything but excitement in Noto’s voice as he talked through this recently-challenged sector. The segment has survived 5 points of rapid rate hikes, rampant inflation, a regional banking crisis and a massive and cumbersome Technisys integration project… all while simultaneously switching go-to-market to pursue larger, more established clients with innately longer sales cycles. When putting all of this together, I think it’s crystal clear why this segment has been more disappointing than the other two, but things are now changing. Integration progress is allowing it to shift more resources to product innovation and go-to-market. More rate cuts are likely coming. The go-to-market overhaul is largely complete… and Noto is optimistic.

“What I'd say is that in terms of the demand picture, it's improved quite dramatically… I'm happy to say the last 6 to 8 months have been very robust in terms of demand generation, and it's been pretty broad-based.”

CEO Anthony Noto

He spoke about the Direct Express deal with the federal government (ramping in 2026) as a “home run” and “another deal it couldn’t name the name of.” And generally speaking, he spoke about 10 signed or almost signed deals in the pipeline. It has “been a long time since that has happened,” according to him. He expects most of these (if not all) to close and begin contributing to revenue in Q1 2026. I think the writing is on the wall that this segment is approaching a convincing re-acceleration, as Noto remains confident in the segment’s multi-year targets.

“But I'm even more excited about the amount of demand that we're seeing from big consumer brands that understand the opportunity in financial services, especially digital.”

CEO Anthony Noto

And it’s not just new clients coming into the fold. Previously lost clients are boomeranging back to Galileo. These clients left Galileo to go with bare-bones, simplistic solutions in an attempt to save a little money. Some also tried to build homegrown solutions. In both cases, these clients found constant issues and limited functionality with other vendors, while the homegrown pursuits all fell flat. Galileo is happy to welcome them back with open arms, because these clients now realize a holistic value proposition is more important than saving a fraction of a penny on processing and gateway fees.

“When someone just wants a low-priced service without any sophisticated add-on products, we're not going to compete in that area. It's not a good area. If someone just wants to use it as a gateway, we're not going to want to do that business. That's a business that's probably going to be a loss leader. But if someone wants to innovate and drive consumer experience and they're not an expert and they haven't scaled, we're going to get them a fair price and we'll be able to add a lot of products over time.”

CEO Anthony Noto

“There are 2 deals in particular that we're about to close that are pretty significant. They're highly visible. They already have installed bases where the partner is optimized for price, not for the level of sophistication that we have, not for the innovation that we provide, and they're coming back to us.”

CEO Anthony Noto

Noto tells us when things are bad. He tells us when things are good. He’s blunt and candid. That’s highly appreciated. And considering that, it’s hard for me to finish reading that transcript anything but optimistic about SoFi. It’s almost time for the revenue ramp… go make it happen.

SoFi Relay & Top-of-Funnel:

While SoFi Relay doesn’t directly generate revenue, it is arguably SoFi’s best cross-selling tool. It displays all first and third-party banks, brokerages, credit cards and more in a single dashboard. And? It has a few tools to nudge best customer practices… which also means boosting SoFi product adoption.

One of these examples is its Cash Coach, which tells people when they can move money into an account for more yield, when they should pay off a credit to minimize interest expense or when they have excess funds to allocate to an index fund. These are just three examples and make it very clear how this + Relay can drive significant product uptake. They’ve already won these customers… Now it’s just about actionably showing them how they can “get their money right.” Speaking of which, Expense Czar is on the way. This will provide overarching benchmarks for spending and debt levels for people at similar ages and income levels, showing consumers where they’re perhaps being a tad too liberal with costs.

SoFi Invest:

Noto reminded investors that Q1 was the best engagement quarter SoFi Invest has ever had. It thinks this is a direct response to interface tweaks like its single-page stock sheets, product suite fortification and unique offerings like the Anthropic private placement. He also reminded us that the vast majority of users are new to investing and simply looking for basic tools. This is why I joke about there being 9 whole members who are bummed about the level one options delay. Most of its users just don’t care in the slightest.

A pedal-to-the-medal mentality will remain in place for this business throughout 2025. It’s now realizing positive variable profit, which means it’s time to scale product and marketing investments to eventually cover fixed costs and deliver a net profit. To Noto, the first part of this profit inflection is permission to get more aggressive for this business. That’s exciting, considering it’s 50% under-monetized and could be (per the team) its biggest segment in the future. Right now, it’s one of the smallest.

And in the world of crypto, they’ll “soon be launching” the ability to trade crypto currencies, with needed regulatory clarity in place. Crypto will be an area of focus throughout 2025, but it sees this initial launch as less exciting than the other opportunities in reach. Things like using it for asset-backed lending and Galileo product launches are both in the roadmap.

Finally, there are a couple product announcements coming soon for Galileo. Noto wasn’t quite ready to name them.

SoFi Plus Subscription:

SoFi Plus is outperforming in terms of existing member uptake and incremental product uptake post conversion. He reminded us that these members have had access to all of the products they’re adding long before becoming SoFi Plus members, which is why this is a pleasant surprise. Perhaps this is just motivating people to explore more of what SoFi can do for them.

Internal Usage of AI:

Loan Platform Business (LPB):

SoFi is eager to harvest more of the $100B in loan demand that it can send to 3rd parties via SoFi Lantern (marketplace for rejected borrowers). Vitally, it will not capture it with its own balance sheet. It sounds like LPB, which uses pre-set commitments from 3rd-party funders to originate credit, is gearing up for an expansion beyond SoFi’s ultra-prime credit bands. There are pros and cons to this in my mind. On the positive side, it likely expands the addressable market and adds to revenue opportunities. But? Those incremental revenue opportunities will be more cyclical than its ulta-prime niche. Capital markets get far more antsy with less affluent borrower cohorts than with SoFi’s typical customer. So? This vertical could introduce higher peaks and lower valleys to SoFi’s results across cycles. It does have a great underwriting reputation and thinks supply will be durable. Still, that potential expansion would put the perceived durability to the test.

2026 Targets & Beyond:

Noto added more context to the $0.55 to $0.80 EPS range they remain confident in. It’ll be closer to $0.80 in a slower-growth environment where they have fewer opportunities to reinvest. It’ll be closer to $0.55 if the opposite plays out. 

He talked about 50 million members by 2030 as an aspirational goal (not a formal guide). This would represent an impressive 35% CAGR from now to then. Again… aspirational goal. But if they come close to realizing this goal, that will mean that the company has done quite well. I think it’s safe to say a 35% member CAGR can easily coincide with a 35% revenue CAGR. Considering how under-monetized many of its businesses remain and how many more products it plans to add to amplify existing member cross-selling, that’s probably a safe bet. Sell-side expects revenue growth to slow to 15% by 2027. Again, I don’t expect a 35% member CAGR or a 35% revenue CAGR, but simply coming close to that would net explosive upward analyst revisions.

Credit Cards:

The retooled credit card business is “performing very well.” This can be a massive business, but they need to build it slowly. Card losses can rapidly mount if underwriting quality isn’t adequate. It seems like that underwriting is at least approaching readiness, which should mean accelerating originations throughout 2025. They see so much opportunity to profitably undercut legacy providers operating at a 40%+ ROE.  This is thanks to the often predatory late fee structures so common in competing business models. SoFi will not be reliant on collecting sky-high interest rates on customer balances; they can help so many people lower the cost of their credit card debt just like they do within unsecured lending.

Going Global:

Noto teased international expansion in the coming year.

Advanced English Learning:

Duolingo continues to change the narrative that its app is only for beginner English learners, rather than for advanced students too. That will take time, as the reputation was fortified over many years before Duolingo began working on adding more advanced content. But? The positive change is happening. Notably, its video facetime tool is used most by English learners vs. any other language. It’s over-indexing to English students more than any other company product launch has in the past. Countries like Japan, with higher ARPU ceilings, are among the strongest examples of that over-indexing. Why does this matter? Because 80% of language learners in the world are learning English, yet less than half of Duolingo’s DAUs are. There’s a massive opportunity to find steady incremental growth as students continue to realize how much better the product has gotten for them since they last tried it.

The end goal for this is for the “Duolingo score” to be synonymous with language capabilities. They want people to say “I’m a Duolingo English 20” and have that be broadly understood by the masses. That will take a lot more work… but if they can get there and make their brand synonymous with language-learning… sky's the limit.

Duolingo Max Ceiling:

Duolingo unsurprisingly expects Max to keep ramping beyond 7% of total paid subscribers. It reminded us that it hasn’t even localized pricing in key countries like India yet. It also has so much A/B testing left to do to optimize upgrades and brand new Max subscriber growth. They’re excited to see that work pay off in the coming quarters.

Price Hikes:

The Duolingo Super (tier below Max) price hike is going well. The churn reaction has been as expected as has the lifetime value (LTV) boost.

The Long-Term Point of View – Today vs. the IPO:

“We did not expect to grow users as fast as we did for as long as we did. I mean there were 12 or 13 straight quarters in 2022-2024 of accelerating user growth, which was crazy because of [tough comparisons]. So now we have just a much bigger user base that we think, again, is going to pay off over time in monetization.”

CFO Matt Skaruppa

App Store Changes:

Duolingo is eager to test directing people to different checkout pages other than Apple’s following regulatory rulings forcing the tech giant to allow that. The tricky part? Apple is wonderful in lowering pages and clicks to checkout, as it has our personal information and can speed through the process. Cutting them out of the equation will inherently add friction and may lower conversion rates to a certain extent. They will carefully A/B test other options and are open to using them if the LTV benefit is positive. Too soon to tell if they’ll simply stick with Apple or not, but I think some degree of change is likely. Any diminishing reliance on Apple would likely represent a large GPM and overall profit margin tailwind, as nearly all of its input costs are app store fees (nearly 30% of total revenue).

Prediction Markets:

Robins thinks prediction market loopholes for sports betting are creating a heightened sense of urgency for states to regulate and legalize this activity. They’re leaving considerable tax revenue on the table by not doing so, and can now directly see that opportunity cost playing out as prediction markets proliferate.

In terms of a threat to DKNG, Robins continues to see it as a bigger opportunity than a risk – and I think he’s right. None of these options come close to the product breadth that DKNG offers. None offer parlays, which are inherently more difficult to provide with peer-to-peer betting. And? They don’t have the foundation needed to create zero latency, real-time, accurate odds on live betting with precision and near-100% uptime. That’s where DKNG makes most of its money.

If sports event contracts are green-lighted in ongoing court cases, that could take a small amount of single bet market share away from DKNG. At the same time, as I’ve said before, it would also mean the company getting access to 130M more American adults at far lower effective tax rates than they currently pay. So a 2x of the addressable market and a material cut to their largest cost of doing business. Sounds like a good tradeoff to me, especially considering powerhouse sports brands like ESPN and Barstool couldn’t make a dent in DKNG’s and FanDuel’s dominant positioning. It’s hard to think brokerage services offering this option will make a dent either. They’ll surely get some volume… but not nearly enough for this to be a net negative in my opinion (and Jason’s opinion).

Robins said they’ll keep exploring the regulatory backdrop and would maybe consider an events contract entrance post-regulator clarity. They’ve already filed for the license, so that looks inevitable depending on how court rulings shake out.

Additionally, DKNG will sometimes stop taking bets if lines are too far skewed and risk management algorithms take over. Event contracts would be an easy way for DKNG to redirect some of this demand to other parties rather than rejecting it.

As a DraftKings bull, I am rooting for this to be allowed.

Live Betting:

Through SimpleBet and other M&A, DKNG thinks it has built a best-in-class front-and-back end combination for live betting. They support the best menu… lowest latency… highest uptime… and best overall experience. Considering this will likely remain one of the fastest-growing piece of the U.S. sports gambling market, a lead here is quite compelling. And? They think it’s quite durable, without anyone (including Fanduel) close to them in terms of capabilities. Robins will bluntly tell you when they’re behind Fanduel on things. He did that throughout 2023 and into 2024 when talking about NBA market share and a gap in parlay offering. He’s blunt. So, I take things like “we’re leading in live betting” seriously.

Long-Term Targets:

DraftKings remains confident in 2028 targets calling for $7.1B in revenue and $2.1B in EBITDA. As a reminder, this doesn’t include any legalization help, so there could easily be upside (as there is expected to be). And considering DraftKings remains ahead of schedule on the path to those ex-new legalization targets, upside is looking increasingly likely.

Notes on KPIs:

The previously-assumed 12% structural hold target is not a ceiling. They continue to become increasingly upbeat on how high this can go. “It’s on an amazing trajectory.” Rising hold rate means revenue growth will lead volume growth. And rising hold rate plus falling promotional spend, single-digit fixed cost growth, more AI-inspired cost efficiencies all mean profit growth will lead everything. Speaking of AI, DKNG thinks they’re comfortably ahead of anyone in the space when it comes to using this technology.

When asked about how DKNG handle (bet volume) growth is accelerating while it’s slowing for the sector, Robins said it’s product driven. He also said he’s not worried about industry growth in the slightest. It just seems like some vendors are prioritizing revenue and hold over maximum handle (through things like hefty promotions) right now. That’s actually good for DKNG, as its brand awareness will naturally lead to more durable user growth as the sector slows external marketing and promos.

iGaming & Lotto Legalization:

Fun fact, iGaming growth in New Jersey… 15 years into legalization there… is still north of 20% Y/Y. The runway for that segment is arguably longer and larger than it is for sports gambling, with just 11% of the USA having legal access vs. 50% for sports betting. DKNG is cautiously optimistic that there will be at least 1-2 bills done from sizable states before midterms. There has been a large cold stretch of no legalization for this space since Rhode Island (0.3% of the population) legalized it 2 years ago. The financial upside from legislation (I find to be when not if) is massive, especially considering DKNG has the top two brands in the space and the New Jersey stat at the top of this paragraph.

Outcomes:

Robins reminded all of us that DKNG could “easily” hedge some outcome risk and remove some of the volatile, unpredictable impact it has on results. They’re not interested. Sports gambling convincingly boasts positive expected value for the actual book. That’s why none of us ever seem to make any money. So? Hedging that risk is hedging away good risk. They should be taking as much of it as they possibly can… even if that leads to short-term stretches of awful outcomes that impact quarterly results (like in Q4 and Q1). The long-term impact on overall shareholder value creation is objectively higher without hedging. Dealing with bad outcome luck is necessary in the pursuit of maximizing returns. 

Tax Hikes:

DKNG is confident in its ability to recoup tax hikes via lower OpEx elsewhere. That won’t be immediate, but it should happen in states like Maryland where the hike was modest. It thinks modest tax hikes will have zero impact on long-term profitability.

From a market share perspective, the risk is in losing some share to the black market. And while that’s certainly real, it also caps how bold states can get with tax increases, knowing they’ll just push more gamblers to illegal sites with no safety controls and a 0% tax rate. From a legal competitor point of view, all other vendors will also need to cut costs to preserve margin. And their needs, aside from FanDuel’s, would probably be larger than DKNG’s. Why? Because of its large market position. They could actually be a relative beneficiary of higher taxes, as long as they’re not progressive tax rates (penalizing incremental volume) like in Illinois. Fortunately, that’s looking like an anomaly. Heightened inefficiency and deadweight stemming from tax hikes loss favors scaled players.

Competition:

The USA’s exclusion of the cheap Chinese goods tariff exemption has not impacted the competitive landscape for MELI. Some thought it would lead to more Chinese goods flooding their markets, as players like Temu and Shein grow their presence. That has not happened (yet). If anything, MELI is finding easier access to Chinese supply for its own first-party inventory needs. While that’s nice, it will also probably be temporary, as tariff levels have come down significantly (and hopefully will stay down).

Rest of LatAm:

While Chile, Colombia, Peru, Ecuador & Uruguay represent the same GDP and population as Mexico, the financial contribution from those countries combined is 20% of Mexico. As Ariel explained, the company has always had developer availability as its limiting factor. Whenever they found more developers, the best decision was to put them to work in Mexico, Brazil and Argentina. With scale, slightly easier developer availability and GenAI. That’s changing. MELI still has a boatload of growth left to enjoy in its 3 core markets, but is finding more capacity to invest in the rest of them now too.

Cutting Shipping Costs:

Following a doubling in its fulfillment footprint in Brazil, shipping cost de-leveraged a bit last year. Ariel reminded us that this isn’t what they’re optimizing for. They’re trying to keep shipping stable as a percentage of GMV, as they have since 2019. Furthermore, they’re using all automation and economies of scale-based efficiency gains to delight its customer more deeply, rather than optimize near-term margin. This means a deeper competitive moat, as MELI makes itself more difficult to compete with from a pricing point of view. And it’s working well. While they’ve kept shipping costs flat, they have boosted 1st-party fulfillment penetration from 10% to 50%, raised free shipping rates by 20 points and quadrupled GMV. Pretty good.

Not only does this create an even larger customer experience gap vs. the field, but also lets MELI rationally and profitably provide lower-priced items to create a larger assortment and customer frequency advantage. This is a key focus for every global commerce marketplace – and rightfully so.

Meli Mas Subscription Program:

The Chile launch last month was called “very good” while the Argentina launch last week was called “amazingly good.” Customer and volume “incrementality is higher than what [they] were hoping for and member growth is ramping quickly.

1st-Party and 3rd-Party Philosophy:

No changes here. MELI fixates on being a predominantly 3rd-party merchant marketplace. But? Sometimes lower-margin goods are tough to provide for these smaller businesses, sometimes the service quality is lacking and sometimes Meli needs to fill in the gaps with its own inventory. It has effectively done that with smartphones in Brazil in the past and is now doing it with groceries. Interestingly, 1st-party grocery is actually a higher-margin business for Meli, which is not the norm. And while 3rd party is a higher-margin business than 1st-party, that gap is closing with significant efficiency gains being realized.

The theme of this product event was helping customers save more money while becoming more valuable for Uber’s ecosystem. It was about driving win-wins wherever possible; that’s what this piece will focus on.

Table-Setting:

Why was customer value the motif of this piece? Interestingly, Uber is not for rich people like folks think. 60% of their rides are from consumers earning less than $75,000/year. People lean on them daily for commuting, groceries and movement of any kind of good you can think of. This idea was the driving force behind debuting all of the products you see below, while Uber positioned these launches to simultaneously augment revenue visibility and quality.

Controlling Pricing – Mobility:

First, Uber debuted Commute Alerts. Customers using Uber to get to work struggle with variable ride times that rapidly fluctuate from day-to-day. This product sends push notifications, based on expected driver supply, traffic and everything else, to nudge when to schedule a ride. It will also tell you if pricing is rising or falling, so you have a better idea of how long you can wait out booking that ride to seek a lower price… or when you should book before that price rises. Through IOS Live Activity and Android Live Update integrations, these push notifications will pop up right on a home screen.

Next is Price Lock. This is another product for the daily commuter and solves for unpredictable day-to-day pricing changes for rides. With this product, a consumer can plug in their pick-up location, destination and an hour window for their commute. They can then pay $2.99 to lock in a more favorable rate for the work week. They save up to $50 and Uber enjoys wonderfully predictable and stable demand from these consumers, without them shopping for cheaper options. If the price is even lower than the locked-in fee, customers get the lowest of the two. This launched in some U.S. and Brazilian cities this week.

It also debuted Prepaid Passes. This is essentially a bulk discount where riders can buy bundles of 5-20 monthly rides at lower rates. Just like with Price Lock, this creates a massive revenue visibility and quality advantage for Uber with those who opt in.

Finally, Uber introduced Route Share. Unlike rideshare, which picks up multiple riders from different locations and drops them off at respective destinations, there’s one pre-set route for everyone. This allows folks willing to walk a little more or wait a little longer for a ride to save up to 50% vs. UberX rides. Rides for routes happen every 20 minutes and it’s working with employers to add this to commuter benefits. This would mean users pay for rides on a pre-tax basis for more savings.

Uber will debut a streamlined commute hub later this year to neatly organize all of these new options in a non-cluttered manner.

Controlling Price – Uber Eats:

Introducing Savings Slider. This lets customers, with pre-built shopping lists for every occasion, automatically deal hunt. The product scapes offers and cheaper substitutes from grocery partners to offer ways to save. This is routinely delivering 15%-20% savings in testing.

Its new OpenTable partnership is also creating some cool new product collaborations. Uber is offering a new Dine Out option. This offers customers a local map of restaurants, eligible deals and an ability to book tables and rides without ever leaving the app. Uber One members will get priority access to some restaurants and this will debut in Sydney this summer. As part of the relationship, OpenTable will offer its loyalty members 6 months of Uber One for free and will offer Uber rides right from within their app as customers book. Booking.com (owns OpenTable) + Uber is a powerful duo.

New Uber One Perks:

AV Savings:

This part of the event was very short. They just talked about the aforementioned Volkswagen partnership to autonomous shared rides. This will commercially debut in LA next year.

“We think that the promise that we're seeing and the alliances and relationships that we're building there are absolutely best of breed.”

CEO Dara Khosrowshahi

Investor Day Targets:

Uber is well on its way to reaching compounded annual ~17% bookings growth and ~38% EBITDA growth.

Autonomous Vehicle Partnerships:

The Waymo Austin launch has gone “even better than ambitious targets.” Utilization rates, uptime, maintenance cadence and opt-in rates are all trending very nicely. This has actually been quite complementary to human drivers so far. The Waymos are being used for less appealing, lower-cost short rides while manned vehicles are enjoying continued strong demand for higher-value, longer rides. There will be non-peak times where AVs replace driver needs, but we likely have years and years of human and nonhuman rides complementing each other on Uber’s marketplace. 

Delivery:

Merchant-funded offers are killing it for Uber. This is helping it observe zero change in delivery demand while foot traffic for many chains has been challenged. That’s also enabling it to secure a leading market share position in 8 of its 10 largest markets, with its piece of the pie growing Y/Y in all of them.

Insurance Costs:

Through lower car insurance CPI readings, route safety optimization, driving safety scoring and positive regulatory developments in states like Georgia, they expect insurance disinflation to be a cost tailwind in the near-to-mid future.

Aurora:

Uber monetized $1B (45%) of its Aurora stake this week. It did so via a convertible note sale that allowed it to collect proceeds above the current market price. They have no plans to sell the rest of the stake. Proceeds will likely be used to fund AV investments like fleet management infrastructure. These facilities need a ton of chargers, experienced maintenance staff and a boatload of compute. They’re expensive. Building them can create a compelling infrastructure moat.

Wall Street Journal published an article on fraud taking place within Facebook. They talked about its platforms representing 50% of reported Zelle scams in 2023 and 2024. I don’t think this was a fair article. It’s very easy to pick on Meta for “needing to do more.” It’s important to remember this is a reality with all massive consumer-facing platforms. Spotify… Airbnb… Uber… PayPal… Block… all of them. It is not possible to control the inevitable bad actors. Just look at X and how difficult it has been for them to control the rampant, predatory bots that comment 50 times per post that I make. Meta dominates U.S. social screentime, has a massive peer-to-peer marketplace and a uniquely large amount of opportunity for financial fraud to take place. Of course there’s a lot of fraud on the marketplace. I expect Meta to keep trying to improve with the help of GenAI and I expect this to be noise.

The other piece of news was a 6-month delay to Llama 4 Behemoth. Wall Street Journal called this a response to “performance concerns.” And while that’s not ideal, I don’t really worry much about Meta’s ability to compete in the LLM race. Zuck is a crazy person in the best of ways, and I am extremely confident that he will make the tweaks needed to keep Llama at the forefront of open source model innovation. Worst case scenario? I’m wrong, it falls behind, licenses competing models, lowers the demand ceiling and immediately starts generating a lot more free cash flow. That’s an easy downside risk to digest… but it’s not a downside risk I expect. 

I’ve gotten a lot of questions about UNH and if I think that the stock is a falling knife to catch. To be candid, this is firmly in my “too hard” pile. I don’t think one can get comfortable owning this unless you have a firm grasp on impending fraud investigations, regulatory risk associated with Medicare Plus, drug pricing, Pharmacy Benefit Managers (PBMs), claim denying practices and the web of confusion that is the U.S. healthcare system. I prefer to focus on fintech (including non-healthcare insurance), enterprise software and consumer discretionary. That’s my circle of competence. Those yield the fastballs down the middle where I have my highest on-base and slugging percentages. Could it keep bouncing after a breathtakingly quick 60% pullback (for an American bellwether)? Sure. But I just think there are easier places with fewer headaches to make money.

The payments giant is integrating PayPal and Venmo checkout right into Perplexity search results as part of a new partnership. I love this idea. It means actionable shopping and checkout with fewer clicks and pages. In turn, that always leads to better conversion rates, happier merchants, happier PayPal and a happier nerd. This will be for the Perplexity Pro platform and will debut this summer.

In other news:

As I’ve been rooting for, Starbucks is exploring a sale of at least part of its China business. I think this is necessary. The Chinese government doesn’t want American companies extracting value from their economy. That’s partially why we have such a massive trade deficit with them. That’s the reality whether we like it or not. SBUX can complain, or they can find a local partner to join hands with in that market. This will take the target off their backs, as the government there is happy to see SBUX succeed if it means their own private sector succeeds because of it.

Make it happen.

Waymo is recalling 1,200 vehicles for a software bug that has been fixed. Alphabet also invested in the new Saudi Technology Ventures AI fund.

Amazon will partner with FedEx to plug some of the large deliveries that UPS will no longer fulfill. AWS signed a new $5B partnership with Saudi Arabia’s AI Zone.

Shopify and Global-E renewed their Shopify Managed Markets partnership for another 3 years. Global-E will remain the merchant of record as the “preferred partner,” but exclusivity is now gone.

SentinelOne secured FedRAMP High Authorization for Purple AI, some other AI tools and its cloud security platform. This opens the door for more contracts with the Department of Defense and other agencies.

The USA and China temporarily lowered tariffs from up to 145% to 30% for at least the next 90 days.

Moody’s downgraded the USA’s credit rating from its highest to second-highest tier. 

I think this is going to be a noisy nothing-burger just like the Fitch downgrade was two years ago.  It could lead to some volatility on Monday, but I don’t anticipate a large fallout beyond that. The USA remains the best game in town by a wide margin and this doesn’t change that.

Inflation Data:

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Consumer & Employment Data: