Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

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Transactions

META (META)

I added to my META position for the second consecutive month. At current levels, I believe it is the best value opportunity within the Mag 7, trading at roughly 18x forward earnings despite a very attractive long-term growth outlook

As I have mentioned previously, AI is already driving tangible results across the core advertising business. Recommendation improvements are increasing time spent on platform, video engagement continues to rise, and better ad targeting is supporting stronger monetisation.

What remains underappreciated, in my view, is the flexibility embedded within META’s AI strategy. Mark Zuckerberg has repeatedly acknowledged that the company may ultimately be overbuilding AI infrastructure, but views this as a necessary risk worth taking. Even in that scenario, META can materially reduce future CapEx while still retaining years of excess data centre capacity. Given how constrained compute remains globally, that capacity could potentially be monetised through third-party demand.

The asymmetry here is compelling. The downside risk appears manageable relative to the scale of the potential AI monetisation opportunity.

Nubank (NU)

I added to NU following the post-earnings selloff after Q1 2026 results. On the surface, this was not a perfectly clean quarter. Gross margin came in at 38%, down from the mid-40s earlier in 2025, while credit loss provisioning is clearly growing faster than revenue on that line. I am not dismissing those concerns, they represent the clearest bear case in the story and deserve close monitoring.

However, once I dug deeper into the numbers, the broader picture remained overwhelmingly positive. In my view, this business is compounding far faster than the market currently appreciates, and the earnings-day weakness created an opportunity.

The headline number tells the story. Revenue reached $5 billion, up 53% year-over-year. More importantly, growth has meaningfully re-accelerated. Earlier in 2025, revenue growth had slowed to 19%, leading many investors to declare the story broken. That narrative now looks increasingly premature. The rebound to 53% growth is a reminder that NU’s opportunity across Latin America remains enormous and largely untapped.

Purchase volume reinforced the same trend, reaching $40 billion in Q1, up 30% YoY, after recovering sharply from the -2% trough in late 2024 that had shaken investor confidence.

The metric that stood out most to me, however, was the operating expense ratio.

General and administrative expenses have now fallen to just 10% of revenue, down from 47% in 2021. Customer service costs sit at 4% of revenue versus 19% in 2020, while marketing expense is only 1% of revenue. These improvements are not cyclical, they reflect a technology-first business model that becomes structurally more efficient with scale.

When revenue is compounding at 53% while operating expenses remain relatively flat as a percentage of revenue, the operating leverage becomes extremely powerful.

I added after this quarter because I believe the market remains too focused on short-term gross margin pressure while underestimating the strength of the operating model underneath.

NU is now generating $15.9 in revenue per customer across a base of 135 million users that is still growing at double-digit rates across largely underbanked markets. This is not simply a digital bank. NU is building the financial operating system for Latin America, while operating with the cost structure of a software company.

That combination is exceptionally rare, and I am happy to remain a patient long-term holder.

InPost (INPST)

I sold my full position in INPST, which represented roughly 5.5% of the portfolio at the time of sale.

The stock was up 45% YTD following the €15.60 per share proposal to take the company private. Since news of the potential takeover emerged, I had largely been holding the position as a hedge given the stock continued trading close to the offer price, at roughly a 1.5% discount.

Now that I have deployed most of my available cash elsewhere, I wanted to raise some capital, and this was the easiest source of liquidity. At this stage, the remaining upside does not justify the opportunity cost of keeping capital tied up.

I also believe that if the takeover ultimately fails, the share price would likely retrace in the short term. The bid has unanimous board support and already has approximately 48% shareholder backing, although 80% tendering is required for completion.

If the bid fails, I would be more than happy to revisit the name in the future. If it does, I do not currently see a scenario where the stock meaningfully trades above the offer price in the near term.

Take-Two Interactive (TTWO)

I deployed a portion of the INPST proceeds into initiating a new position in TTWO.

I already shared a dedicated article covering the full thesis, but in short, this is a catalyst-driven investment. I believe the launch of GTA VI represents the single largest catalyst in the company’s history, driving a multi-year earnings inflection that transforms the business from a low-profit or loss-making base into a high-margin, record-scale cash flow machine.

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Allocation

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Buy List

Mercado Libre (MELI)

MELI is already my largest position by a significant margin, but that has never stopped me from adding when I believe valuation and long-term opportunity remain attractive. In my view, the market has once again presented that opportunity.

The stock has struggled recently, down 15% YTD and 33% over the past year. Much of this weakness reflects temporary margin pressure caused by aggressive reinvestment into an enormous and still underpenetrated Latin American opportunity.

Q1 2026 results were exceptionally strong from a growth perspective. Net revenue increased 49% YoY to $8.85 billion, the fastest growth rate in nearly four years. E-commerce GMV grew 42%, marking the fifth consecutive quarter of acceleration and the fastest growth since Q1 2021.

Fintech revenue grew 51%, while TPV increased 50%, accelerating for the third consecutive quarter.

However, EPS came in at $8.23, below consensus expectations of roughly $8.8 to $9.7, as management deliberately prioritised growth over short-term profitability.

I put “miss” in quotation marks because MELI does not provide guidance. The company did not miss expectations, analysts simply underestimated the level of reinvestment management was willing to pursue.

This is a familiar playbook. We have seen similar periods throughout MELI’s history over the past two decades. Management consistently prioritises long-term market leadership and ecosystem expansion over near-term margins, and historically that strategy has compounded shareholder value exceptionally well.

Take-Two Interactive (TTWO)

I intend to build my TTWO position relatively quickly over the coming months as I believe the stock could begin moving materially once GTA VI marketing ramps up.

Last week, CEO Strauss Zelnick stated in an interview:

“The next few weeks don’t fall into summer yet, but when summer arrives, Rockstar anticipates beginning the promotion for GTA 6.”

To me, this strongly suggests the official marketing campaign will begin towards the end of June or early July.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

This was a very active month by my standards. I added to two existing positions, exited a full position, and initiated a new one. Cash now sits just above 1%, although I expect to deploy the remainder during June.

I continue to see significant opportunities across the market. Indices may be near all-time highs, but beneath the surface many sectors, particularly software, payments, and e-commerce, continue to lag materially. It remains an excellent environment for active stock picking.

Keep an eye on RBRK this month, with earnings scheduled for 5 June. At one point in April, the stock was down 42% YTD, although it has since staged an impressive recovery and now sits roughly flat for the year.

The stock had largely been punished through broader SaaS weakness, but I believe AI could become a significant long-term tailwind for the business. Perhaps the market is already beginning to anticipate that outcome. We will find out next week.

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Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Contents

1. Introduction

2. The Catalyst

3. The Opportunity

4. Valuation Framework

5. The Moat

6. The Risk

7. Investment Outlook

1. Introduction

If you have been a long-time reader of this newsletter, you know my general philosophy. I do not usually pitch catalyst plays. My bread and butter is finding structural advantages, unloved compounders, and cash-flowing machines with massive moats. I prefer to buy businesses where time is the friend of the company, rather than betting on binary events or product launches.

But every once in a while, the market hands you an obvious mispricing on a plate. Wall Street’s obsession with the next quarter can completely blind it to the massive, transformative cash flow tsunami on the horizon. When that happens, you put away the standard playbook and seize the opportunity.

Yesterday, Take-Two Interactive released its FY26 fourth-quarter earnings and provided forward guidance for the upcoming fiscal year. Unsurprisingly, the stock sold off. The culprit? Management issued notoriously conservative guidance, projecting $8.1 billion in bookings for the fiscal year.

If you look purely at the numbers, without applying any critical thinking, management is effectively guiding for only $1.4 billion more in bookings than last year. In other words, they are telling the market that the launch of Grand Theft Auto VI, a title that has been thirteen years in the making, will only move the needle by a little over a billion dollars.

For the uninitiated, this looks like a growth stall. It appears as though the immense hype surrounding Rockstar Games’ crown jewel is failing to translate into financial expectations. But for those paying attention, this is textbook sandbagging.

In my view, this is one of the clearest examples of expectation management in modern gaming history. Here is why I believe the market is pricing this opportunity incorrectly, and why I am using this post-earnings weakness to initiate a position.

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2. The Catalyst

To understand just how conservative the $8.1 billion bookings guidance is, you first need to understand the scale of what is about to happen.

Later this year, Rockstar Games will release Grand Theft Auto VI. Calling this just a video game release fundamentally misunderstands the intellectual property.

Grand Theft Auto V is one of the best-selling video games of all time, with more than 230 million copies sold globally. It transcended gaming years ago and became a foundational piece of global pop culture.

When GTA V launched in September 2013, it generated an astonishing $1 billion in retail sales within its first three days, setting a world record for the fastest-selling entertainment product in history. One billion dollars in 72 hours.

Crucially, that figure was achieved with a significantly smaller console install base and in a completely different era of digital consumption. Suggesting that GTA VI, launching into a vastly larger and more engaged gaming ecosystem, will only generate $1.4 billion in incremental bookings across an entire fiscal year is difficult to take seriously.

This is what experienced management teams do. They aggressively lower expectations, set a conservative baseline, and position themselves for a multi-quarter beat and raise cycle.

The pent-up demand for this release is unprecedented. We are talking about a consumer base that has spent more than a decade dissecting trailer clips frame by frame and waiting for this exact launch.

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3. The Opportunity

The true asymmetric upside of this thesis lies not only in initial unit sales, but in how dramatically the internet, social media, and gaming ecosystems have evolved since 2013.

The amount of money GTA VI is positioned to generate over the next five years could make GTA V’s historic run look modest by comparison.

Consider the state of the world when GTA V launched:

• TikTok did not exist.

• Discord did not exist.

• Instagram was barely three years old and focused primarily on square photos.

• Twitch was still emerging from its earlier iteration as Justin.tv, and livestreaming remained a niche hobby.

Today, gaming is no longer a solitary activity. It is a broadcasted, viral social experience.

When GTA VI launches, it will dominate the global internet. The free marketing loop created by TikTok clips, YouTube Shorts, Twitch streamers, and dedicated Discord communities will act as a permanent accelerant for player acquisition and engagement. Take-Two will not need to spend billions on advertising because the culture itself will market the product.

The shift in distribution is equally important.

In 2013, most GTA V sales came through physical discs sold at retailers like GameStop. Retail partners took a meaningful share of economics, while manufacturing and logistics pressured margins.

Today, the industry has overwhelmingly shifted toward digital downloads. When users purchase GTA VI directly through PlayStation or Xbox storefronts, Take-Two captures materially higher margins. The unit economics are dramatically better than they were a decade ago.

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4. Valuation Framework

Wall Street is currently valuing TTWO based on management’s conservative $8.1 billion midpoint guidance. I believe that framework materially understates the company’s true earnings power.

Given the expanded install base of current-generation consoles and the industry-wide move from $60 to $70-plus pricing for premium titles, it is entirely plausible that GTA VI generates $2.5 billion to $3 billion during its initial launch window alone.

But the real value creation begins after launch.

The initial retail sales will be enormous, but the long-tail monetisation opportunity is where the real cash flow engine emerges. The ancillary revenue streams could be unlike anything the entertainment industry has previously seen:

• In-game spending: The next iteration of GTA Online will almost certainly be designed around modern live-service mechanics, including microtransactions, battle passes, and digital economies. GTA V stumbled into this opportunity. GTA VI is being built for it.

• Licensing and media expansion: As gaming increasingly converges with broader entertainment, the value of the GTA intellectual property should continue to expand.

• Subscription monetisation: Services such as GTA+ could evolve the franchise from a one-time purchase into a recurring revenue ecosystem.

Software scales exceptionally well. Once the massive development costs are absorbed, incremental digital sales and microtransactions flow through at extremely high margins.

If forward bookings ultimately land closer to $9.5 billion to $10.5 billion over the next 12 to 18 months, and EBITDA margins normalise in the 25% to 30% range, TTWO may already be trading at a mid-teens forward EV/EBITDA multiple on its true earnings power.

For a company that effectively owns the highest-quality franchise in interactive entertainment, that valuation looks very reasonable, if not outright cheap.

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5. The Moat

Now let’s discuss downside protection.

Even if you completely strip away the GTA excitement, Take-Two still owns an exceptional collection of gaming assets.

The company owns Zynga, a major mobile gaming platform with highly recurring revenue streams. It owns the NBA 2Kfranchise, an annualised cash machine with a deeply entrenched player base. It also owns Red Dead Redemption, another globally recognised blockbuster franchise.

More importantly, this portfolio becomes even more valuable in a world increasingly flooded with AI-generated content.

Over the next five years, the internet will likely be saturated with infinite amounts of low-quality, commoditised media. In that environment, truly differentiated intellectual property becomes more valuable, not less.

Nobody is going to vibe-code a Grand Theft Auto game.

You cannot simply prompt an AI model to create a meticulously crafted, hundred-hour open-world experience with proprietary game engines, deeply interwoven narratives, and decades of accumulated cultural relevance.

The barriers to entry required to build a franchise of this scale are enormous. In my view, the moat surrounding Rockstar’s intellectual property is wider today than at any point in the company’s history.

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6. The Risk

Of course, there is one obvious risk factor: delay risk.

Rockstar Games is famously perfectionist. The company has repeatedly demonstrated that it prioritises long-term quality over quarterly expectations. If management believes the game requires additional polishing, they will delay it.

There is a very real possibility that the planned release slips into early 2027. If that happens, the stock would likely sell off further in the short term as impatient capital exits the name.

But the key distinction is this: a delay does not destroy the demand. It simply shifts the cash flows further to the right.

Historically, delays for Rockstar titles have often increased anticipation and resulted in stronger long-term player engagement after launch.

If this were purely a short-term options trade, a delay could be devastating. But that is not how I am approaching this investment.

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7. Investment Outlook

This is not a momentum trade.

I am not buying the hype simply to sell the news into launch excitement. This is a multi-year investment thesis centred on the long-tail monetisation potential of the next iteration of GTA Online.

The real opportunity is the transformation of GTA VI from a blockbuster product launch into a recurring revenue, high-margin ecosystem capable of compounding shareholder value for years.

Right now, Wall Street is focused on heavily sanitised guidance and near-term quarterly optics. I am focused on what may become the most commercially successful entertainment launch in history, backed by an irreplaceable intellectual property moat and operating inside a fully mature digital ecosystem designed to maximise monetisation.

I believe the market is mispricing the opportunity because management has deliberately lowered expectations. I am using this post-earnings weakness to build a position before the underlying cash flow potential becomes impossible to ignore.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

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Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

• E-commerce delivered another record quarter, with GMV reaching $37.3 billion, up 30% YoY, marking the strongest growth since Q1 2025. Gross orders rose 29% YoY to 4.0 billion, while the implied take rate increased to 12.1%, supported by exceptional advertising momentum. Ad revenue surged 80% YoY in Q4 2025, with the ad take rate expanding by more than 90 basis points. Shopee’s investments in instant delivery, fulfilment capabilities, and the ShopeeVIP membership programme are already improving unit economics. In Indonesia, instant delivery costs fell 20% YoY despite volume growth exceeding 35%. Brazil remained a standout market, delivering the fastest growth across the business while continuing to operate profitably.

• Digital Financial Services maintained its rapid expansion, with the loan book surging 71% YoY to $9.9 billion, including $8.8 billion on-book and $1.1 billion off-book. Growth was driven by the addition of 4.9 million first-time borrowers during the quarter. Active credit users surpassed 38 million, growing more than 35% YoY, while average loan outstanding per user increased 25% to $250. Brazil became the fourth market to exceed $1 billion in loans, growing more than 250% YoY, supported by the recently obtained SCFI licence, which expands Monee’s service capabilities. Importantly, the 90-day NPL ratio remained stable at 1.1%, highlighting strong credit discipline despite aggressive expansion into new user segments and off-Shopee use cases.

• Digital Entertainment delivered its strongest quarter since 2021. Bookings increased 20% YoY to $931 million, while quarterly paying users reached 73 million, up 12% YoY. Free Fire’s collaboration with Jujutsu Kaisen generated more than 700 million content views, becoming one of the most successful IP partnerships in the game’s history. Arena of Valor also achieved record quarterly bookings in its tenth year, reinforcing Garena’s ability to operate games profitably across genres and geographies over long periods. The paying user ratio improved to 10.9% from 9.8% a year ago, while ARPPU increased to $1.40 from $1.17.

• Total revenue accelerated 47% YoY to $7.1 billion, representing the company’s fastest growth rate in four years, since Q1 2022. Gross margin declined to 44% from 46% a year ago as cost of revenue increased 52%. Operating income reached a record $593 million, rising 30% YoY in absolute dollars, although the operating margin declined to 8% from 9% due to continued investment. Operating expenses grew 43%, while Sales and Marketing expenses increased 52% and rose to 20% of revenue from 19% a year ago. Notably, an incremental $11 million in spending generated an additional $246 million in revenue, underscoring improving efficiency and returns on investment.

• The company generated adjusted EBITDA of $1.0 billion for the first time, representing 9% YoY growth. Overall, the quarter demonstrated strong absolute profitability growth, even as margins compressed due to deliberate investment. Management continues to prioritise market share gains and strengthening competitive moats over near-term margin optimisation.

Contents

1. Financial Highlights

2. Wall Street Expectations

3. E-Commerce

4. Digital Financial Services

5. Digital Entertainment

6. Financial Analysis

7. Guidance

8. Conclusion

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1. Financial Highlights

• Revenue: $7.1 billion (+47% YoY)

  • E-commerce: $5.1 billion (+45% YoY)

  • Digital Financial Services: $1.2 billion (+58% YoY)

  • Digital Entertainment: $697 million (+41% YoY)

  • Other: $44 million (+33% YoY)

  • Sale of Goods: $612 million (+51% YoY)

• Operating Income: $593 million (+30% YoY)

• Net Income: $438 million (+7% YoY)

• Adjusted EBITDA: $1.0 billion (+9% YoY)

2. Wall Street Expectations

• Revenue: $6.64 billion (beat by 7%)

• Earnings per Share: $0.70 (miss by 4%)

3. E-Commerce

Shopee delivered another record-breaking quarter, with GMV reaching $37.3 billion, up 30% YoY, its strongest growth rate in two years. Gross orders exceeded 4.0 billion, up 29% YoY, driven by a 16% increase in monthly active buyers and approximately 12% growth in purchase frequency.

With GMV at $37.3 billion and marketplace revenue of $4.5 billion, the implied take rate reached 12.1%, up from 10.8% in Q1 2025. Achieving take rate expansion alongside rapid GMV and order growth is particularly impressive and highlights Shopee’s strengthening competitive position.

Exceptional Advertising Momentum
Advertising revenue was the primary growth driver, increasing approximately 80% YoY. The ad take rate expanded by more than 90 basis points YoY to roughly 2% of GMV. Both the number of ad-paying sellers and average seller spend increased by around 35% YoY, reflecting the strong ROI sellers are seeing from Shopee’s advertising products.

Importantly, with the ad take rate still only around 2%, there remains meaningful upside. Over the medium term, this could potentially expand toward 4-5% as AI-driven targeting and conversion tools improve further.

Logistics: Deepening the Moat

Shopee’s logistics advantage continues to widen. SPX Express remains one of the region’s largest e-commerce logistics providers, and investments in instant and same-day delivery are paying off.

In Indonesia, instant delivery can now fulfill orders in as little as two hours. Volume grew more than 35% in Q1 while cost-per-order declined approximately 20% YoY. This is a classic example of operating leverage, where higher scale drives lower unit costs.

The company also expanded partnerships with major offline retailers, including convenience chain Indomaret, bringing approximately 7,000 stores onto the instant delivery platform by quarter-end. This helps bridge online and offline commerce, particularly in higher-frequency categories such as groceries and pharmacy products.

Users of instant delivery services continue to demonstrate higher spending and stronger retention, reinforcing Shopee’s ecosystem flywheel.

Fulfillment is emerging as the next major growth lever. Order volumes through Shopee fulfillment centers grew approximately 25% QoQ, improving delivery speed and operational efficiency for sellers.

In Taiwan, Shopee expanded its collection point network to more than 3,100 locations, up nearly 50% YoY. Combined with innovations such as direct-to-locker shipping, which removes the need for additional packaging, buyer waiting times improved 12% YoY. The result was continued double-digit GMV growth in an already mature market.

ShopeeVIP: A Powerful Retention Engine

The subscription-based ShopeeVIP program is becoming an increasingly important driver of engagement and monetization.

Subscribers across Asian markets surpassed 10 million by the end of March, up more than 40% QoQ, while retention rates remained above 80%. ShopeeVIP members consistently show double-digit spending increases after subscribing, reaching as high as 30-40% in some markets.

The program now contributes approximately 20% of GMV across Asia and was launched in Brazil during April, creating another growth lever in Shopee’s fastest-growing market.

Content Ecosystem and Live Streaming
Shopee’s content ecosystem continues to strengthen user engagement.

AI tools are helping sellers create video content without expensive studio setups, lowering barriers to participation. In Southeast Asia, more than 20% of physical goods orders in Q2 originated from live streaming and short-form video content.

Shopee’s partnership with YouTube also remains a meaningful traffic driver, with more than 7 million videos featuring Shopee product links by June, up over 60% QoQ.

Brazil: The Standout Growth Market

Brazil was Shopee’s fastest-growing market in Q1, while also remaining profitable, an increasingly rare combination in global e-commerce.

Active buyers, purchase frequency, and basket size all expanded, supported by broad product assortment, competitive pricing, and improved logistics. Delivery times improved by more than one day YoY, while three additional fulfillment centers increased the total network to five.

These investments enabled Shopee to attract more premium merchants. ShopeeMall GMV more than doubled YoY and now represents approximately 15% of total GMV.

Given Brazil’s still relatively low e-commerce penetration, the long-term growth runway remains substantial.

AI: The Invisible Hand
Shopee’s practical use of AI is already producing measurable benefits.

AI-powered search and recommendation improvements lifted purchase conversion rates by 14% YoY. AI-generated content tools are also helping sellers create more effective listings at lower cost.

On the operational side, approximately 80% of customer queries are now handled by AI chatbots, reducing customer service cost-per-contact by roughly 30% YoY while maintaining strong satisfaction levels.

Looking ahead, Shopee is testing an AI shopping assistant for buyers and a virtual business advisor for sellers, both of which are expected to see broader rollouts over time.

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4. Digital Financial Services

Monee delivered a stellar start to 2026, with the credit business continuing to act as the primary growth engine. The loan book reached $9.9 billion at quarter-end, comprising $8.8 billion on-book and $1.1 billion off-book, representing growth of more than 70% YoY.

The company added 4.9 million first-time borrowers during Q1, bringing active credit users to 38 million, up more than 35% YoY. Average loan outstanding per user increased 25% YoY to approximately $250, reflecting deeper engagement as users establish credit histories and qualify for larger borrowing limits.

The Three-Pronged Growth Strategy

1. Deepening Existing Relationships

   As users successfully repay loans, Monee increases their credit limits and extends loan tenures. This creates a natural progression where borrowers gradually move up the credit ladder and borrow more over time.

2. Acquiring Higher-Quality Users

   Monee is increasingly targeting more affluent users with stronger credit profiles. These customers typically demonstrate better repayment behavior and larger borrowing capacity.

   Early campaigns focused on competitive pricing, higher limits, and longer tenures are already showing encouraging traction.

3. Expanding Off-Shopee Use Cases

   This remains the largest long-term opportunity.

   Off-Shopee SPayLater in Thailand and Indonesia exceeded 20% of the overall SPayLater portfolio by quarter-end. In Indonesia, growth has been particularly strong in higher-value categories such as electronics and two-wheelers, where installment financing plays an important role.

   Personal cash loans, targeted toward reliable SPayLater users, nearly doubled YoY. Despite the strong growth, penetration remains relatively low, suggesting meaningful room for expansion.

Brazil: The Fourth Pillar
Brazil became Monee’s fourth market to surpass $1 billion in loan book size, growing more than 250% YoY.

Growth was driven by a localized product combining SPayLater and cash loans, designed specifically around Brazilian consumer credit behavior. This resulted in strong user adoption and higher repeat usage, with average loan outstanding per user more than doubling YoY.

SPayLater penetration on Shopee in Brazil currently sits at roughly 10% of GMV, still well below more mature markets such as Indonesia, where penetration is already in the mid-teens. This highlights the significant growth runway still ahead.

The SCFI license secured during the quarter further expands the range of financial services Monee can offer and strengthens its long-term positioning in the market.

Asset Quality
Despite expanding aggressively into new segments, geographies, and off-platform use cases, the 90-day NPL ratio remained stable at 1.1%, unchanged QoQ.

This consistency highlights the strength of Monee’s underwriting capabilities and disciplined growth strategy. The relatively short duration of most loans allows management to adjust the portfolio quickly, while real-time optimization of credit limits and loan tenures helps preserve asset quality as the business scales.

Management summarized the opportunity well:

“Expansion into more user segments, off-Shopee use cases, and early markets like Brazil are giving us a much larger addressable opportunity across our portfolio.”

Monee increasingly looks positioned to become a major long-term profit driver for Sea.

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5. Digital Entertainment

Garena delivered its strongest quarter since 2021, with bookings rising 20% YoY to $931 million. The performance was driven by the continued strength of Free Fire alongside a record contribution from Arena of Valor.

Quarterly active users reached 667 million, roughly flat YoY. More importantly, quarterly paying users increased 12% YoY to 73 million, while the paying user ratio expanded to 10.9%, up from 9.8% a year ago.

This marks nine consecutive quarters of double-digit paying user growth following several years of decline. ARPPU also improved meaningfully, rising to $1.40 from $1.17 YoY, reflecting stronger monetization across the portfolio.

Free Fire: Eight Years and Still Growing

Free Fire continues to defy the normal lifecycle of mobile games, maintaining more than 100 million average daily active users eight years after launch.

A key reason is Garena’s ability to consistently execute high-quality IP collaborations.

In January, Free Fire launched a major collaboration with the anime Jujutsu Kaisen, generating more than 700 million official content views. The event integrated iconic anime mechanics directly into gameplay, including themed environments and character abilities such as Gojo’s “Unlimited Void.”

The collaboration followed the highly successful Naruto Shippuden partnership in 2025 and further demonstrated Garena’s ability to create culturally relevant gaming experiences that resonate globally.

Beyond IP collaborations, Garena continues refining its localization strategy.

A strong example was the Ramadan campaign. Historically limited to Ramadan-observant regions, Garena expanded the concept into a global “Lost Treasure” event in Q1 2026. Players in relevant markets viewed it as a culturally tailored celebration, while global users experienced it as a fresh desert-themed gameplay event.

The campaign generated more than 120 billion social media impressions, up approximately 70% YoY.

Arena of Valor: Longevity at Scale

Arena of Valor achieved record quarterly bookings in its tenth year of operation, a rare feat in gaming.

The continued success of both Free Fire and Arena of Valor highlights Garena’s unique capability to operate gaming franchises profitably across multiple genres, markets, and time horizons through continuous innovation and engagement.

AI: The Next Enabler

Garena sees AI as an important long-term growth enabler across development, engagement, and content creation.

AI tools are already accelerating asset creation and enabling higher-quality content production at scale. AI-driven game agents may also improve retention by supporting solo players.

Longer term, Garena is experimenting with generative content that could allow players to create in-game assets themselves, although scalability and quality control remain key priorities.

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6. Financial Analysis

Revenue

Total revenue accelerated 47% YoY to $7.1 billion, the fastest growth rate in four years and the strongest since Q1 2022.

The acceleration is particularly notable given Sea’s scale and reflects strong momentum across all three core businesses.

• E-commerce revenue grew 44% to $4.5 billion, driven by GMV growth and improved monetization, particularly advertising.

• Digital Financial Services revenue surged 58% to $1.2 billion, fueled by rapid credit expansion.

• Digital Entertainment revenue increased 41% to $697 million, supported by improved monetization and stronger user conversion.

Gross Margin

Sea reported a gross margin of 44%, down from 46% in Q1 2025.

Cost of revenue increased 52% YoY to $4.0 billion, outpacing revenue growth. The margin compression reflects deliberate investment across instant delivery, fulfillment infrastructure, ShopeeVIP subsidies, and user acquisition.

The business mix remained relatively stable:

• Digital Entertainment represented 10% of revenue

• Digital Financial Services increased from 16% to 17%

• E-commerce declined modestly from 64% to 63%

This suggests most of the gross margin pressure came from e-commerce investments rather than structural deterioration elsewhere in the business.

Notably, both Digital Entertainment and Digital Financial Services improved their gross margins during the quarter. Digital Financial Services, in particular, expanded gross margin from 86% to 89%.

Given that Digital Financial Services is both Sea’s highest-margin and fastest-growing business segment, it is likely to become a larger share of overall revenue over time. If that trend continues, Sea’s consolidated gross margin could potentially exceed 50% over the longer term.

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Operating Margin

Sea delivered record operating income of $593 million, up 30% YoY in absolute dollars, although operating margin declined slightly to 8% from 9% a year earlier.

Operating expenses increased 43% YoY to $2.6 billion, slightly below revenue growth but not enough to fully offset gross margin pressure.

Sales and marketing expense rose 52% YoY to $1.4 billion, although it remained relatively stable at roughly 20% of revenue.

The key takeaway is that marketing efficiency continues to improve.

From Q4 2025 to Q1 2026, Sea invested an additional $11 million into sales and marketing, generating approximately $246 million in incremental revenue. This suggests increasingly efficient customer acquisition and monetization across the ecosystem.

Other notable cost trends included:

• Provision for credit losses increased 65% to $466 million, reflecting rapid loan book expansion while remaining manageable relative to growth.

• General and administrative expense rose 32% to $404 million, broadly in line with company growth.

• Research and development expense remained flat at $297 million, reflecting disciplined investment while maintaining innovation capacity.

Adjusted EBITDA

Sea surpassed $1 billion in adjusted EBITDA for the first time, up 9% YoY.

Shopee’s adjusted EBITDA declined from $264 million to $223 million as management prioritized long-term investments in delivery, fulfillment, ShopeeVIP, and customer acquisition. However, improving unit economics suggest this pressure is likely temporary rather than structural.

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7. Guidance

Management does not provide formal quantitative guidance but offered several important qualitative updates.

E-commerce

• 2026 GMV growth target of approximately 25% YoY was reaffirmed.

• Full-year adjusted EBITDA is still expected to be no lower than 2025 in absolute dollar terms.

With Q1 GMV growth already reaching 30%, Shopee appears ahead of pace relative to its full-year target.

Digital Financial Services

• Loan book growth is expected to continue outpacing Shopee GMV growth.

• Expansion into off-Shopee use cases and Brazil remains at an early stage.

• Management remains focused on maintaining stable asset quality while scaling.

Digital Entertainment

Management expects strong momentum at Garena to continue throughout 2026.

Wall Street 2026 Estimates

Current analyst expectations are:

• Revenue: $29.7 billion, up 29% YoY

• Adjusted EPS: $3.91, up 23% YoY

Following the Q1 results, upward estimate revisions appear likely, continuing a trend that has persisted over the past two years.

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8. Conclusion

Sea Limited delivered an exceptionally strong Q1 2026, combining its fastest revenue growth in four years with record levels of absolute profitability.

Revenue increased 47% YoY to $7.1 billion, while operating income reached $593 million and adjusted EBITDA exceeded $1 billion for the first time.

At the same time, margins compressed modestly as management accelerated investment across logistics, fulfillment, ShopeeVIP, user acquisition, and off-Shopee credit expansion. Importantly, these investments appear strategic rather than defensive.

All three core businesses are performing well:

• Shopee continues strengthening its logistics, content, and membership ecosystem while maintaining 30% GMV growth.

• Monee is scaling rapidly across new users, geographies, and use cases while preserving excellent asset quality.

• Garena has returned to growth with stronger monetization and sustained user engagement.

Most importantly, the underlying unit economics are improving:

• Instant delivery costs per order declined approximately 20% YoY despite strong volume growth.

• AI chatbots reduced customer service costs by roughly 30% YoY.

• ShopeeVIP members demonstrated 30-40% spending uplifts.

• Marketing efficiency continues improving as incremental spend drives disproportionately higher revenue growth.

These trends strongly suggest the current margin pressure is temporary and tied to investment timing rather than structural weakness.

Management’s guidance reinforces this view. Shopee still expects full-year adjusted EBITDA to be at least in line with 2025 levels while simultaneously pursuing approximately 25% GMV growth.

Perhaps most importantly, Sea is making these investments from a position of strength: strong profitability, healthy cash generation, a robust balance sheet, and leadership positions across all three businesses.

Rating: 4 out of 5. Exceeds expectations.

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• MAPCs grew 17% YoY to 199 million, accelerating from 15% growth in Q4 2025. Trip volumes surged 20% YoY to 3.6 billion while frequency remained strong at 6.1 trips per customer per month, up 3% YoY and sustaining the record engagement levels first reached in Q2 2025. Gross Bookings accelerated to 21% constant currency growth, reaching $53.7 billion.

• Uber One surpassed a major milestone of 50 million members, up from 30 million at the end of 2024, meaning the company added 20 million members in just over one year. Members now account for more than 50% of combined Mobility and Delivery Gross Bookings and spend 3x more than non-members. The program continues to be the company’s primary cross-platform engagement driver.

• Revenue increased 14% YoY to $13.2 billion, or 10% in constant currency. Growth was impacted by business model changes that reduced reported growth by 9 percentage points, or 8 percentage points in constant currency. Mobility revenue rose 5% YoY to $6.8 billion, or 1% in constant currency, while Delivery revenue surged 34% YoY to $5.1 billion, or 28% in constant currency, driven by grocery and retail expansion alongside growing membership adoption.

• Operating income reached $1.9 billion, with margins expanding to 15% from 11% in Q1 2025, representing 57% YoY growth. Free cash flow totaled $2.3 billion, flat YoY, while the company returned a record $3.0 billion to shareholders through buybacks during the quarter. Management also expects insurance cost savings of hundreds of millions of dollars in 2026, with those savings expected to be passed on to consumers to help accelerate US Mobility growth through the remainder of the year.

• Autonomous vehicle deployments increased more than 10x YoY, with Uber on track to operate in up to 15 cities by year-end through partnerships with more than 30 AV companies. New partnerships with Zoox, Nuro, Lucid, and others were announced, while the company also launched Uber Autonomous Solutions, a platform designed to provide fleet management and data infrastructure for AV partners.

Contents

1. Financial Highlights

2. Wall Street Expectations

3. Business Activity

4. Financial Analysis

5. Guidance

6. Conclusion

1. Financial Highlights

• Revenue: $13.20 billion (+14% YoY)

  • Mobility: $6.80 billion (+5% YoY)

  • Delivery: $5.07 billion (+34% YoY)

  • Freight: $1.34 billion (+6% YoY)

• Operating Income: $1.92 billion (+57% YoY)

• Adjusted EBITDA: $2.48 billion (+33% YoY)

• Free Cash Flow: $2.29 billion (+2% YoY)

2. Wall Street Expectations

• Revenue: $13.26 billion (miss by 4%)

• EPS: $0.69 (beat by 4%)

3. Business Activity

Monthly Active Paying Customers (MAPCs)

MAPCs grew 17% YoY to 199 million, accelerating from 15% in Q4 2025. This reacceleration is notable given Uber’s scale and highlights continued momentum in customer acquisition.

Management also noted that cross-platform consumers, users engaging with both Mobility and Delivery, are growing 1.5x faster than overall consumer growth. This validates Uber’s strategy of driving engagement across multiple services.

Trips

Trip volumes reached 3.6 billion, up 20% YoY.

CEO Dara Khosrowshahi highlighted that trip growth in sparse and suburban markets is growing 2x faster than core urban markets globally, representing a significant long-term expansion opportunity.

Frequency

Trips per MAPC reached 6.1 per month, compared to 6.0 in Q1 2025, representing 3% YoY growth.

Frequency has now remained in the 6.0 to 6.2 range for seven consecutive quarters, a meaningful improvement from the 5.0 to 5.5 range seen between 2020 and early 2023. Uber has successfully evolved from an occasional convenience into habitual consumer infrastructure.

Membership

Uber One reached 50 million members, up 50% YoY from roughly 36 million in Q2 2025 and 30 million at year-end 2024. That equates to 20 million net additions in just over one year.

Members now account for over 50% of combined Mobility and Delivery Gross Bookings and spend 3x more than non-members.

Management highlighted several new benefits supporting continued adoption:

• 10% Uber credits on hotel bookings through the new Expedia partnership, covering 700,000 hotels

• Up to 20% additional savings on 10,000+ select hotels

• Global membership benefits for international travelers

• No delivery fees on grocery orders over $50

• Member Days promotional events

Khosrowshahi commented:

“We’ve seen this growth going on for a long time. We’ve kind of wondered when it’s going to slow down. At this point we don’t see it slowing down thanks to the innovation of the team.”

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Gross Bookings

Gross Bookings reached $53.7 billion, up 21% YoY on a constant currency basis, or 25% reported. This marked an acceleration from 18% constant currency growth in Q4 2025.

Mobility Segment

Mobility Gross Bookings grew 20% constant currency to $26.4 billion, continuing to accelerate from prior quarters. Take rates remained above 25%.

Management highlighted a “barbell strategy” supporting growth:

Affordability

• Moto, two and three-wheelers, exceeded $1.5 billion in annual bookings with 40%+ trip growth

• Wait & Save and shared rides continued expanding

Premium

• Comfort, SUV, and Black surpassed $10 billion in annualized Gross Bookings with 35%+ trip growth

• Reserve grew “well in excess” of the core business

• Corporate travel grew nearly 30%

CFO Balaji Krishnamurthy provided important commentary on insurance costs:

“This will be the first year since COVID where we expect to see good leverage on our insurance cost line for the US Mobility business.”

Auto insurance renewals in March produced favorable terms, with management expecting hundreds of millions of dollars in insurance savings during 2026. These savings are being reinvested into lower prices to accelerate trip growth.

Delivery Segment

Delivery Gross Bookings grew 23% constant currency to $26.0 billion, while take rates remained steady at 19%.

This was the fourth consecutive quarter of accelerating growth, driven by:

• Grocery & Retail expansion, with selection growth at its fastest pace in nearly three years

• Rising Uber One adoption, which drives materially higher frequency

• Cross-platform engagement across the Uber ecosystem

Management noted that the Delivery tab inside the Mobility app generated $15 billion in annualized Delivery Gross Bookings, nearly $4 billion per quarter, while also acquiring 30% of first-time Delivery customers.

Importantly, 30% of eligible Mobility users have never tried Delivery, while 75% have never used Grocery & Retail. This represents a massive long-term cross-sell opportunity.

Freight Segment

Freight returned to growth for the first time in nearly two years, with Gross Bookings rising 6% YoY to $1.3 billion.

The segment still represents less than 3% of total company Gross Bookings.

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4. Financial Analysis

Revenue

Revenue grew 14% YoY to $13.2 billion, or 10% in constant currency.

However, business model changes negatively impacted reported growth by 9 percentage points. Excluding these changes, underlying revenue growth would have been approximately 23% YoY, much closer to the company’s 21% constant currency Gross Bookings growth.

The revenue mix continues to differ materially from Gross Bookings due to varying take rates:

• Mobility represented 49% of Gross Bookings but 52% of revenue

• Delivery represented 48% of Gross Bookings but only 38% of revenue

Mobility revenue grew 5% YoY to $6.8 billion. The relatively modest growth versus 20% Gross Bookings growth reflects both business model changes and management’s decision to pass insurance savings back to consumers through lower prices.

Delivery revenue grew 34% YoY to $5.1 billion, marking the fastest growth rate since Q2 2022. Growth was driven by Grocery & Retail expansion, rising Uber One adoption, and stronger cross-platform engagement.

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Operating Margin

Operating income reached $1.92 billion, with operating margins expanding to 15% of revenue versus 11% in Q1 2025. Absolute operating income increased 57% YoY.

Sales & Marketing remains Uber’s largest operating expense. This line includes customer promotions, though driver incentives are recorded within cost of revenue.

At its peak, Uber spent nearly 40% of revenue on Sales & Marketing. That figure has now stabilised between 9% and 10% over the past two and a half years, a dramatic improvement in efficiency.

Khosrowshahi also highlighted the growing impact of AI on productivity:

“About 10% of our code now that is committed is built by agents, autonomous agents...if every person in this company can increase their throughput by 20%, 30%, 50%, 100%, then I think metering head count growth and leaning in on AI investment is going to be well worth it.”

Krishnamurthy added further context around the company’s investment strategy:

“On our barbell for Mobility, the low-cost products that we’ve been investing behind, they drive 75% higher frequency than our core products. And on the other end of the spectrum, our higher fare premium products drive 3.5 times higher profit growth for the company.”

Net Margin

Uber reported net income of $263 million, impacted by a $1.5 billion pre-tax headwind related to revaluations of equity investments.

Cash Flow Analysis

Free cash flow reached $2.29 billion, up 2% YoY, with trailing twelve-month FCF now exceeding $9 billion.

Operating cash flow totaled $2.35 billion, while CapEx remained extremely low at just $65 million, reinforcing the strength of Uber’s asset-light business model.

The company also returned a record $3.0 billion to shareholders through buybacks during Q1 2026, part of the broader $20 billion buyback program announced in 2025.

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5. Guidance

For Q2 2026, management expects:

• Gross Bookings growth of 18% to 22% constant currency, equating to approximately $56.25 billion to $57.75 billion

• Adjusted EBITDA of $2.70 billion to $2.80 billion, representing 31% to 38% YoY growth

Importantly, guidance remains comfortably within the company’s three-year outlook issued in February 2024.

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6. Conclusion

Uber delivered an outstanding Q1 2026, further reinforcing the strength and durability of its platform model.

1. The Uber One flywheel is accelerating

Uber One reached 50 million members, up from 30 million just one year ago. Members now account for more than 50% of Gross Bookings and spend 3x more than non-members.

With new benefits such as hotel partnerships being layered into the ecosystem, Uber is building a powerful consumer subscription model that competitors will struggle to replicate.

2. Growth is reaccelerating across the business

• MAPCs: +17%, accelerating from +15%

• Trips: +20%, the strongest growth since Q3 2023

• Gross Bookings: +21% constant currency, accelerating from +18%

The narrative that Uber is becoming a mature, slower-growth business increasingly looks outdated. Delivering 20% trip growth at a base of 3.6 billion quarterly trips is exceptional execution.

3. Insurance savings are becoming a major tailwind

Management’s commentary around insurance costs was among the most bullish in years.

With hundreds of millions in expected savings being reinvested into lower pricing, Uber appears positioned for sustained acceleration in US Mobility. Management specifically highlighted improved trends in Los Angeles, historically one of the company’s most insurance-constrained markets.

4. The cross-platform opportunity remains enormous

Management disclosed that 30% of Mobility users have never tried Delivery, while 75% have never engaged with Grocery & Retail.

Meanwhile, the Mobility app already generates $15 billion in annualized Delivery Gross Bookings. The scale of the cross-sell opportunity remains underappreciated and still appears to be in its early innings.

5. AI is improving productivity, not just increasing costs

Uber’s AI investments are already showing tangible operational benefits.

Management disclosed that 10% of committed code is now agent-generated, while engineering productivity continues improving. Combined with moderated headcount growth, this positions Uber to continue expanding margins while still investing aggressively in growth initiatives.

Overall, Q1 2026 demonstrated how far Uber has evolved from its earlier “growth at all costs” era.

The company is now simultaneously compounding growth, profitability, and free cash flow, while maintaining strong strategic focus across AI, autonomous vehicles, sparse markets, and platform expansion.

Khosrowshahi continues to establish himself as one of the strongest non-founder CEOs in public markets. Returning $3 billion to shareholders in a single quarter while still investing heavily for future growth highlights both disciplined capital allocation and exceptional execution.

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Wolf of Harcourt Street

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Email: wolfofharcourtstreet@gmail.com

Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

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Microsoft (MSFT)

I added to my Microsoft position, as flagged in last month’s review. At the time, the stock was trading at 21x forward earnings, which felt reasonable for a business of this quality.

The company reported FY26 Q3 earnings this week and continues to execute. Revenue grew 18% to $82.9 billion, while net income increased 20% to $31.8 billion.

Uber (UBER)

I added to Uber following its new partnership with Expedia, which allows users to book hotels directly within the app. Over time, this will expand to more than 700,000 properties globally.

Uber One members will earn 10% back in credits on bookings and receive at least 20% off a rolling list of 10,000+ hotels. Vacation rentals from Vrbo will be added later this year, with plans to expand beyond the U.S.

Uber is steadily evolving into a super app, and ironically delivering on much of what Airbnb has long promised. Execution has been strong, and Dara Khosrowshahi continues to stand out as one of the top operators:

“We’re all living through a moment of real cognitive overload: too many apps, too many decisions, too much noise. At the end of the day, our job is to help people reclaim their time, spending less of it managing the logistics of life and more of it actually living.”

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

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Buy List

Meta (META)

Meta sold off 8% despite what I view as very strong earnings. Revenue grew 33% to $56.3 billion, and operating income increased 30% to $22.9 billion.

At this scale, that level of growth is remarkable. The key driver is AI. Ad impressions rose 19%, while the average price per ad increased 12%.

Meta’s ad engine has become highly effective, allowing it to serve more ads while also improving performance for advertisers. As a result, businesses are willing to pay more.

Importantly, Meta’s ads don’t feel like a tax on the platform, unlike what you might see on Amazon or Google. They are embedded within the content experience. In many cases, users don’t even realise they’re viewing an ad, and that integration should continue to improve.

Nubank (NU)

Nu will report earnings later this month, which I’m looking forward to.

A company growing revenue and EPS north of 30% would typically command a premium multiple. Yet NU trades at just 16x forward earnings.

While that may look elevated relative to traditional banks, NU operates in a different category. Incumbents tend to grow at single digits and carry heavier cost structures, whereas NU is digitally native.

Viewed as a high-growth platform business, the current valuation looks compelling.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

A relatively quiet month in terms of activity. I deployed the remainder of my cash position after holding a modest balance during the recent portfolio consolidation.

A softer Q1 created several opportunities, which I took advantage of. The portfolio is now fully invested once again.

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Wolf of Harcourt Street

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Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

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Evolution (EVO)

I sold my full position in EVO, which was just over 3% of the portfolio at the time of sale. This is a decision I had been sitting on for some time, as the thesis had broken down and my conviction had been fading. When the market presented more attractive opportunities elsewhere, I finally decided to act.

Before moving on, it’s important to go through the post-mortem. When I first published the EVO investment thesis in October 2023, the bull case felt almost self-evident. A business with 70% EBITDA margins, 26% revenue growth, durable network effects, and a near-unassailable position in live casino. It looked like a company you could hold for a decade.

The bull case rested on three pillars:

1. Structural moats. EVO’s advantage came from switching costs embedded in operator relationships, the network effects of the world’s largest live dealer studio network, and IP that competitors had repeatedly failed to replicate at scale.

2. Market growth as a tailwind. The global iGaming market was projected to grow from ~$73 billion in 2023 to over $127 billion by 2027. As the dominant B2B infrastructure layer, EVO was positioned to grow at least in line with the market and historically had grown well ahead of it.

3. Margin durability. A fixed-cost studio model with significant scalability meant each incremental game round carried extraordinary operating leverage. The margin profile was a feature of the business model.

None of these have disappeared entirely. But Q4 again showed that the growth engine has stalled, and in ways that aren’t easily reversed.

Europe is the problem that won’t go away. Channelisation is working against EVO. Ring-fencing measures across key European markets are shrinking the addressable pool, and management gave no credible timeline for reversal. This has been a headwind for several quarters.

Asia has a similar issue, but with a different root cause. Cybercrime, specifically the hijacking of Evolution’s video streams, has been a known issue since 2024. I gave management the benefit of the doubt when they described it as solvable. Twelve months later, the answer on the Q4 call was effectively “slow, methodical progress.”

Meanwhile, the growth that does exist in North America (+9%) and Latin America (+12%) comes with an important caveat. Combined, these regions still represent just over half of Asia’s revenue alone. Even at double-digit growth rates, they cannot offset the structural decline in EVO’s core markets within a reasonable time horizon.

There was one line in the Q4 earnings call that stood out. When asked what it would take for financial performance to finally match operational progress, CEO Martin Carlesund replied: “Just a stable environment. No more, no less.”

That was the tell. When a company’s re-acceleration depends primarily on external circumstances rather than controllable execution, the investment changes. You are no longer underwriting a business, you are underwriting a macro bet on regulatory stability in Europe and law enforcement effectiveness in Asia.

That is not the original thesis.

EVO remains a high-quality operator and will likely continue to generate significant cash and return it to shareholders. But the original thesis assumed double-digit growth with stable margins. Those assumptions are no longer valid, not in Europe, not in Asia, and not at a pace that the Americas can offset. For full transparency, I sold the entire position for an overall 41% loss.

Mercado Libre (MELI)

The capital freed up from EVO found a natural home. As I referenced in last month’s portfolio review, MELI sold off after Q4 2025 earnings on margin concerns. Operating margin compressed to 10% as the company leaned into fulfilment infrastructure, free shipping, and AI tooling across the platform.

I have seen this movie before with MELI: deliberate investment cycles that look like deterioration but turn out to be the foundation for the next leg of growth. When a business is growing revenue at 45%, adding 16 million new buyers in a single quarter, and building an advertising business growing 67%, a near-term margin dip is not a thesis breaker, it is the price of admission. The add was straightforward.

Adyen (ADYEN)

Adyen’s H2 2025 results were solid. Net revenue grew 21% on a constant currency basis, EBITDA grew 23%, and margin expanded to 55%, yet the market punished the stock by nearly 19%. The culprit was processed volume.

Full-year TPV grew just 8% versus 33% in 2024, with the Digital segment contracting 1% in H2, mainly due to the off-boarding of low-margin Cash App revenue. Currency headwinds and softer volumes from APAC-based merchants exposed to US tariff uncertainty also had a negative impact.

The market saw volume deceleration and sold first. I read it differently. Unified Commerce and Platform, the two segments that reflect Adyen’s strategic direction and long-term wallet share, both grew. EBITDA margin hit 53% for the full year, up from prior periods.

The land-and-expand model is working. Existing customers are expanding across geographies and sales channels, India is emerging as a meaningful new market, and embedded financial products, issuing, capital, and bank accounts, are inflecting. Management guided 20–22% net revenue growth for 2026 on a constant currency basis, underpinned by detailed customer conversations rather than top-down aspiration.

A forward EV/EBITDA of 11 on a business with >50% EBITDA margins, a clean balance sheet, and a durable competitive position in enterprise payments looks like an opportunity to me. I added accordingly.

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Allocation

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Performance

• Q1: -13.2% vs. S&P -4.6%

Top Contributors YTD:

1. INPST: +43%

2. ASML: +25%

3. NIO: +18%

Largest Detractors:

1. RBRK: -40%

2. SE: -39%

3. ADYEN: -37%

4. MSFT: -27%

5. V: -15%

Buy List

Microsoft (MSFT)

Microsoft is on the buy list for one reason above all others: Azure. During Q2 FY26, Azure grew 39%, with Q3 guided to 37–38%.

What makes the current setup interesting is valuation. Microsoft is trading at approximately 21x forward earnings, well below its five-year average of ~33x. A business compounding operating income at 21%, with Azure re-accelerating and a 47% operating margin, does not often trade at 21x earnings.

The bear case centres on CapEx, and it is a fair concern. Capital intensity is running at historically high levels as Microsoft builds infrastructure to meet backlog demand. But this is the same debate investors had when Amazon was pouring cash into AWS in its early years. Microsoft is now at its lowest earnings multiple since 2017. Even during the pandemic, the stock did not fall this low.

Visa (V)

I recently came across the Death by Claude tool, a SaaSpocalypse survival scanner, and it had this to say about Visa:

“Visa will be processing the payment for your funeral, your grandchildren's funerals, and the funerals of whatever sentient species replaces us. They survived the internet, crypto, Apple Pay, and now they'll survive Claude. They literally just sit between money and collect a toll - they're the final boss of capitalism."

Visa is probably one of the highest quality businesses in the world and is now trading close to the low end of its 10-year valuation range.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

The decision to sell EVO had been made some time ago, but I acted on it this month to free up cash and deploy it into what I believe are more attractive opportunities.

From a performance perspective, this was an ugly quarter and the worst for the portfolio since Q2 2022. From a concentration perspective, the portfolio is now down to 14 positions, which I am comfortable with. There are many opportunities in the market at the moment, both within the portfolio and on the watch list.

I deployed the majority of the EVO proceeds but still have almost 1% in cash. While tensions in the Middle East are having very real impacts on lives and markets, these periods often create some of the best opportunities in equities.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

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Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

Top 10 Rebound Stocks for 2026

Meta once dropped 70%. Netflix: 50%. Amazon: 40%. Every investor had ruled them out, citing “the companies were done”.

But they all rebounded - Meta: 690%. Netflix: 540%. Amazon: 153%.

Every world-class company suffers deep drawdowns. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalize on their eventual rebound.

Just last year, they identified ASML (up 58%), Google (up 40%), and AMD (up 61%) as ideal rebound prospects. The Wolf of Harcourt Street readers can now unlock their exclusive 25-page report on the top 10 rebound opportunities for 2026 for free!

Download the 2026 Report [Free]

Transactions

Sea Limited (SE)

I executed the buy decision in SE that I flagged in last month’s portfolio review. The stock continues to face pressure, despite being largely insulated from the AI disruption narrative. However, the underlying fundamentals remain as strong as ever.

Even more compelling, this growth business now trades at just 25 times forward earnings.

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

Sign up using my affiliate link here.

Buy List

Mercado Libre (MELI)

My largest holding reported earnings this week and delivered another exceptional quarter, with revenue growing 45% year over year and comfortably beating expectations.

Long term readers will know that MELI does not issue guidance. As a result, Wall Street analysts have a poor track record forecasting its results. This quarter was no different. Earnings per share came in below estimates because management chose to invest aggressively for long term growth at the expense of short term profitability.

That is exactly what you want to see.

When a business has a vast market opportunity and a long reinvestment runway, it should be reinvesting as much as possible. I repeat this every quarter, but the message remains the same. The key performance indicators continue to validate the strategy, and I will be looking to make my largest position even larger.

Nubank (NU)

NU also reported a strong quarter and, similarly, was punished by the market. Revenue beat estimates, with growth accelerating for the third consecutive quarter, marking the fastest growth rate since Q1 2024.

Despite its scale, NU continues to add roughly 4 million customers per quarter. Most of that growth still comes from Brazil, even though Mexico and Colombia are growing faster on a relative basis.

Importantly, nearly half of NU’s customer base joined within the past three years. Even so, average revenue per active customer, ARPAC, reached a record $15. That is already 19 times its cost to serve, before considering increased wallet share and monetisation as cohorts mature.

Customers who have been with NU for eight years generate ARPAC of $30.20. As the newer cohorts age, ARPAC should naturally expand.

In a previous article, I modelled a credible path for NU to triple revenue by 2030 from its existing customer base alone. That thesis is steadily playing out. I recommend revisiting that piece if you missed it.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

Investing is often described as an art rather than a science. Nothing captures that better than the discipline of doing nothing.

The past month has been highly volatile, particularly across technology, software, and payments. Yet it has been one of my least active months in some time. That has been intentional. I avoid emotional decisions and prefer to let the dust settle before acting.

I am currently contemplating two potential sales:

Evolution (EVO)
The company reported another disappointing quarter. It was a humbling reminder that situations can deteriorate further than expected.

As I acknowledged in my 2025 Annual Report, holding despite clear fundamental decline has been one of my larger mistakes. My conviction has faded. It is now a question of when, not if, I sell.

InPost (INPST)
Earlier this month, an offer was tabled to take INPST private at €15.60 per share. If completed, this would be deeply disappointing. It would mark the second time the company has gone private, and in both cases minority shareholders would bear the cost.

CEO Rafal Brzoska would see his ownership increase from 13% to 16%, which speaks to where incentives lie. Leverage has been cited as the rationale, but the alignment is clear.

With the current share price around €15.20, the remaining upside is roughly 2.5%. This could ultimately become a forced sale outside my control.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

Subscribe now

The Chat is a space designed to facilitate, real-time discussions, share knowledge and debate ideas with fellow investors. Join the conversation.

If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

Top 10 Rebound Stocks for 2026

Meta once dropped 70%. Netflix: 50%. Amazon: 40%. Every investor had ruled them out, citing “the companies were done”.

But they all rebounded - Meta: 690%. Netflix: 540%. Amazon: 153%.

Every world-class company suffers deep drawdowns. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalize on their eventual rebound.

Just last year, they identified ASML (up 58%), Google (up 40%), and AMD (up 61%) as ideal rebound prospects. The Wolf of Harcourt Street readers can now unlock their exclusive 25-page report on the top 10 rebound opportunities for 2026 for free!

Download the 2026 Report [Free]

Transactions

Microsoft (MSFT)

I finally added to my MSFT position for the first time since 2022. MSFT is one of the anchors of my portfolio but is currently materially underweight.

In the past, I have been too greedy waiting for a lower multiple. The stock recently fell to ~24x forward earnings, which I believe is very reasonable for a business that can continue to grow earnings at double digit rates for at least another decade, supported by powerful secular tailwinds in cloud and AI.

Rubrik (RBRK)

Rubrik was a new addition to the portfolio in 2025 and, in my view, offers a compelling opportunity below $60.

At $56, an inverse DCF implies ~19% annual growth over the next decade. I believe this is entirely reasonable given Rubrik is currently growing revenue by ~50%, even allowing for a deceleration into the ~30% range in coming years. On top of that, the business should benefit from meaningful operating leverage, with expanding free cash flow margins as it scales and matures.

The stock has been under pressure over the past couple of months, largely due to the broader “AI disrupts SaaS” narrative. However, cybersecurity is one of the most insulated areas of SaaS. Backup relies on immutable, offsite, air gapped copies, making third party platforms a necessity for security and compliance.

Backup is subtractive risk management, requiring independence. AI tools are additive. Even with internal AI solutions, enterprises still need trusted third party backup providers, which is exactly what RBRK offers. Importantly, RBRK integrates AI and machine learning for threat detection without introducing substitution risk.

Visa (V)

Last month, I added to Visa and noted the following:

“I added to my position in Visa for the second month in a row. Paying 25x forward earnings for a business of this quality feels very reasonable. The multiple has already expanded to almost 28x in a relatively short period.

With stable, high quality businesses like this, I try to add near the lower end of their historical valuation range. Sometimes there is no need to overcomplicate things.”

The exact same logic applied again this month.

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

Sign up using my affiliate link here.

Buy List

Adyen (ADYEN)

Payments has been under pressure over the past few months and Adyen has not been immune. The stock is down ~15% over the past three weeks, yet nothing has fundamentally changed.

I built the majority of my position in 2023 when the stock was cut in half and traded below €700. At that point, the forward EV/EBITDA multiple fell to ~16x. Enterprise Value is the appropriate metric for Adyen given the large amount of cash it holds on behalf of merchants.

While the share price is almost double today, the multiple has once again compressed below 20x for the first time since. This is a high quality business and, at this valuation, I believe it offers an attractive opportunity. I continue to expect >20% top line growth over the next three to five years.

Sea Limited (SE)

It has been a tough three to four months for Sea Limited, with the stock down almost 40% since October 2025.

Fundamentally, little has changed. Sea continues to fire on all cylinders, as shown in its most recent Q3 earnings report towards the end of 2025. I have nothing further to add here that I have not already written, but I would draw your attention to this excellent piece from , which aligns closely with my own view.

The current drawdown appears driven far more by sentiment than fundamentals

GabGrowth

Why I’m Not Worried About $SE Sea Limited’s 38% Drawdown

Sea Limited is in a 38% drawdown from its most recent high in September 2025…

Read more

4 months ago · 32 likes · 2 comments · GabGrowth

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

The portfolio got off to a very strong start to the year, reaching a new all time high. Interestingly, beneath the surface, several themes have been getting hammered, particularly enterprise SaaS and payments.

On one end, ASML and INPST are both up ~30% year to date. On the other, RBRK and MSFT are already down double digits.

This is a great example of how sector diversification creates opportunity. Readers will know that I was buying ASML and INPST throughout 2025 when they were widely disliked. Now that they are back in favour, I am doing nothing.

Conversely, RBRK and MSFT are currently out of favour, and I am buying. There will almost always be one or two sectors under pressure at any given time. That is typically when I aim to do the majority of my buying.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

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The Chat is a space designed to facilitate, real-time discussions, share knowledge and debate ideas with fellow investors. Join the conversation.

If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Overall, I am satisfied with the result. Since the 2022 bear market, the portfolio has generated returns of 34%, 15%, and 16% over the past three years. Since inception, the portfolio has achieved a 16% compounded annual growth rate (CAGR), comfortably above my long-term target of 10%.

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Portfolio Turnover

I started 2025 with 18 positions and ended the year with 15, achieving a long-standing goal of consolidating the portfolio. This was accomplished by closing five positions and initiating two new ones.

The new additions were Rubrik (RBRK) and ASML (ASML). I exited PayPal (PYPL), Airbnb (ABNB), Auto Partner (APR.WA), Home Depot (HD), and Texas Instruments (TXN). The rationale behind each transaction has been covered in prior monthly portfolio reviews, so I will not repeat it here.

The chart above is from Portseido’s new Year in Review feature. It highlights that my five most sold positions were the five I fully exited, while the most bought positions include the two new additions.

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

Sign up using my affiliate link here.

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Contributors and Detractors

The top-performing stocks in 2025 were:

• Nu (NU) +62%

• ASML (ASML) +55%

• Uber (UBER) +35%

• AbbVie (ABBV) +33%

• NIO (NIO) +17%

Notably, NIO was my worst-performing stock in 2024, down 52%, yet became a top contributor in 2025, albeit still well below its 2024 price. Meanwhile, NU, which was among the strongest performers in 2024, continued its momentum. Some winners kept winning, while certain beaten-down stocks proved to be somewhat oversold.

The worst-performing stock was InPost (INPST), down 37%, followed by Evolution (EVO), down 23%. All other holdings posted positive returns.

Evolution’s struggles extended into a second consecutive year. After being one of the weakest performers in 2024, it again disappointed in 2025. Put simply, shareholders have endured two years of deeply underwhelming performance.

Looking ahead to 2026, InPost appears best positioned for a turnaround. At the time of writing, the stock is already up 30% year to date. Unlike Evolution, InPost’s weakness in 2025 was driven more by narrative than by deterioration in the underlying business. The recent takeover approach caused the share price to surge, validating my view that its valuation made it an obvious target. My preference remains that any offer is rejected, as an acquisition would remove what I believe could be more than a decade of compounding returns for long-term shareholders.

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Dividends Received

Dividends received in 2025 declined 9% year over year, reflecting my continued focus on total return rather than dividend optimisation. Of the five positions sold in 2025, three were dividend payers with yields between 1% and 3%. These were not replaced, as Rubrik pays no dividend and ASML’s yield remains well below 1%.

This was partially offset by strong dividend increases from Visa (+14%), Microsoft (+10%), and AbbVie (+6%). Dividends are pooled with cash contributions and reinvested opportunistically.

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Fees

I track fees as a percentage of new deposits, as this best reflects the drag on compounding regardless of portfolio size. The calculation is straightforward, total annual fees divided by total cash deposits.

After a sharp increase in 2023 following DEGIRO’s fee hikes, I made a concerted effort to reduce this ratio. I subsequently opened Trade Republic and Interactive Brokers accounts, both of which offer significantly lower fee structures.

As a result, I am pleased to report that fees as a percentage of new deposits fell again in 2025 to 0.55%. Driving this figure as close to zero as possible remains a priority.

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Newsletter Performance

2025 was a solid year for the newsletter, with a net increase of 2,223 subscribers, bringing the total to 9,329. Growth would have been higher had I not conducted a clean-up in June, removing subscribers who had not opened an email or read on the app in the previous twelve months.

Total subscribers is a vanity metric. I would much rather have an engaged readership, so this clean-up will become a recurring exercise.

Growth was also slower than in 2024 due to reduced activity in Q4 while I took an extended travel break. While the newsletter prioritises quality over quantity, the data is clear, more frequent publishing drives faster subscriber growth.

The audience continues to become increasingly global, with subscribers now spanning 134 countries.

The most popular posts in 2025 were:

1. Rubrik Quick Pitch - 10.4k views

2. Shopee’s Dominance in Southeast Asia’s E-Commerce Market - 10.4k views

3. Portfolio Review - November 2025 - 10.4k views

4. Evolution: Trading Margin for Certainty - 10.3k views

5. NU: Hidden Pressures Under the Hood - 9.9k views

An underrated aspect of the archive is the longevity of evergreen content. The Nu Holdings Investment Thesis remains the most-read post of all time, with over 18k views.

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Lessons Learned

1. Buy and Continuously Verify

One of my better decisions in 2025 was exiting Auto Partner in July after reviewing its Q1 earnings. It became clear that the original thesis was no longer playing out due to:

• Stagnating revenue growth

• Gross margins reverting after a period of inflation-driven over-earning

• Margin pressure from minimum wage increases

I concluded that these trends were likely to worsen before improving, and I could no longer say with confidence that the company would return to high-teens revenue growth or restore net margins to 2021 levels. Since the sale, margins have continued to deteriorate and the stock was down a further 25% at one point.

I would reconsider the stock if revenue growth reaccelerates decisively into the mid-teens and there is clear evidence of renewed operating leverage, potentially driven by the new distribution centre. At the time, I did not expect either catalyst before mid-2026.

This reinforced a key lesson, it is better to wait for evidence of reacceleration than to rely on hope.

2. Be More Ruthless

The most common investing mistake is selling winners too early. My issue is the opposite, I often hold underperformers for too long.

Evolution is a clear example. Had I applied the same discipline used with Auto Partner, I would have sold when the business first began to stall. Instead, I assumed the weakness was temporary. Over time, it became clear that the problems were structural, not cyclical, and the stock was punished accordingly.

The correct approach would have been to sell, continue monitoring the company, and wait for proof of a turnaround. Today, I am stuck in no-man’s land. The valuation is undemanding, but there is no evidence (yet) that management can fix the issues or reaccelerate growth.

With the portfolio now concentrated at 15 positions, the performance bar is higher. Entry and continued inclusion must be earned. There is little point in active monitoring if I am unwilling to act when evidence contradicts my thesis.

3. Valuation is Relative to Duration

Arguably, the most profitable decision of 2025 was initiating and building a position in ASML below €700. The biggest gains in high quality investing are often made when the market mistakes a temporary cyclical headwind for a permanent structural decline. Buying ASML at 25x forward earnings established a valuation floor for a business with an extraordinary competitive moat. The catalyst was not just earnings growth, it was effectively buying a call option on the market’s eventual return to reality.

The real alpha sits in the gap between a pessimistic multiple (25x) and a justified multiple (40x). When you buy quality at a fair price, you get paid twice. First, through growth in the underlying earnings power of the business. Second, through the market’s willingness to pay more for each euro of those earnings. Success requires the discipline to ignore macro noise and the patience to wait for the inevitable re rating.

When a company with 100% market share in a mission critical technology like EUV sells off due to macro uncertainty or a lack of 18 month forward guidance, the risk is rarely in the business itself. More often, it lies in the investor’s timeframe. By focusing on ASML’s €33 billion order backlog, driven by multi billion dollar fab builds from TSMC, Intel, and Samsung, and the structural necessity of High NA EUV for the next generation of semiconductors, it was clear the trough reflected a temporary accounting reality.

I did not need to predict which AI chip would win. I only needed to know that whoever did would have to pay the ASML tax to manufacture it.

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That’s it for 2025. Now on to 2026.

Thank you for your continued support and engagement. A newsletter is only as strong as its readership, and I am genuinely grateful to have you on this journey. Wishing you a healthy and profitable 2026.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

Subscribe now

The Chat is a space designed to facilitate, real-time discussions, share knowledge and debate ideas with fellow investors. Join the conversation

If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

The best opportunities exist in uncertain times.

Meta once dropped 70%. Netflix: 50%. Amazon:40%. Every investor had ruled them out, citing “the companies were done”.

But they all rebounded - Meta: 690%. Netflix: 540%. Amazon: 153%.

Every world-class company suffers deep drawdowns. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalise on their eventual rebound. It’s a contrarian philosophy so precise that even Michael Burry is a subscriber.

In the last few months, they have identified ASML (up 33%), Google (up 52%), and AMD (up 61%) as ideal rebound prospects. Subscribe today to unlock their exclusive End of the Year Offer.

Subscribe to Rebound Capital

Transactions

Visa (V)

I added to my position in Visa for the second month in a row. Paying 25x forward earnings for a business of this quality feels very reasonable. The multiple has already expanded to almost 28x in a relatively short period.

With stable, high quality businesses like this, I try to add near the lower end of their historical valuation range. Sometimes there is no need to overcomplicate things.

Uber (UBER)

I went a step further with Uber and added to my position for the third consecutive month.

For much of 2025, I regretted the size of my initial position, which I opened in December 2024 shortly before the stock moved sharply higher. While Uber is now in a roughly 20% drawdown over the past two months, the fundamentals remain as strong as ever.

The narrative that autonomous vehicles pose an existential threat to Uber has resurfaced, and this is where my view diverges from the market. I believe autonomous vehicles will evolve into a highly fragmented market with multiple winners rather than a single dominant player. In that scenario, Uber is well positioned to leverage its global distribution network and infrastructure.

We saw further evidence of this fragmentation recently, as Baidu announced plans to launch driverless taxi trials in the UK next year in partnership with Uber and Lyft. As part of the agreement, Baidu’s Apollo Go RT6 vehicles will join the London networks of both platforms in 2026. This marks the first direct competition between U.S. and Chinese autonomous players in a European capital, following Waymo’s recent supervised testing in the city.

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

Sign up using my affiliate link here.

Performance

• Q4: -6.0% vs. S&P +3.1%

• YTD: +16.0% vs. S&P +17.2%

Top Contributors YTD:

1. NU: +63%

2. ASML: +54%

3. UBER: +36%

4. ABBV: +29%

5. NIO: +26%

Largest Detractors:

1. INPST: -28%

2. EVO: -11%

Buy List

Microsoft (MSFT)

I highlighted Microsoft last month but did not take action, as I felt Visa and Uber offered more attractive opportunities at the time.

Microsoft continues to trade at around 29x forward earnings, a level that has historically provided reasonable entry points since the stock re rated higher. I remain underweight Microsoft in the portfolio despite significant appreciation from my original cost basis, and it is a name I am watching closely as we head into 2026.

Sea Limited (SE)

2025 has been a rollercoaster year for Sea Limited. At one point in September, the stock was up 85% YTD. At the time of writing, it sits in a 33% drawdown, yet still shows gains of 22% for the year, comfortably outperforming the broader market.

I believe SE is one of the more compelling opportunities within the existing portfolio. The company delivered strong revenue growth and meaningful margin expansion in 2025, with all three business segments accelerating key performance indicators.

The metric that stood out most to me was Sales and Marketing efficiency. Historically, SE was often criticised for subsidising growth, with incremental S&M spend exceeding incremental revenue. Over the past five quarters, that dynamic has flipped decisively.

In Q3 alone, SE invested an additional $141 million in S&M and generated $727 million in incremental revenue, a roughly 5x return on investment. When I see a business with a reinvestment runway like this, I want management to reinvest aggressively.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

From both a portfolio management and newsletter perspective, I was less active in Q4 as I spent much of the period travelling. As an active investor, I view this as an important part of my long term process.

While investing is highly enjoyable, it can also be mentally draining. Stepping away to recharge is not optional, burnout is real, and if left unaddressed it eventually catches up with you. To finish first, you must first finish.

From a performance standpoint, Q4 was a weaker quarter, especially compared to the exceptionally strong start to the year. At the end of Q3, the portfolio was on track for returns of 23%, but we ultimately finished the year at 16%.

Investing is all about expectations. If you had told me at the end of Q3 that I would finish the year at 16%, I would have been a little disappointed. But if you had told me in January that I would deliver that return after 34% in 2023 and 16% in 2024, I would have taken it without hesitation.

Looking ahead to 2026, I continue to believe that some of the best opportunities in the market are already among the portfolio’s largest positions, particularly SE and MELI.

As always, I will share the Annual Report in January, with deeper insights into the portfolio and reflections on the year. In the meantime, readers can revisit the 2024 Annual Report.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

Subscribe now

The Chat is a space designed to facilitate, real-time discussions, share knowledge and debate ideas with fellow investors. Join the conversation.

If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

Be greedy when others are fearful.

Meta once dropped 70%. Netflix: 50%. Amazon:40%. Every investor had ruled them out, citing “the companies were done”.

But they all rebounded - Meta: 690%. Netflix: 540%. Amazon: 153%.

Every world-class company suffers deep drawdowns. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalise on their eventual rebound.

In the last few months, they have identified ASML (up 23%), Google (up 52%), and AMD (up 61%) as ideal rebound prospects. Subscribe today to unlock their exclusive Black Friday offer.

Subscribe to Rebound Capital

Transactions

Visa (V)

I added to my position, as flagged in last month’s Buy List. Nothing complicated here. Visa remains a proven long term compounder and the mid 20s forward earnings multiple is reasonable for a business of this quality.

Uber (UBER)

I increased my position after the stock sold off alongside the broader market this month. Earlier in the month, Uber delivered another strong quarter with acceleration across all key operating metrics.

Charts tell the story better than words. As you can see from the visuals, the business is performing exceptionally well and the thesis is unfolding exactly as expected.

Sea Limited (SE)

I added to my SE position following another exceptional quarter. Despite a strong revenue beat, the stock fell 8% due to an EPS miss. When a company is growing at this pace, you actually want it to reinvest as much profit as possible into future opportunities.

Even with heavy investment, SE still posted a healthy 8% operating margin, which shows it is scaling in a sustainable way. A few standout highlights from the quarter:

GMV growth continues with no signs of slowing.

Monee remains the fastest growing segment.

Garena QPUs accelerated and reached their largest cohort since Q4 2021.

Revenue growth has exceeded 30% for five consecutive quarters.

Sales and Marketing efficiency hit new highs, with an extra $141 million driving $727 million in incremental revenue, a 5x ROI.

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns.

From 26 November to 1 December, Portseido are offering a huge Black Friday sale with up to 40% off for new customers for three months.

Sign up using my affiliate link here.

Buy List

Microsoft (MSFT)

Microsoft is the longest held position in my portfolio and one of my largest winners. I have not added since May 2022. The stock still is not cheap, but it now trades below 30 times forward earnings, which has historically been a good entry zone since the multiple rerated.

Given the position is only 5% of the portfolio, and much of that weight is due to price appreciation rather than capital invested, I would like to increase it.

Meta (META)

If Microsoft might still look a little expensive, Meta appears far more reasonable at roughly 22 times forward earnings.

Much of the debate around Meta concerns its CapEx and whether the returns will justify such eye watering investment. CapEx has risen from about $2 billion ten years ago to over $62 billion in 2025, with even higher expected in 2026. Yet over the same period, Meta’s return on invested capital has tripled from 8% to almost 23%. Few, if any, would have predicted this a decade ago.

I cannot say exactly how the future will play out, but Mark Zuckerberg remains one of the strongest founder CEOs in the industry. He has better visibility into potential and early returns than any outside observer. Meta’s revenue acceleration in recent quarters is no coincidence and is clearly being supported by these investments.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

I have been less active on the newsletter this month as I have been travelling in Japan. It is my first time here and it has been an incredible experience. The people are respectful and polite, the food is fresh and affordable and the public transport system is unlike anything I have seen elsewhere. It is also a great time to visit with a relatively weak yen.

Trips like this remind me of my why. I invest to buy back time. Being able to take trips like this while I am still (relatively) young and healthy, rather than waiting until formal retirement, matters a lot to me. Without my investment portfolio, I would be more constrained by an employer and might not have the flexibility to travel like this.

Keeping your why front and centre helps maintain discipline and a long term mindset, especially when markets get noisy.

What is your why?

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

Subscribe now

The Chat is a space designed to facilitate, real-time discussions, share knowledge and debate ideas with fellow investors. Join the conversation.

If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

The questions ranged from competitive moats to grey market exposure and shareholder communication. The responses shed light on how management views Evolution’s positioning, regulatory challenges, and strategic priorities, while also revealing where the company remains cautious about offering detail.

The Moat

When asked about threats to Evolution’s moat over the next 5–10 years, Linton focused more on internal discipline than external barriers. He acknowledged that “barriers to entry have always been relatively low, while the barriers to success are much higher,” noting the recent exits of competitors who underestimated the difficulty of building first-class live casino products.

The takeaway was clear: Evolution’s advantage is executional, not structural. The company’s moat depends on relentless innovation and an obsessive focus on player experience. “The threat is if Evolution would be complacent and stop pushing the industry forward,” Linton said, framing risk as primarily self-inflicted.

This view is both reassuring and sobering. It reinforces that Evolution operates in a winner-takes-most market where scale and execution drive advantage. Yet it also means the moat is only as strong as management’s ability to maintain its creative and operational intensity.

Online vs. Land-Based

Linton was emphatic that Evolution isn’t competing with Las Vegas-style casinos. “Land-based casinos are a very different type of entertainment than iGaming,” he said, pointing out that physical casinos have changed little in 15 years while online gaming continues to evolve.

More interestingly, he framed Evolution’s real competition as the broader entertainment ecosystem, Netflix, Facebook, TikTok, rather than traditional gaming venues. This helps explain some of Evolution’s product strategy, including its television-inspired game shows and experiments with hyper-casual formats aimed at “a TikTok generation who wants everything faster.”

Whether this framing is entirely correct is debatable, but it reveals management’s product philosophy: entertainment value that transcends gambling, appealing even to non-betting audiences. It’s a vision of iGaming as content-driven entertainment, not just gambling infrastructure.

The Grey Market Elephant in the Room

The most anticipated questions centered on Evolution’s exposure to unregulated markets and the reputational risks that follow. Linton’s responses were notable more for what they didn’t say than for what they did.

He restated Evolution’s standard position: the company is a B2B supplier that doesn’t interact with end users, see player identities, or handle transactions. Regulatory responsibility, he said, rests with operators and their regulators. “It is between the operator and its supervising authority, the regulator, to agree on the terms for which the operator can offer products to end users.”

When asked about balancing short-term revenue from unregulated markets against long-term credibility, Linton offered polished but generic language: “Our goal is to stay ahead of regulatory developments, always doing what is right, while maximising business potential.”

What was missing was quantification of grey market exposure, examples of proactive exits, or discussion of revenue forgone for reputational reasons. While the answers acknowledged the sensitivity of the issue, they offered little transparency.

On management’s previous inability to quantify European black market exposure, Linton clarified terminology: “Unregulated markets do not equal illegal markets,” adding that accessing unlicensed sites isn’t illegal in jurisdictions with open internet access. While technically true, this sidestepped the central question: does Evolution know where its products are being used, and what does that data reveal?

Strategic Focus

Linton was clear about Evolution’s strategic limits. Sports betting? “Not on our agenda for the time being.” Moving into B2C? “We are and will stay a technological content supplier.” That stance is logical, running a B2C casino would demand new capabilities in payments, KYC, customer acquisition, and compliance across multiple jurisdictions. Diversifying would “blur our focus and industry-leading know-how in B2B.”

On U.S. sweepstakes, Linton said it’s “an immaterial part of North American revenues,” stressing regulatory caution over expansion. Evolution operates only where the legal framework is clear. The company sees sweepstakes as “quite popular,” but not a major growth lever.

This strategic conservatism is arguably a strength. Evolution has thrived by doing one thing exceptionally well rather than chasing adjacencies. The risk is that the company might miss opportunities if the market shifts dramatically.

Capital Allocation

With its capital-light model generating strong cash flow, capital allocation matters. Linton reaffirmed Evolution’s framework of balancing dividends and buybacks to suit shareholder preferences, a pragmatic if unspectacular approach.

More intriguing was a question about Evolution’s long-term identity: by 2035, will it look more like the AWS of iGaming (infrastructure) or the Netflix of iGaming (content)? Linton declined to choose, suggesting instead that “I wouldn’t be surprised if we saw completely different types of distributors of our games in 2035 than what we have today.”

It’s an answer that hints at uncertainty about how the industry will evolve, while maintaining confidence in Evolution’s adaptability. Whether that confidence proves justified again depends on execution.

Communication Strategy

One of the most significant updates was the creation of a new Communications department aimed at “taking a more proactive stance in positioning Evolution and what we stand for.” Linton said media coverage has been “too unbalanced and tilted to the negative,” citing the Playtech/Black Cube report and the Georgia strike as cases where “people have not been critical enough about the source when they have read accusations on Evolution.”

The company’s historical approach hasn’t served it well in an environment where perception drives reality. Linton noted that Evolution holds “more than 500 investor meetings per year,” showing strong institutional engagement.

For private investors, however, that statistic underscores rather than resolves the information gap. Hundreds of closed-door meetings with institutions, with little public disclosure, create a two-tier environment. While Linton was right that “answering every question on X would require a different type of organisation and budget,” the asymmetry between institutional and retail access remains stark.

The key question is whether this new department will close that gap or simply refine messaging. Publishing conference transcripts, increasing IR website content, or hosting periodic public calls would be low-cost ways to level the playing field and improve transparency, if management is willing.

What I Learned (and Didn’t)

The Q&A provided useful insight into management’s mindset: confidence in execution, discipline around adjacencies, and recognition that communication must improve. The formation of a dedicated Communications department signals that management understands reputational damage has real costs.

What was missing was depth on the issues investors care most about, data on grey market exposure, examples of regulatory exits, or a framework for assessing when short-term revenue isn’t worth the long-term risk. On those points, the responses were polished but evasive.

For investors, the core tension remains: can Evolution sustain its edge while navigating regulatory complexity and rebuilding trust? Management believes the answer is yes. Whether execution matches that belief remains to be seen.

Finally, I want to thank Carl and the IR team for their time and thoughtful responses. As a private investor, I believe engagement with management shouldn’t be reserved for institutions. With technology enabling greater access, private investors will continue to play a growing role in capital markets and it’s encouraging to see Evolution recognise that.

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Wolf of Harcourt Street

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Every month, I'll provide you with an update on my portfolio, including all of the transactions, the current allocation, and my buy list. In addition, I'll share a recap of the articles you may have missed from the previous month.

House Keeping

1. Thank you to everyone who completed the subscriber survey a couple of weeks ago. The responses were excellent and gave valuable insight and feedback on the newsletter. Congrats to Rafa who won a copy of Morgan Housel’s new book, The Art of Spending Money.

2. Due to personal circumstances (all good), newsletter editions will be less frequent between now and Christmas. I still plan to publish a couple of articles during this period, but I want to give everyone advance notice. The subscriber chat will remain active and is a great place to engage with the community.

Now, on with the show.

Be greedy when others are fearful.

Ask yourself this…

Would you rather have bought Meta shares for $378 in September 2021 or $90 in November 2022? Both purchases would have seen tremendous growth.

A $1,000 investment in September 2021 would be worth $2,014 today. But a $1,000 purchase when Meta pulled back in November 2022 would be worth $8,300.

Sometimes it can pay to wait for a pullback. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalise on their eventual rebound. In the last few months, they have identified ASML (up 23%), Google (up 52%), and AMD (up 61%) as ideal rebound prospects.

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Transactions

Mercado Libre (MELI)

I added to MELI after a sell off driven by perceived negative news:

• Brazil: Amazon made its most aggressive move in Brazil since entering the market. From Sept 30 to Dec 3, during Black Friday season, it reset all storage and shipping fees for Fulfillment by Amazon. In short, joining Amazon Marketplace is practically free. We have seen this play before and history shows it takes much more than free shipping to topple MELI’s dominance.

• Argentina: There was fear that President Javier Milei’s party would lose the midterms after losing the Buenos Aires provincial election the prior month. Milei’s party is pro-capitalism and a loss was viewed as negative for MELI. This did not materialise and Milei’s party won.

Earlier this week MELI reported another exceptional quarter. Revenue grew 39%, marking the 27th consecutive quarter above 30%, which is nearly seven years. The story was familiar, MELI beat on revenue and missed on earnings because the company continues to prioritise growth and long-term dominance over near-term profitability.

One example is expanding free shipping, which is core to their long-term strategy. In Brazil the free shipping threshold was reduced from R$79 to R$19 and GMV is already up 36%. Unique buyers grew 29% year on year, the fastest pace since Q1 2021 and the largest quarterly increase ever, surpassing the pandemic peak. Sold items in Brazil rose 42%.

This remains my largest position and the one I have the most conviction in. Even though it is already significantly sized, I prioritise adding during periods of weakness over adding to any other holding

Rubrik (RBRK)

I continued to accumulate Rubrik under $80. As a new position, I want to build it quickly at these levels. Key developments this month:

• The Asahi ransomware attack underlined Rubrik’s relevance. A week later Asahi systems were still down and beer was shipping manually. Rubrik’s immutable backups, recovery, and anomaly detection could have limited damage and restored operations within hours.

• South Korea has had a major cyber incident every month this year. In one case the government lost all data because servers were in one single location with no backups. This is exactly the problem Rubrik solves and the need grows as data volumes increase.

• Chinese hackers breached US cyber firm F5. When even defenders are hit it shows breaches are inevitable and resilience matters.

• Launched Rubrik Agent Cloud, the first product designed to monitor, govern, and remediate AI agents.

• Named a leader in IDC MarketScape for worldwide cyber recovery, which adds external validation.

  

Uber (UBER)

I added to Uber after a 10% pullback earlier this month. I want this to be a much larger position. The pitch at $60 dollars in December was a fat one, so I have been buying above $90 into strength because I still believe it is undervalued. My valuation work from earlier this year pointed to a fair value near $115.

Uber continues to execute well with several positive developments this month:

• Launched JourneyTV Presents, an in-ride entertainment platform with content partners including Time Out. Uber Advertising has strong appeal because it holds high-intent data, it knows where users are and where they are going.

• Acquired Segments.ai to strengthen self-driving through better labelled data. Data quality is a key edge in the autonomy race.

• Signed a long-term partnership with Riyadh Air to integrate Uber services into the airline’s app and loyalty experience.

• Began piloting digital tasks in the United States. Select drivers can earn by completing tasks such as uploading photos to train AI models or submitting multilingual documents. This was already tested in India.

• Partnered with Nvidia to scale a level-4-ready mobility network. Stellantis will deliver at least 5,000 Nvidia-powered L4 vehicles to Uber. Uber will run fleet operations and customer support.

Texas Instruments (TXN)

I sold my full TXN position, which was 2.5% of the portfolio. I shared a full writeup already, but in short it does not fit my investment philosophy. The business and industry are highly cyclical, and I do not believe I can forecast them with confidence. I recorded a 20% profit, but returns were much lower than expected because the earnings trough lasted longer than anticipated. Cyclical industries are hard to value and time, and predictability is often worth paying for.

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Allocation

I’ve been using Portseido to track my portfolio for years, and I highly recommend it. It consolidates all my transactions in one place, while its data visualisation and analytics capabilities guide my future decision-making and, ultimately, enhance my returns. Sign up using my affiliate link here.

Buy List

Visa (V)

Visa stays on my buy list from last month. It delivered another dependable quarter with double-digit growth in revenue, earnings and dividends.

It is one of those true sleep-well stocks thanks to low emotional volatility (looking at you Evolution). At 26x forward earnings, the valuation is reasonable for a business of this quality and reliability.

Uber (UBER)

I am careful not to get price-anchored with Uber. It is still undervalued in my view despite the rally this year. At a 4% position there is scope to increase it materially. I will wait for next week’s Q3 earnings before acting.

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In Case You Missed It

Some of the articles you might have missed during the past month:

Final Words

This was a very active month. I sold one more position and have now hit the 15-position portfolio I have been working toward for over a year. Long-time readers know this concentration was deliberate and methodical. I was not selling for the sake of it, I was waiting for sound reasons to emerge.
Managing fewer positions has been mentally liberating.

I do not rule out further consolidation where the original thesis has broken or is materially different today. Evolution is one such example, though I am not rushing. The Q3 earnings and thoughtful community commentary have given me plenty to consider.

Even after adding to three positions, I ended the month with 4.5% cash, unchanged from last month. With two months left in 2025, I think the portfolio is positioned for a strong finish. Let’s see if Mr Market agrees.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

Buy me a coffee

Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

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If you found today's edition helpful, please consider sharing it with your friends and colleagues on social media or via email. Your support helps to continue to provide this newsletter for FREE!

Share

Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

• Cybercrime headwinds intensified in Q3 and drove a sharp revenue hit in Asia, not because of new attacks but because Evolution’s own countermeasures unintentionally blocked legitimate users. Management admitted they “over-extended”. The dilemma is unchanged: clamp down too hard and real players are hurt, clamp down too softly and pirates win. The company is deploying resources and believes it found a better balance late in the quarter, but the situation remains volatile and there is still no clear path to a full fix.

• Evolution posted its first ever YoY decline in net revenue, down 2%. FX-adjusted growth was modest at 4%. The core Live segment shrank 3%. RNG grew 4% and, for the first time, outpaced Live. Asia fell 6% YoY and 10% sequentially amid cyber countermeasures and regulatory shifts in markets such as the Philippines and India. Europe declined 7% YoY but returned to sequential growth.

• Operating margin fell to 58% from 63% as operating expenses rose 5% to €211 million, although the margin held sequentially. For the first time in recent memory, management stressed cost control rather than “grow to gain share”. Operating expenses fell 3% QoQ, suggesting a cost base reset. Personnel costs rose 6% YoY to €118 million on higher headcount but fell 5% sequentially. FTEs increased 11% YoY to 15,996 but were flat QoQ. Revenue per FTE fell to €32k, a five-year low. Operating leverage has been negative for three straight quarters, explaining the hiring pause.

• Free cash flow margin improved to 67% from 63% and cash conversion reached 83%. Management stated that cash generation is back on track after a seasonally weak Q2 when free cash flow fell to 37% due to timing effects. The company returned €187 million via buybacks in the quarter, bringing year-to-date buybacks to €406 million, and still ended with €656 million in cash. Evolution has many problems at the moment, but cash is not one of them.

Contents

1. Financial Highlights

2. Wall Street Expectations

3. Business Activity

4. Financial Analysis

5. Conclusion

1. Financial Highlights

• Net Revenue: €507 million (-2% YoY)

  • Live: €432 million (-3% YoY)

  • RNG: €76 million (+4% YoY)

• Operating Profit: €297 million (–7% YoY)

• EBITDA: €337 million (-5% YoY)

• Free Cash Flow: €342 million (+5% YoY)

2. Wall Street Expectations

• Net Revenue: €536 million (miss by 5%)

• Adjusted EPS: €1.33 (miss by 6%)

3. Business Activity

Cybercrime Headwinds

Cybercrime issues intensified in Q3 2025 and led to a sharp revenue drop in Asia. The decline was driven by the unintended fallout from aggressive countermeasures taken earlier in the quarter. This marks a clear change in tone. Until now, management had been cautiously optimistic about resolving the issue.

Management described the core challenge as a balancing act. Measures that are too strong hurt legitimate users. Measures that are too soft fail to stop pirates. In Q3 the company admits it “over-extended” and “did too much”, which directly harmed revenue because real users were affected.

Management said they are using “top-notch” resources and will spend whatever is required. The constraint is not money. They believe they found a better balance late in the quarter, but the situation remains volatile and unpredictable in the near term. The most concerning takeaway is that management does not yet know how to fully fix the issue and is effectively throwing resources at a problem that may not be fully solvable.

Ring-fencing Update

Revenue in Europe returned to sequential growth, indicating that the ring-fencing and regulatory adjustment phase is mostly complete and now supports growth.

Management believes they are in a “very good position” in Europe and do not expect further ring-fencing actions. One major European regulator singled out the company as one of the best B2B suppliers.

Separately, the UK Gambling Commission review of Evolution Malta Holding Limited continues. A conclusion is expected before year-end 2025. Management maintains that they have the “most sophisticated compliance framework” for the UK market.

Capacity

North America. Strong customer investment led to several large dedicated studios going live across the USA and Canada. Ezugi launched as the second Live Casino brand in the US. A second Michigan studio will open in H1 2026.

Latin America. The São Paulo Live Casino studio, opened in July, is scaling ahead of plan and already being expanded.

Asia. The new Philippines studio is off to a strong start. It suffered minor building damage due to an October earthquake, but operations continued.

Game Rounds Index

Despite capacity build-out, overall activity declined. The Game Rounds Index fell by 1 percent YoY.

New Games

The company continues to deliver on its full-year pipeline of more than 110 releases. Twenty-two new titles were launched on the RNG side in Q3.

Several notable late-2025 titles are still to come:

• Red Baron A hybrid Live and RNG title where players cash out before the “Red Baron flies away”, with winnings increasing the longer a player waits.

• Insurance Baccarat A Baccarat variant with an insurance mechanic designed to reduce loss severity.

Playtech Unmasking

After nearly four years of legal process, Playtech has been identified as the client that funded the defamatory smear campaign launched in December 2021. Playtech paid Black Cube, an intelligence firm, to produce the false report that harmed Evolution and its shareholders.

With the source now confirmed, litigation will proceed and is expected to run through 2026. The immediate step is to replace “Joe Roe” with Playtech in the lawsuit, followed by depositions and potential information disclosures.

The CEO emphasised that the objective is to protect shareholder value and seek “fairness and justice”. While damage estimates were not disclosed, the CEO described the amount sought as “a severe amount”.

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4. Financial Analysis

Revenue

For the first time in its history, Evolution reported a year-on-year decline in net revenue, down 2%. The collapse in revenue momentum has been astonishing, marking the twelfth consecutive quarter of deceleration. The CEO again said management is “not satisfied with the growth so far this year”. Adjusted for foreign exchange, revenue grew 4% YoY. FX is simply the price of admission for international expansion and I do not expect it to reverse.

The Live segment (85% of revenue), shrank 3% YoY. RNG (15% of revenue) grew 4%. For the first time, RNG outgrew Live. When RNG is no longer the problem child, you know performance has shifted in a historic way.

Regional Performance

• Asia (36% of revenue): Declined 6% YoY and 10% QoQ. Management described performance as “still very far from satisfactory” and “a bit worse” than expected. The decline was driven by “over-extended” cyber countermeasures and regulatory volatility in markets like the Philippines and India.

• Europe (35%): Declined 7% YoY, grew 1% QoQ, returning to sequential growth after the ring-fencing impact in Q2. Management saw “good momentum” despite summer seasonality.

• North America (14%): Grew 15% YoY but slowed from 23% in the prior quarter. Still one of the report’s bright spots, supported by customer investment in dedicated studios.

• Latin America (8%): Grew 6% YoY. This was underwhelming given Brazil’s new regulatory framework. Management said growth is “once again picking up” as the market adjusts.

  

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Operating Margin

Operating margin fell to 58%, down from 63%, as operating expenses rose 5% to €211 million. Sequentially, margin was stable for the third quarter. For the first time I can recall, management emphasised cost control and discipline, a sharp pivot from its prior “grow to gain share” approach. Operating expenses declined 3% QoQ which management cited as evidence of cost base adjustment to weaker revenue.

Personnel expense rose 6% YoY to €118 million on headcount growth, but fell 5% QoQ. FTEs rose 11% YoY to 15,996 but were flat sequentially. Management repeated its principle “we do not hire unless we grow”. It is a chicken or egg question: do they grow because they hire, or hire because they grow..

Revenue per FTE fell to €32k, a five-year low. Operating leverage, once the hallmark, has been negative for three consecutive quarters. No surprise hiring paused. Cost per FTE held at €7k. The revenue-to-cost ratio held at 4.3 times QoQ, down from 4.7 times YoY.

EBITDA margin fell to 66% to 68%, leaving EBITDA flat. The 66% is within the full-year range of 66 to 68 percent. Management is clearly fighting costs to defend the bottom of that range.

Cash Flow Analysis

CapEx held at 6% of revenue, in line with recent quarters. Management now expects full-year CapEx to come in “slightly lower” than the €140 million forecast, another sign of tighter spending.

Free cash flow margin rose to 67% from 63%, with cash conversion at 83%. Management said Evolution is “back on track” after a “seasonally and unusually weak second quarter” when FCF margin dropped to 37%. Timing effects matter.

After €187 million in buybacks in the quarter (€406 million year-to-date), cash ended at €656 million. Evolution has many problems, but cash ain’t one.

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5. Conclusion

I have been following Evolution for over two years and I can honestly say this is the worst quarter I have seen from the company in that time. Just when it looked like the business might have turned a corner last quarter, it now feels like one step forward, three steps back.

The key focus this quarter is Asia. The question is whether this is becoming an unfixable problem. Management adjusted its near-term outlook meaningfully and sounded far more cautious and frustrated than in prior quarters. The CEO acknowledged that Asia’s poor performance is a recurring theme and noted that this time it looks a bit worse. Last quarter they were “very cautiously optimistic” about the rest of the year. Now the CEO says they are being realistic and keeping expectations low. When asked for a recovery timeline, he said he cannot share any time frame and cannot comment on potential Q4 impacts given the volatility.

While management is cautious on timing, they do not suggest that the core cybercrime and technical issues are unfixable. This is where I have a problem. Evolution has been dealing with these cyberattacks for a year now since they first surfaced in Q3 2024. If they have not fixed them despite throwing all available resources at the issue, what evidence is there that they can fix them? At this point, it is a clear case of show me, not tell me.

Any company can experience issues like this, but when they persist for this long you have to question whether this is solvable or simply the new normal. Is this now the equivalent of pirated Sky Sports or Netflix streams that are widely accessible online? If so, there is very little Evolution can do to protect itself, especially in unregulated markets.

There are still some positives. The company is not at risk of bankruptcy, not even close. If management can stabilise the business, the valuation is undemanding. The cash pile is large and the combination of dividends and buybacks could deliver an 8-10% floor-type return, all else equal. Famous last words of course.

Over the past couple of quarters, I have maintained that Evolution would not return to double-digit growth until Q1 2026 at the earliest. That view was based on the impact of ringfencing measures and cyberattacks in Asia. Fundamentally, nothing has changed in Europe, so this part of the thesis is still on track. However, given the uncertainty in Asia, mid-single-digit growth in Q1 2026 now looks more realistic.

Asia is believed to be Evolution’s most profitable market, while North America is the main growth driver but at much lower margins. If Asia continues to face issues, earnings growth is likely to lag even the already reduced revenue outlook.

With no clear near-term catalyst, the stock is likely dead money for the next six months. The Evolution investment thesis today is meaningfully different to what it was twelve months ago.

A stock that was long considered a growth darling is now firmly in turnaround or value territory.

Rating: 1 out of 5. Significantly below expectations.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

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Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

Brokerage statements were basically useless. If you hold the same stock across multiple accounts, those statements tell you nothing about your true position size or your portfolio-level allocation.

In 2021 after years of inefficiency I found Portseido. Four years later it remains the backbone of my portfolio management process and the source of the verified performance data I share each month in this newsletter.

What Portseido Actually Does

Portseido is a portfolio tracking and analytics platform for individual investors who want institutional-grade tools without institutional complexity. It solves a simple problem, it consolidates holdings across multiple brokers into one accurate real-time view.

The real value is not the consolidation itself, it is what you can do once the data is unified.

The platform connects to brokers directly or accepts spreadsheet upload. Once connected it tracks transactions, dividends, fees and performance across your entire portfolio. The interface is clean, the visuals are clear and the analytics run deeper than any free tool I have used.

The Features That Matter

After four years of use these are the capabilities I rely on most:

1. Effortless Transaction Management

Every buy or sell updates in seconds. No formulas to maintain, no broken links, no version control issues. This sounds trivial until you have done it the hard way.

2. True Portfolio Allocation View

Portseido displays both market value and cost basis allocation at the portfolio level. When I held 25 positions across three brokers this was transformative. What looked like a 3% position at Broker A and 2 percent at Broker B was in reality a 5% allocation. This clarity helped me consolidate down to 15 positions.

3. Verified Performance Data

As someone who publishes monthly portfolio reviews, I need performance numbers that are accurate, auditable, and presentation-ready. Portseido’s performance tracking accounts for cash flows, timing, and dividends automatically. The platform generates performance data I can share with confidence, benchmarked against the S&P 500.

4. Automatic Dividend Tracking

Dividends are notoriously tedious to track manually, especially with reinvestment and timing considerations. Portseido automatically updates when dividends are declared and displays dividend yield, total dividend income, and projected future income. For income-focused investors, this feature alone justifies the subscription.

5. Fee Transparency

Portseido tracks fees as an absolute number and as a percentage of portfolio value. Seeing my annual fees as a percentage of AUM in 2023 prompted me to switch brokers. That single decision paid for the subscription several times over. Without this visibility I likely would not have noticed the fee drag until it compounded over years.

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The Workflow in Practice

My typical workflow is straightforward:

• Weekly check-ins: I log in to review allocation, performance, and any dividend updates. This takes 5-10 minutes.

• Transaction updates: After any buy or sell, I update Portseido immediately, usually takes under a minute.

• Monthly reviews: At month-end, I pull performance data, heat maps, and allocation charts for my newsletter. The visuals are export-ready.

The data visualisation tools are where Portseido truly shines. The charts I use most frequently include:

• Market value allocation pie chart: Shows current position sizing across the portfolio.

• Cost allocation pie chart: Reveals where my capital is actually deployed.

• Sector allocation breakdown: Highlights sector concentration and diversification gaps.

• Performance vs. S&P 500 benchmark: Tracks relative performance over time periods.

• Performance heat map by stock: Instantly identifies winners, losers, and laggards.

Time Saved

Before Portseido, I spent 2 to 3 hours per week maintaining spreadsheets, reconciling data, and building charts. That is more than 100 hours per year that should have gone to research, not admin.

Now, portfolio administration takes less than an hour per month, a reduction of more than 90 percent. For anyone who takes portfolio management seriously, that time recapture is meaningful.

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Cost

Portseido offers a free tier. The paid tier starts at $8 per month.

For context, if the fee transparency feature saves you even 10 basis points annually on a $100,000 portfolio, that is $100 per year. The tool pays for itself in the first month.

Who Should Use This

Portseido suits individual investors who:

• Hold positions across multiple brokers

• Want institutional-grade analytics without complexity

• Track performance seriously, especially if publishing results

• Need accurate dividend and fee tracking

• Value their time and want to eliminate manual admin

If you manage a personal portfolio with any seriousness, it is worth evaluating.

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Limitations

Portseido is not a financial planning tool. It does not offer tax optimisation features, and it is built around equities rather than multi-asset portfolios or alternatives. If you need derivatives tracking, you will need other tools.

However, the development team is highly responsive. When I have requested features or workflow improvements, they have been receptive and often implement suggestions. That responsiveness is rare and valuable.

There is also a mobile app for on-the-go monitoring.

Final Assessment

After four years and hundreds of hours of use, Portseido is now indispensable to my investment process. It turned portfolio tracking from a labor-heavy chore into a streamlined, insight-driven workflow.

The platform does not make decisions for you, it gives you the data infrastructure to make better decisions yourself. For disciplined, fundamentally driven investors, that is exactly what a tool should do.

If you are still using spreadsheets or relying on broker statements alone, you are operating with incomplete information. Portseido solves that cleanly and at low cost.

Sign up for Portseido

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Join the community of informed investors – subscribe now to receive the latest content straight to your inbox each week and never miss out on valuable investment insights.

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• Q3 2025 bookings revealed a clear shift in ASML’s demand mix. Memory orders surged 186% to €2.54 billion, while Logic bookings declined, reducing Logic’s share from 84% to 53%. Of the €5.4 billion total, €3.6 billion came from EUV systems, underscoring continued strength in advanced lithography. This pivot toward Memory reflects broader semiconductor trends as AI adoption drives higher lithography intensity across both Logic and DRAM. Management expects more critical exposures in both segments, suggesting AI-driven workloads may be ushering in the early stages of a new Memory super-cycle.

• Revenue rose slightly YoY to €7.5 billion, in line with guidance but down sequentially due to timing effects. Net system sales reached €5.6 billion, including one High NA system, while Installed Base Management revenue eased to €2.0 billion (35% of total sales). The revenue mix shifted modestly toward Memory (35%) and geographically toward China, which surged to 42% of net system sales on strong DUV demand. Gross margin contracted to 51.6% from 53.7% in Q2, mainly due to a higher share of lower-margin DUV systems and shipment timing.

• Management reaffirmed 2025 guidance, maintaining expectations for ~15% YoY net sales growth (around €32.5 billion) and a 52% gross margin, with a strong Q4 needed to meet targets. The company forecasts Q4 sales of €9.2–€9.8 billion and margins of 51–53%. Looking ahead, ASML refrained from setting explicit 2026 targets but stated that sales will not fall below 2025 levels. While Chinese headwinds are expected to weigh on results, management anticipates this will be offset by accelerating demand for advanced nodes driven by AI adoption.

Contents

1. Financial Highlights

2. Wall Street Expectations

3. Business Activity

4. Financial Analysis

5. Guidance

6. Conclusion

Be greedy when others are fearful.

Ask yourself this…

Would you rather have bought Meta shares for $378 in September 2021 or $90 in November 2022? Both purchases would have seen tremendous growth.

A $1,000 investment in September 2021 would be worth $2,014 today. But a $1,000 purchase when Meta pulled back in November 2022 would be worth $8,300.

Sometimes it can pay to wait for a pullback. Rebound Capital identifies high-quality companies undergoing drawdowns to capitalise on their eventual rebound. In the last few months, they have identified ASML (up 23%), Google (up 52%), and AMD (up 61%) as ideal rebound prospects.

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1. Financial Highlights

• Revenue: €7.52 billion (+1% YoY)

• Gross Profit: €3.88 billion (+2% YoY)

• Net Income: €2.13 billion (+2% YoY)

2. Wall Street Expectations

• Revenue: €7.74 billion (miss by 2%)

• EPS: €5.38 (beat by 2%)

3. Business Activity

Bookings and Demand

Bookings in Q3 2025 showed a slight decline in total net bookings compared to the prior quarter, alongside a significant shift toward Memory end use. Of the €5.4 billion in net bookings, €3.6 billion came from Extreme Ultraviolet (EUV) systems.

Logic customers accounted for 53% of bookings, down sharply from 84% in Q2 2025. In absolute terms, Memory bookings jumped 186%, from €887 million to €2.54 billion.

This shift toward Memory reflects broader market trends. The semiconductor industry is gaining strong momentum, driven by the widespread adoption of Artificial Intelligence (AI) across a growing range of applications. AI demand now extends to both leading-edge Logic and advanced DRAM customers, increasing the need for advanced lithography and higher litho intensity.

Management expects more critical lithography exposures for both Logic and Memory processes. My interpretation is that AI workloads are pushing demand for more sophisticated memory solutions, signalling potential beginnings of a Memory super-cycle.

Technology and Product Adoption

Management highlighted solid progress on the technology roadmap, marked by ongoing EUV adoption, a new product launch for Advanced Packaging, and the growing integration of AI across ASML’s lithography ecosystem.

EUV Technology

Customers have processed more than 300,000 wafers on High NA systems. Maturity levels are currently ahead of where Low NA was at a similar stage. SK hynix has started installing its first EXE:5200 (High NA EUV tool) in production, which is expected to be a key enabler for future DRAM development.

Strong EUV execution continues to drive down the cost of technology at advanced nodes. Management anticipates that the product mix will increasingly favour EUV.

Advanced Packaging and 3D Integration

ASML shipped its first product for the Advanced Packaging market, the TWINSCAN XT:260. This i-line scanner supports 3D integration and delivers up to 4x productivity versus existing solutions.

3D integration is viewed as the “other way to drive Moore’s Law,” complementing traditional 2D lithography. ASML’s holistic lithography technology can be extended to 3D integration to meet customers’ tightening performance requirements.

Integration of AI

ASML entered a strategic partnership with Mistral AI, becoming the lead investor in their Series C round and acquiring roughly an 11% stake. Management expects AI to accelerate product development and reduce time-to-market.

Personally, I believe this Mistral AI partnership is more political than practical, but time will tell whether it delivers tangible value.

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4. Financial Analysis

Revenue

Total revenue rose marginally YoY to €7.5 billion, in line with guidance, despite a slight sequential decline.

• Net system sales were €5.6 billion, including one High NA system recognised during the quarter. ASML’s quarterly results can appear “lumpy” due to the high unit cost of each system, one machine sale timing difference (for example, between September 30 and October 1) can shift revenue by around €400 million.

  

• Installed Base Management revenue (service and field options) fell sequentially to €2.0 billion, now representing 35% of total revenue. This recurring stream reflects ongoing productivity upgrades (such as on NXE:3800E systems) and higher service demand from the expanding EUV base.

• End-use mix: Logic made up 65% of net system sales in Q3 2025, while Memory accounted for 35%. This is a slight shift toward Memory from the Q2 split (Logic 69%, Memory 31%), consistent with booking trends.

  

• Geographic mix: China accounted for 42% of net system sales, up sharply from 27% in Q2. This likely reflects backlog conversion involving Deep Ultraviolet (DUV) systems. Taiwan and South Korea followed, contributing 30% and 18%, respectively. Geopolitical and regulatory risks remain notable factors.

Gross Margin

Gross margin contracted sequentially, as guided, landing at 51.6% (or €3.9 billion in gross profit), down from 53.7% in Q2 2025.

The decline was primarily driven by product mix and cost recognition. While Logic systems still dominated sales (65%), the higher proportion of lower-margin DUV systems sold to China diluted the overall margin. Although one High NA system was recognised, its impact was offset by this DUV-heavy mix.

My view: this contraction was expected and managed, mainly a result of shipment timing and revenue recognition.

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Net Margin

Net margin fell to 28.3% (or €2.2 billion in net income), down 150 bps from 29.8% in Q2 2025.

Operating expenses were broadly stable, so the decline reflects reduced revenue and margin compression:

• R&D costs: €1.1 billion, slightly down from €1.2 billion in Q2.

• SG&A costs: €303 million, slightly up from €299 million.

Cash Flow

Free Cash Flow was €244 million, down from €319 million in Q2 2025, mainly due to lower operating cash flow. ASML’s FCF tends to fluctuate by quarter given the large-ticket nature of its business.

ASML ended the quarter with €5.2 billion in cash and returned nearly €800 million to shareholders through:

• An interim dividend of €1.60 per share

• Share buybacks of about 218,000 shares for €148 million

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5. Guidance

Management reiterated and confirmed its full-year guidance for 2025:

• Total Net Sales: ASML continues to expect total net sales growth of around 15% for 2025 relative to 2024. Based on the reported Q3 figures, achieving this target will depend heavily on a strong final quarter. The full-year net sales figure is anticipated to be around €32.5 billion (using the midpoint of Q4 guidance).

• Gross Margin: The expectation for the full-year 2025 gross margin remains around 52%.

• Q4 Outlook: ASML projects a very strong Q4, with total net sales between €9.2 billion and €9.8 billion, and a gross margin between 51% and 53%.

The most notable update in guidance relates to the initial outlook for 2026. In typical ASML fashion, management avoided explicitly forecasting growth, instead stating that “ASML does not expect 2026 total net sales to be below 2025.”

Management plans to provide more detailed 2026 guidance in January. They noted that while geopolitical headwinds in China will weigh on results, these will be more than offset by growth in advanced technology nodes driven by AI adoption. ASML expects China’s total net sales to decline significantly in 2026, following the exceptionally strong levels of 2024 and 2025.

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6. Conclusion

ASML reported solid headline numbers, but this business is best assessed through its multi-year technology transition and order book stability, rather than quarterly performance. Since production slots are allocated months or even years in advance, the most valuable insights lie in structural trends shaping the outlook for 2026 and beyond.

Key Takeaways:

1. Implicit Backlog Coverage: The implied order backlog exiting Q3 is €33 billion, suggesting 100% coverage for achieving flat revenue in 2026. ASML’s reaffirmation that 2026 sales will not fall below 2025 levels is noteworthy, especially given expected headwinds. This reinforces my belief that committed customer orders substantially de-risk the coming year.

2. China Headwind: Management expects a significant decline in China’s total net sales in 2026. They have consistently described the high levels seen in recent years as “very high and in no way normal.” This surge was due to ASML “eating into our backlog” to meet pent-up demand. The business is expected to normalise next year, returning to more sustainable levels.

3. AI as a Structural Growth Catalyst: The confidence that 2026 revenue will hold or grow despite lower China sales is fundamentally bullish. It reflects strong, broad-based investment in AI-related semiconductor demand, especially in leading-edge Logic and advanced DRAM. This trend requires greater lithography intensity and a broader customer base, reducing the risk of supply constraints and supporting long-term capacity growth.

4. Favourable Product Mix Shift: The expected 2026 dynamic is higher EUV sales and lower DUV sales (due to China restrictions). This shift toward higher-margin EUV systems supports earnings growth even if sales remain flat, highlighting the secular adoption of cutting-edge technology that is less cyclical than DUV.

Rating: 3 out of 5. Meets expectations.

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Wolf of Harcourt Street

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Email: wolfofharcourtstreet@gmail.com

Part 1 explored how early competitive advantages and founder mentality became organisational DNA.

Part 2 traced how culture scaled, from marketing and logistics infrastructure to ecosystem building.

Part 3 examines the company’s response to existential competition, the deliberate succession from founder to professional management, and what happens when an organisation becomes bigger than any individual leader.

It’s the conclusion to understanding not just Mercado Libre, but what their model reveals about building companies that endure.

When Marcos Galperin Stepped Back

When Marcos Galperin announced his departure as CEO on 21 May, 2025 (26 years after founding Mercado Libre), he did something unexpected: he made it look like the most rational decision possible.

Not a victory lap. Not a retirement announcement. A deliberate step back, taken precisely because the company had matured enough that it no longer needed him in that specific role.

This moment represents the culmination of everything Mercado Libre has built. And it reveals truths about scaling, competition, and leadership that extend far beyond one company.

Mercado Libre Specific Insights

Why This Transition Works

Marcos didn’t leave because he was bored or because Mercado Libre had plateaued. He left because the organisational design patterns his team built over 26 years made it possible and necessary.

The succession to Ari Szarfsztejn wasn’t improvised, it was architected. Three years before stepping down, Marcos moved Stelleo Tolda, his Brazilian co-pilot of 20+ years, aside to give Ari broader visibility in an executive role. This wasn’t a demotion; it was strategic positioning.

Ari proved himself managing Mercado Envíos through the pandemic (when volumes grew 5x overnight) and its subsequent expansion into logistics, technology infrastructure, and supplier relationships. He had already been making company-wide decisions. The CEO title simply formalised what was already true.

But here’s the deeper pattern: Marcos built an organisation where the founder’s departure doesn’t create a vacuum. Sean Summers describes walking into Mercado Libre and being shocked by how “leaderless” decisions felt, not because no one was leading, but because leadership was distributed. Ideas mattered more than titles.

The Board challenged Marcos (Henrique Dubugras explicitly questioned why he was leaving at all). The management team operated with founder mentality even as the company scaled to $30 billion in revenue.

This is organisational design working at scale. Most succession failures happen because founders build cults of personality. Marcos built something different: a culture where the founder is systemically replaceable, even as his imprint remains.

The Paranoia Mechanism

One quote from Marcos crystallises everything: “Only the paranoid survive.” This isn’t motivational fluff, it’s a design principle embedded in quarterly reviews, NPS obsession, and strategic planning.

Mercado Libre has dominated Latin America. They’ve beaten Amazon in multiple markets. Yet when Chinese competitors entered Brazil, Marcos didn’t defend conservatively, he doubled down. The company announced a 76% reduction in free shipping costs (from R$79 to R$19 in Brazil) during his final act as CEO.

A massive investment in a market they already led. Why? Because in their view, the moment you defend a position is the moment you lose it.

Quarterly business reviews focused not on what went well, but on what could go wrong. NPS was a forcing function to uncover root causes. When customer satisfaction stalled, they rebuilt technology infrastructure for years. When logistics depended on a single provider and that provider struck, they diversified aggressively.

This isn’t paranoia as pathology, it’s paranoia as operational discipline. It’s what prevents a $30 billion company from behaving like one.

Strategic Trade-offs That Reveal Hidden Logic

Marcos and team made a striking decision about content: they said no. Amazon built original series and created lock-in through entertainment. Mercado Libre looked at that and concluded it wasn’t in their DNA. Instead, they partnered with Disney and local producers, maintaining focus on commerce and fintech.

The insight: the biggest companies sometimes win by not doing everything competitors do. When mobile came, they built apps, not studios. When AI emerged, they focused on agent-based commerce and cost reduction, not robotics.

Most large companies suffer from “me-too” strategic dilution. Mercado Libre’s discipline, its refusal to chase categories outside its competitive advantage, is why it remains dominant.

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Universal Business Principles

Founder Departure as Strength, Not Ending

The conventional narrative says founder departures signal decline. Mercado Libre inverts this. Marcos stepping down signals something more radical: an organisation confident enough to outlast its founder, and a founder secure enough to step away from what he loves most.

This only works when three conditions exist:

1. The successor shares the founder’s values but brings different capabilities. Ari is a strategist with logistics expertise.

2. The organisation has codified culture, not just lived it. Leadership behaviors, debate protocols, and decision-making principles are documented.

3. The founder transitions, not disappears. Marcos remains Chairman, engaged but not in daily execution.

Most founder transitions fail because they’re treated as binary (founder stays or leaves). Mercado Libre shows a third path: founder transforms.

Competing Without Imitation

When Amazon entered Latin America in 2013, Mercado Libre’s Board debated closing Mexico. The conventional move would have been retreat. Instead, under pressure from Micky Malka and Javi Oliván, they multiplied marketing spend sevenfold. Their message: “Every square metre of Latin America will cost you.”

Most companies, when facing stronger competitors, either imitate or retreat. Mercado Libre did neither. They played harder at what they were already good at.

When Chinese competitors arrived, the same pattern repeated. Marcos didn’t panic. He adapted, building supply chains from Asia, adjusting pricing but stayed true to Mercado Libre’s model.

Leadership as Saying No

Marcos doesn’t attend quarterly earnings calls. He skips nearly all conferences, investor meetings, and media appearances. This might seem counterintuitive for a public company CEO, but his logic is clear: every hour spent externally is an hour not spent learning internally.

He divides his time roughly three ways: one-third with his teams, one-third studying Mercado Libre, one-third on family and learning. The remaining time is blocked and unavailable.

The lesson: leadership bandwidth is finite. The best companies protect it ruthlessly. They say no to the good to preserve time for the critical.

The Role of Uncomfortable Board Members

When Henrique Dubugras questioned Marcos’s succession decision, he wasn’t being contrarian for effect. He was doing exactly what a Board should do: create friction and force clarity.

Marcos’s reaction? Relief. Not because Henrique changed his mind, but because a Board willing to challenge him, respectfully and rigorously, is exactly what’s needed during major transitions.

Boards add most value not through approval but through calibrated skepticism. Marcos’s most trusted Board members, like Micky Malka and Javi Oliván, understood tech deeply and weren’t afraid to contradict him. Henrique played the same role here.

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The Unfinished Mountain

Marcos closes his narrative with a reflection on climbing. On Aconcagua, there’s a base camp every 2,000 metres. You reach what feels like a summit, only to look up and see 25 more peaks ahead. “It never ends,” he says. “That’s the truth.”

Mercado Libre faces Chinese competitors with relentless execution, AI reshaping commerce, and volatile regional economies. The company isn’t resting, it’s competing perpetually.

But the infrastructure they’ve built, distributed leadership, a culture that treats complacency as an existential threat, and a proven succession model, positions them better than most for what’s next.

The lesson isn’t that they’ve figured everything out. It’s that they’ve figured out how to keep learning, adapting, and evolving as an organisation, not just as individuals. What makes Mercado Libre worth watching is that they’ve built the tools to navigate whatever comes.

This is the final instalment of a three-part series on the climbers & scalers podcast.
If you’ve followed along from the beginning, I hope you enjoyed it. There are few case studies that reveal as much about scaling, leadership, and resilience as Mercado Libre’s story.

I’ll personally be referring back to this series in the future because the lessons here about organisational design, discipline, and founder evolution are timeless.

If you’d like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

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Wolf of Harcourt Street

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Email: wolfofharcourtstreet@gmail.com

There were no subscribers, no community, just me documenting my investment decisions and hoping to connect with a few like-minded investors.

Today, we’re 9k strong, spanning continents, experience levels, and investment styles. Some of you have been here since the early days, others joined last week, but you’re all part of what has become a truly global community of independent investors.

I started this newsletter as a finance professional and private investor who wanted to apply the same analytical framework I use in my day job to my own portfolio. The mission was simple: understand the business behind the stock. Think like an owner, not a renter.

Over these five years, I’ve analysed hundreds of companies. I’ve dissected quarterly earnings until 2 AM. And the messages I’ve received from many of you, telling me that this newsletter has given you the confidence to manage your own portfolio, make better decisions, and think more clearly about investing, have made every hour worth it.

But here’s the thing: I need your help.

As we enter year six, I want to make sure The Wolf of Harcourt Street continues to deliver exactly what you need, not what I think you need, not what other newsletters do, but what matters most to you.

So I’ve put together a short survey (15 questions, roughly 5 minutes) to help me understand:

• What content resonates most with you (and what doesn’t)

• Which companies and sectors you want more coverage on

• How the newsletter fits into your investment process

• What would make this even more valuable in 2025 and beyond

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As a thank you, everyone who completes the survey will be entered to win a copy of The Art of Spending Money: Simple Choices for a Richer Life by Morgan Housel, his highly anticipated new book releasing soon. One winner will be drawn after 7 days.

Your feedback will directly shape the future of this newsletter. I’ll be reading every single response, and I’ll share the aggregate results in a future edition. Your individual responses will remain 100% anonymous.

This community has grown because of your referrals, your engagement in the chat, and your thoughtful questions. Now I’m asking you to help make the next five years even better than the first.

The survey closes in 7 days. Take 5 minutes today:

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Thank you for being here. Whether you’ve been along for the ride since November 2020 or just joined yesterday, I’m grateful to have you as part of this community.

Here’s to the next chapter.

P.S. Seriously, your input matters. This isn’t a box-ticking exercise. The insights from this survey will inform every deep dive, every earnings analysis, and every strategic decision I make for this newsletter in 2026. Don’t hold back.

If you’d like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

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Wolf of Harcourt Street

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Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

While I achieved a profit in absolute terms, TXN underperformed the S&P 500 by roughly 60% during my holding period. In a portfolio management context, it was a drag on performance and an opportunity cost.

As I work to consolidate my portfolio to a maximum of 15 high-conviction positions, TXN emerged as an obvious candidate for exit. More importantly, as I reflected on the Investment Philosophy I recently articulated, it became clear that this position falls outside the framework that should guide my capital allocation decisions.

The Original Thesis

When I initiated my position in Q3 2022, the decision seemed straightforward. I had no exposure to the semiconductor industry, a critical sector in the modern economy. TXN, with its leadership in analog and embedded processing chips, appeared to offer a way to gain that exposure through a quality business.

The valuation seemed compelling: TXN traded at roughly 18 times forward earnings. For a company with TXN’s market position and reputation for operational excellence, that multiple looked reasonable, particularly during a broader market selloff.

But here’s where my analysis fell short: that forward earnings multiple was not a true representation of the business’s normalised earning power. The cyclical nature of the semiconductor industry meant I was looking at a temporary snapshot, not a reliable baseline. I thought I was buying quality at a discount. In reality, I was buying cyclicality at what turned out to be an inflated earnings base.

Being Early Is the Same as Being Wrong

One of the core assumptions in my thesis was that I was buying near the trough of TXN’s cycle. The semiconductor industry had begun showing signs of inventory corrections and demand softness. My intention was to position for the recovery, benefiting from the eventual upturn while collecting a reasonable dividend in the meantime.

The problem? That trough has lasted far longer than I anticipated. The downcycle has been deeper and more prolonged than my initial analysis (and Wall Street analysts) suggested. In the subsequent years, TXN’s EPS declined by 25% in 2023 and 26% in 2024.

In investing, being early looks identical to being wrong, at least in terms of portfolio performance. The opportunity cost of capital sitting in a position that goes sideways, or worse, declines, while the broader market advances is very real.

This experience reinforces a lesson every investor eventually learns the hard way: cyclical industries are extraordinarily difficult to time. Even with a solid grasp of business fundamentals, predicting the inflection point requires near-perfect foresight of macroeconomic conditions, supply chain inventory dynamics, and end-market demand across multiple sectors.

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The Slow Compounder That Wasn’t Predictable Enough

My initial vision for TXN was that it would serve as a steady compounder, a business that might not deliver explosive growth but would generate consistent double-digit returns through a combination of modest growth, margin expansion, and shareholder returns.

The challenge is that this characterisation doesn’t align with reality. While TXN has strong advantages in analog chips and a record of solid execution, the inherent cyclicality of its business makes it far less predictable than a true compounder should be.

Consider Visa, another holding that plays a similar “steady compounder” role in my portfolio. Visa currently trades at around 28 times forward earnings, while TXN trades near 30 times. On the surface, valuations look similar. But the critical difference lies in earnings predictability.

Visa’s model, taking a small percentage of payment transactions, is remarkably stable and predictable. I can forecast Visa’s earnings several years out with reasonable confidence because consumer spending, while cyclical, is far more consistent than semiconductor demand.

TXN, by contrast, serves markets including industrial, automotive, personal electronics, enterprise systems, and communications equipment, all subject to inventory cycles, capital expenditure swings, and economic sensitivity. When I try to forecast TXN’s earnings three to five years out, the error bars are dramatically wider. Given that uncertainty, does it make sense to pay a similar multiple to a business like Visa? I’ve concluded that it doesn’t.

Outside My Investment Philosophy

In my recent article outlining my investment philosophy, I emphasised several core principles:

1. Understanding the business comes first.

Every investment should begin with deep research into the business model, revenue and margin drivers, competitive advantages, and key risks. While I understood TXN’s business at a high level, I underestimated how the cyclicality would dominate other considerations.

2. Platform businesses with structural advantages.

The most compelling long-term opportunities tend to operate as platforms or ecosystems, benefiting from network effects, switching costs, and large under-penetrated markets. TXN doesn’t fit this profile. While it has advantages in analog chips, it’s not a platform business with winner-take-most dynamics.

3. Long-term mindset with conviction.

My edge lies in holding through volatility when the long-term thesis remains intact. But with TXN, my conviction eroded rather than strengthened.

The consolidation of my portfolio to 15 positions isn’t just about reducing position count, it’s about ensuring every holding represents a business I truly understand, believe in, and can hold through volatility. TXN no longer meets that standard.

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Why ASML Stays While TXN Goes

Some readers might wonder: if you’re exiting TXN due to semiconductor cyclicality, why continue holding ASML?

The answer lies in the quality and uniqueness of ASML’s business model. ASML holds a complete monopoly on Extreme Ultraviolet (EUV) lithography machines, essential for manufacturing the most advanced semiconductor nodes. Every leading-edge chipmaker, TSMC, Samsung, and Intel, depends on ASML’s machines.

This monopoly means that while ASML’s revenue fluctuates with semiconductor capital expenditure cycles, its market share and pricing power remain unassailable. The company essentially serves as a toll gate for advanced chip manufacturing.

TXN, though in a strong position, doesn’t have this degree of competitive insulation. It competes across markets with players like Analog Devices, and its profitability depends on whether customers choose TXN’s chips over others.

Quality matters enormously in investing. While both businesses are cyclical, ASML’s structural position is simply superior, which justifies maintaining exposure despite volatility.

Key Lessons

Every investment, whether successful or not, offers lessons. Here’s what I’m taking away from TXN:

• Cyclical industries are exceptionally hard to value and time.

  The margin for error is thin, and being early costs real money. The market doesn’t reward patience if the opportunity cost is high.

• Predictability is worth paying for.

  A business that generates consistent, visible earnings can be more valuable than higher but volatile returns.

• Investment philosophy should be a filter.

  Writing down your investment principles is only valuable if you use them. When a position no longer fits, acknowledging that reality is the disciplined choice.

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Final Thoughts

Selling TXN wasn’t a decision I made lightly. Three years of holding creates a certain attachment, even when the analytical case weakens. But discipline in investing means making decisions based on current facts and forward-looking analysis, not sunk costs or emotion.

My understanding of what belongs in the portfolio has evolved, and my investment philosophy has become more defined. Articulating why TXN no longer fits has strengthened my conviction in the framework I’m applying.

For those building their own portfolios, periodically evaluate whether each position still aligns with your philosophy. Markets evolve, businesses evolve, and your own understanding deepens. What made sense three years ago may not today. The key is having the intellectual honesty to recognise it and the discipline to act on it.

If you'd like to support the work of an independent analyst, you can buy me a coffee. The proceeds will contribute to covering the annual running costs of the newsletter.

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Happy investing

Wolf of Harcourt Street

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Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

If you are new to this newsletter, I recommend checking out Part 1 first, which covers episodes 1–9 and explores MELI’s philosophy and competitive frameworks.

Mercado Libre-Specific Insights

Nuclear Winter Strategy

Nico Szekasy’s account of the dot-com crash provides the clearest window into MELI’s strategic discipline during crisis. When the internet bubble burst in 2001, most companies scrambled for survival. MELI had already implemented what Szekasy calls “nuclear winter” planning, assuming capital markets would remain frozen indefinitely.

The company’s response was surgical: they cut teams in half while preserving $50 million in capital, centralised operations from nine countries into Buenos Aires, and shifted from growth-at-all-costs to a path-to-profitability mindset. This was not just cost-cutting, it was strategic repositioning. By 2005, they achieved profitability with substantial reserves intact, a decisive advantage when acquisition opportunities arose.

This experience created institutional memory around capital efficiency that persists today. Unlike competitors who optimised for favorable conditions, MELI built assuming adversity as the baseline. This explains their current approach to expansion and investment, always maintaining flexibility for the next downturn.

The Inconscience Advantage

The creation of Mercado Pago stands as one of the most successful platform extensions in e-commerce, yet Paula Arregui’s candid reflection on the role of “inconscience” reveals its unlikely origins. She noted, “If we had fully understood the complexity of what we were attempting, we might never have started.”

Her team’s early reality, manually processing transactions, entering card data into spreadsheets, faxing information, even creating physical coupons, illustrates both desperation and grit. This inconscience advantage enabled MELI to act when exhaustive feasibility studies might have paralyzed them.

The breakthrough was not technological but behavioral: solving trust between strangers rather than merely processing payments. By holding funds until buyers confirmed satisfaction and creating reputation systems, MELI turned the biggest barrier to adoption into a competitive moat. From manual processes to neural network fraud detection, this “naive” start enabled sophisticated solutions that perfectionism might have delayed.

70% Pay Reduction Philosophy

Nico Berman’s choice to take a 70% salary cut to join MELI, framing it as “investment in education,” highlights a recruitment philosophy that traditional compensation frameworks miss. His path from spotting a billboard to becoming employee number 8, shows how MELI hired for curiosity and learning capacity rather than narrow expertise.

This model filtered for conviction-driven employees. Significant financial sacrifice meant skin in the game that stock options alone could not match. The fact that many early MELI employees went on to found venture capital firms validates this human capital investment thesis.

Regulatory Arbitrage

Ozzie Giménez’s account of Mercado Pago’s battles with financial incumbents highlights MELI’s regulatory arbitrage playbook. Rather than waiting for permission, they built operations first, forcing regulators to adapt.

Because no regulation existed for businesses like Mercado Pago, MELI shaped new frameworks to its advantage. In markets dominated by monopolistic acquirer networks, they worked with competition authorities to pry open access. This created durable advantages that technology alone could not.

Amazon Counterplay & Global Learning

Germán Spataro’s perspective on Amazon’s entry into Brazil highlights MELI’s most sophisticated competitive analysis. Amazon expanded cautiously through books and categories, but MELI understood the real threat: Amazon’s operational excellence and customer obsession.

MELI responded by accelerating logistics, deepening local integration, and maintaining faster decision cycles. They bet that Amazon’s Seattle-centered approvals would slow local adaptation. As Spataro noted, “Brazil is the main country for Mercado Libre, while for Amazon it is just one of many.”

At the same time, MELI imported models from global peers, particularly Chinese fintech and e-commerce players. By adapting QR payments and money-market funds to Latin America, MELI leapfrogged local financial limitations. Remarkably, QR payment penetration in Argentina surpassed e-commerce usage, evidence of successful adaptation over invention.

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Universal Business Principles

Inconscience–Competence

Arregui’s “inconscience” insight frames a broader principle: productive ignorance vs destructive ignorance. Productive ignorance allows teams to attempt the “impossible” without being constrained by industry baggage.

Firms can harness this by creating “ignorance buffers”, leaders articulate bold visions while shielding teams from paralysing detail. Hiring should balance domain expertise with fresh perspectives, avoiding teams that only optimise for known constraints.

Income-for-Learning

Berman’s salary sacrifice illustrates treating career transitions as educational investments rather than financial optimisations. Organisations can apply this by enabling employees to invest in skill-building periods that trade short-term productivity for long-term returns. Periods of reduced current income/productivity in exchange for learning acceleration can create exponential future value.

Scarcity Planning

Planning for scarcity during abundance creates resilience. MELI’s nuclear winter mindset exposed inefficiencies and forced resource discipline. Any organisation can benefit from occasionally planning as if today’s favourable conditions will vanish.

This mental exercise often reveals operational inefficiencies, strategic dependencies, and resource allocation opportunities that aren’t visible during normal conditions. A recent example of this is the ZIRP era which fuelled a startup boom and tech growth but caught many businesses off guard when it ended.

Friction Analysis

MELI’s evolution from marketplace to payments, logistics, and credit reflects systematic friction analysis. Each expansion solved a customer pain point and transformed it into a business opportunity.

This framework applies broadly: every user journey contains friction points that represent either barriers to remove or services to monetize. The strategic choice depends on whether eliminating friction increases platform usage more than monetising it increases revenue.

Competitive Intelligence

Rather than benchmarking, MELI practiced multi-level competitive learning: tactical copying, strategic adaptation, and cultural pattern recognition. This enabled rapid iteration while avoiding costly strategic errors.

Talent Compound Interest

Early hiring choices generated compound returns through talent ecosystems. Former MELI employees became founders and investors, strengthening MELI’s reputation as a “talent factory” and attracting future high-potential hires. Organisations that treat employee development as ecosystem investment rather than pure cost can access better human capital at lower costs than competitors optimising for employee retention alone.

Continuous Beta

MELI operationalised continuous beta, treating everything as permanently improvable. The approach involved structured experimentation, fast testing systems, and institutional learning capture which prevented chaos and turned permanent iteration into a growth engine.

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Conclusion

Episodes 10–19 reveal how MELI systematically built organisational capabilities that compound. Talent, regulatory navigation, and global learning created a self-reinforcing system.

MELI’s success lies in shifting from marketplace to platform mindset, treating every challenge as a platform extension opportunity. Payments, logistics, and credit were not side bets but integral expressions of this philosophy.

For investors, the key takeaway is that MELI’s moat extends beyond financials into institutionalised innovation systems. For business leaders, the lesson is to build organisations that convert external shocks into enduring advantages.

This is Part 2 of a three-part series on the climbers & scalers podcast. The final installment will cover MELI’s global expansion philosophy and long-term positioning.

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Wolf of Harcourt Street

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