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.

10 AI-proof SaaS 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.

And now, SaaS is in peak pessimism due to AI-led disruption.

Rebound Capital has identified 10 AI-proof SaaS companies with deep moats in steep drawdowns.

Wolf of Harcourt Street readers can now unlock their exclusive 24-page AI-proof stock report for free!

Download the Report [Free]

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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.

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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.

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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

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

3 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!

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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.

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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.

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Wolf of Harcourt Street

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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.

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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?

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Wolf of Harcourt Street

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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

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.

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

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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.

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Wolf of Harcourt Street

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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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Wolf of Harcourt Street

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Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

• 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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Twitter: @wolfofharcourt

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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Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

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

Start Survey

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:

Start Survey

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.

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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Happy investing

Wolf of Harcourt Street

Contact me

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.

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Wolf of Harcourt Street

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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.

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

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

InPost (INPST)

I added to my position after the stock dropped 13% following its Q2 earnings report. I shared a full analysis below, but in summary: the company reported solid results. The market reacted negatively because INPST prioritised strategic investment for future dominance, primarily front-loaded integration costs from the Yodel acquisition, which came at the expense of near-term profit and resulted in weaker net earnings despite beating on revenue.

Since earnings, INPST has continued executing on UK expansion with two notable partnerships:

• 536 Aldi stores now feature INPST parcel lockers (with a target of 600+ by year-end).

• UK Post Office trial: pick-up and drop-off lockers at hundreds of branches. If successful, INPST could tap into the full 15,000-branch network, a potential game changer for density.

Mercado Libre (MELI)

I added to my position after the stock sold off indiscriminately with all Argentinian ADRs following the Buenos Aires provincial election, where President Milei’s party was defeated. The national election is this month. Milei’s party is pro-capitalism, which can be viewed as a positive for MELI.

That said, he has been in power for 2 years, while MELI has been around for 25. Political shifts that may harm the entire market will hit sub-scale players more than MELI. If you listened to the recent climbers & scalers podcast with MELI’s founders, you know this company is built to thrive during adversity. You can read my key insights below.

Execution highlights this month:

• Mercado Pago hits 1M POS terminals in Mexico (doubling since Sept 2024). Its network now rivals the entire traditional banking ecosystem (1.4M terminals), driving inclusion in a country where ~40% remain unbanked.

• Launched Mercado Libre Negocios, a wholesale platform for entrepreneurs, companies, and governments to buy in bulk with ease, security, and better pricing.

• Launched Dr. Virtual in Argentina, a new digital health service offering unlimited 24/7 tele-consultations and access to specialists like psychologists, nutritionists, and dermatologists, all from your phone.

• Acquired Brazilian firm Nikos, allowing Pago to structure and distribute fixed-income securities, funds, and third-party products while growing AUM. This is its first acquisition in Brazil and marks a shift from its usual build-in-house approach.

Rubrik (RBRK)

I added to my position after the stock fell 20% following its Q2 FY26 earnings report. This is a new position I initiated in August, and the stock had already run up by a similar amount into earnings.

In summary, RBRK posted a fantastic quarter, beating guidance and raising full-year expectations. Despite accelerating overall revenue growth, the market focused on a minor deceleration in Subscription ARR. As I noted, the company shifted from half-yearly to annual sales comp plans at the start of FY26. This means Q2 and Q3 should now look more alike, without the Q2 accelerator seen in prior years. Q4, however, is projected to be seasonally strong, which I believe the market overlooked.

Another observation: RBRK’s valuation reset sharply in one month. When I shared my initial pitch at $83, an inverse DCF implied a 37% growth rate. With revenue growth, four consecutive quarters of positive FCF, and the stock now at $74, the implied growth rate dropped to just 27%. That’s a much more reasonable expectation given revenue growth and margin expansion ahead. A company at an inflection point can make premium valuations look not so premium very quickly.

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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

• Q3: +1.2% vs. S&P +7.8%

• YTD: +23.4% vs. S&P +13.7%

Top Contributors YTD:

1. NIO: +75%

2. SE: +68%

3. UBER: +62%

4. NU: +55%

5. MELI: +37%

Largest Detractors:

1. INPST: -28%

2. TXN: -2%

3. AMZN: 0%

Buy List

Rubrik (RBRK)

If RBRK remains below $80, I will continue to accumulate shares aggressively and build this into a substantial position faster than usual, given the cash position I am sitting on. While the stock is not cheap, I believe it is not as expensive as it might initially appear. It remains one of the most attractive high-growth software businesses on the market today.

Visa (V)

I built my initial position in Visa about a year ago at 25x forward earnings. The stock was in a mini drawdown at the time following news that the U.S. Justice Department alleged Visa illegally monopolised the U.S. debit card market. These types of lawsuits happen periodically, and if any company is built to handle an antitrust inquiry, it is Visa.

The investment has worked out well, beating the market by a decent margin. With the stock now trading at 27x forward earnings and holding just a 3% weight in my portfolio, it might be time to add more shares in what I view as a very low-risk investment.

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In Case You Missed It

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

Final Words

This has been another strong quarter, and year so far, for the portfolio. I am very satisfied with the results. I have consistently beaten the market over several years, but what I am most proud of is achieving this with what I consider a moderate-risk portfolio

As we know, anyone can outperform in a bull market by simply loading up on high-beta, high-risk names. My outperformance has been achieved by sticking to a consistent strategy and avoiding hype-driven stocks that often overlook downside risks. Some of the best-performing stocks of the year so far, SE, UBER, NU, and MELI, were companies I highlighted at the end of 2024. These businesses all share one important trait: they are platform businesses with structural advantages, which is a cornerstone of My Investment Philosophy. They are profitable, growing faster than the market, and continue to benefit from operating leverage.

Despite this outperformance, I remain cautiously optimistic about the future. I am holding a 4.6% cash position and plan to increase it over the next month or two, while reducing my total holdings to 15 (from the current 16) to align with my maximum target allocation.

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.

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Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

I have followed the company for many years, so this release got me very excited. And I was not disappointed. Very early into the first episode, I realised I needed to sit down with a pen and paper to take notes. Each podcast is so rich in detail that I decided to write a three-part series sharing my key learnings and insights.

These insights fall into two categories: company-specific takeaways that reframe MELI’s competitive advantages, and universal business principles that apply across all organisations. Even if you are not interested in MELI, there are lessons every investor can apply to their own universe. Part 1 covers episodes 1 to 9.

Mercado Libre-Specific Insights

Platform-First

The most striking revelation from Chief Operating Officer Dani Rabinovich concerns MELI’s fundamental technology philosophy. His assertion that “we are not a technology company, we are a product company” may sound counterintuitive for a firm trading at technology multiples. Yet this distinction reveals a deeper insight: MELI’s technology exists only to solve user problems, never as an end in itself.

This philosophy manifested most dramatically during the “Ground Zero” project, when MELI rebuilt its entire platform from scratch while being a public company, spending nearly two years without releasing new features. The courage to prioritise scalability over short-term metrics explains their current ability to handle massive transaction volumes that would have been impossible with their original architecture.

The transition from closed, monolithic systems to open, loosely coupled platforms enabled both technological and organisational scaling. Rabinovich noted that “the hiring curve looks completely flat for 10–13 years, and starts an exponential curve since we finished New World.” This connection between technology architecture and human capital efficiency is rarely discussed, yet it is critical for understanding MELI’s operating leverage.

The Amazon Paradox

Perhaps the most counterintuitive insight comes from Rabinovich’s assertion that “Amazon was the best thing that ever happened to us.” While conventional analysis views Amazon’s Latin American presence as a threat, MELI’s leadership suggests the opposite. Competing against Amazon forced MELI to pursue operational excellence that might not have emerged otherwise.

This explains MELI’s seemingly irrational investments in logistics infrastructure that analysts often questioned. By benchmarking every operational decision against Amazon, MELI created an internal discipline rare among Latin American companies. As former CFO Pedro Arnt emphasised, the “build to scale” mentality requires designing every system for 100x growth if you want to compete with global leaders.

Network Effects

Rabinovich’s tennis metaphor, “to win Wimbledon you have to beat everyone, not almost everyone,” illustrates why MELI has maintained market leadership despite well-funded competitors. Network effects are winner-take-all. Second place has little value.

This insight explains MELI’s aggressive market share defense and willingness to sacrifice short-term profitability for dominance. Their strategy prioritises position over immediate returns, recognising that in network-effect businesses, being number two is close to being irrelevant.

Learning From eBay

The partnership with eBay provided MELI with an invaluable case study of what not to do. Former CFO and COO Hernán Kazah described the “Lake Como moment” when eBay shifted from startup mentality to corporate complacency. That lesson continues to influence MELI’s culture today.

Arnt’s observation that “Amazon should never have happened the way it did, if eBay had done things right” reflects MELI’s deep understanding of competitive dynamics. The company learned that technical superiority and market position mean nothing without continuous innovation and user focus. This underpins their perpetual beta mentality, even as market leader.

Talent Philosophy

The Sole Dematteo mobile app story reveals MELI’s approach to talent development. Instead of punishing employees who built competing products, management acquired the application and promoted its creators. This unconventional response rewarded initiative while building loyalty and capturing innovation.

Rabinovich’s hiring philosophy, preferring problem-solvers over domain experts, explains MELI’s success in new verticals. Adaptability is prioritised over narrow expertise, which is essential for a platform expanding across multiple business lines.

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Universal Business Principles

Obsession

The most powerful universal insight concerns sustainable competitive advantage. Rabinovich distinguishes between those who “like to have read” and those who “like to read.” The latter embodies obsession, which drives excellence.

He cites guitarist Paco de Lucia’s 12-hour daily practice as an example of obsession translating into mastery. Companies that enable employees to channel this kind of drive into their work will outperform those optimising only for balance.

Rabinovich’s “journey versus destination” mentality, described through his tango practice, underscores the value of enjoying the process of improvement. Teams that thrive on progress rather than outcomes sustain performance longer.

Communication

The 80-15-5 communication framework, 80% smooth operations, 15% tension, 5% rough discussions, offers a practical approach to team dynamics. High-performing groups require occasional conflict to maintain standards while preserving relationships.

Sole Dematteo’s testimony about working with Rabinovich confirms the framework’s effectiveness. By ensuring that criticism targets ideas, not people, MELI fosters direct communication and faster resolution.

Focus

Hernán Kazah’s insight that “good management is excluding, it’s leaving out” highlights the importance of saying no. In environments with infinite opportunities, success depends more on what you avoid than what you pursue.

This discipline was evident during the dot-com crash when MELI closed its Miami offices despite ample capital. Focus enabled survival.

Exponential Thinking

Kazah’s Stanford experience, which exposed him to thinkers who “disrespected the linear process and encouraged exponential thinking,” reveals why MELI designed for scale from day one.

Rather than expanding gradually, MELI launched as a regional player, reflecting the mental model of exponential leaps over incremental steps.

Paranoia and Happiness

Rabinovich’s claim that “paranoid can be extremely happy” challenges traditional leadership wisdom. He distinguishes clinical paranoia from operational paranoia, the constant drive to improve and fix problems.

Happiness, in this view, comes from enjoying improvement itself. Teams that thrive on identifying weaknesses rather than avoiding them build durable competitive advantages.

Ecosystems

The move from closed to open systems reflects not just technology but business philosophy. When companies position themselves as platforms that empower others, they create ecosystems that scale beyond their direct control.

This principle extends beyond tech. Any business that enables third-party success while capturing value gains an edge over vertically integrated competitors.

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Conclusion

The climbers & scalers podcast highlights how Mercado Libre’s success comes from principles that challenge conventional business wisdom. Their emphasis on long-term thinking over quarterly optimisation, obsessive improvement over outcome celebration, and systematic paranoia over comfort offers a blueprint for enduring competitive advantage.

For investors, this suggests MELI’s premium valuation reflects more than financials, it represents systematic advantages in decision-making, talent, and strategy that compound over time. For business leaders, it offers practical frameworks for building cultures that sustain growth over decades.

Without MELI’s use of AI voice cloning, English speakers like myself would not have been able to enjoy this masterpiece. We are lucky to have access.

This article is Part 1 of a three-part series on key insights from the climbers & scalers podcast. Future installments will cover MELI’s expansion strategies and fintech evolution.

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!

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Happy investing

Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

This is an enormous engine for revenue growth, and it got me thinking: What could Nu’s revenue look like in 2030 simply from existing customers maturing, without adding a single new customer?

Customers by Cohort

The starting point for my analysis was Nu’s 123 million customers as of Q2 2025. By reviewing quarterly filings, I calculated the net new customers added each quarter and grouped them into cohorts by months since origination. For example, all customers added in Q1 2025 fall into the 2–12 months since origination bucket.

One thing really stood out: 66% (81 million) of Nu’s customers joined within the past four years or less. This shows not only how young most of Nu’s customer base is, but also how under-monetised it remains. At 48 months since origination, monthly ARPAC is just $10.90.

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Annual Revenue by Cohort

Using ARPAC and customer data by cohort, I estimated annual revenue at Q2 2025. It’s no surprise that customers with Nu for less than two years account for just 16% of total revenue despite representing 32% of total customers.

The more interesting point is that cohorts with 60+ months of tenure account for 55% of total revenue while representing only 34% of total customers. The longer a cohort stays, the more valuable it becomes. Nu’s extremely strong retention rate allows it to consistently up-sell and cross-sell, supporting customers as they progress through their financial journey.

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The 2030 View

By maturing each cohort five years, we can forecast what the customer mix might look like in 2030. The shift toward late-stage cohorts is glaringly obvious: by 2030, 68% of customers will have been with Nu for 8+ years.

This maturation sets the stage for explosive revenue growth. With 84 million customers on track to generate $27.30 in monthly ARPAC, this group alone could produce $27.4 billion in annual revenue by 2030. In total, today’s 123 million customers could generate $37 billion in 2030 revenue, more than 3x the $11.5 billion reported in 2024.

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Conclusion

There are a number of caveats to this analysis that are worth pointing out if not already apparent. The first major one is the assumption that the existing ARPAC by cohort will continue into the future. There is no guarantee of this, as many factors influence this single data point. Conditions outside the company’s control, such as a global recession, could materially impact its ability to grow its credit portfolio, which has been the key driver of revenue growth in recent years.

This assumption also ignores the potential upside of ARPAC increasing for each cohort by 2030. In just one year, the mature ARPAC cohort has risen from $25 in Q2 2024 to $27 in Q2 2025. It is likely this figure will climb further by 2030, even from inflation alone, not to mention Nu’s ongoing launch of new products and services.

Another factor left out of this analysis is the impact of new customers. With a high degree of certainty, Nu’s customer base in 2030 will be larger than it is today. The company is adding roughly 4 million new customers each quarter, and while this growth rate will naturally slow as market penetration increases, it is highly probable that the customer base will keep expanding. The only scenario that could prevent this is an asteroid hitting Earth.

With all that being said, there is a credible path to a 3x increase in revenue by 2030.

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Wolf of Harcourt Street

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Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

• Customers with $100K+ in subscription ARR grew 27% YoY to 2,505 and now contribute 85% of total subscription ARR. Retention remains strong, with subscription NRR above 120%, driven by expanding data usage, adoption of additional applications, and rising demand for security functionality. Notably, 35% of NRR this quarter came from security feature adoption. CEO Bipul Sinha held over 125 customer and prospect meetings in Q2 FY26, underscoring strong engagement across industries. Wins included displacing both legacy vendors and next-gen competitors at Fortune 50 and Fortune 500 firms, government agencies, and global enterprises, often due to Rubrik’s faster recovery times, stronger cyber resilience, and lower costs.

• Rubrik delivered strong top-line performance with revenue of $310 million, up 51% YoY and above guidance, marking its fourth consecutive quarter of accelerating growth. Subscription revenue accounted for 96% of the total at $297 million, up 55% YoY, supported by a 36% increase in Subscription ARR to $1.25 billion. Non-recurring revenue tied to expiring material rights contributed about 7 percentage points to growth. Adjusted for this, revenue rose closer to 44% and the beat versus Wall Street narrowed from 10% to 5%.

• On profitability and cash flow, Rubrik showed clear progress despite remaining unprofitable. Operating loss narrowed to $95 million with operating margin improving to -30% from -82% a year ago, as operating expenses rose only 7% against 51% revenue growth. Rubrik also delivered $61 million in positive free cash flow, a sharp turnaround from negative $30 million last year, aided by early renewals, multi-year contracts, and refinancing high-cost debt with a 0% convertible. The main gap between operating losses and positive free cash flow stems from stock-based compensation of $88 million, which remains high but is trending lower as a percentage of revenue.

• Management raised guidance across all major metrics for Q3 and FY26. Full-year expectations now call for subscription ARR of $1.408–1.416 billion (+29–30% YoY), total revenue of $1.227–1.237 billion (+38–40% YoY, or +32–34% excluding material rights), and free cash flow of $145–155 million, more than double prior expectations. Non-GAAP EPS guidance also improved sharply to ($0.50) to ($0.44), versus earlier guidance of ($1.02) to ($0.96).

Contents

1. Financial Highlights

2. Wall Street Expectations

3. Business Activity

4. Financial Analysis

5. Guidance

6. Conclusion

1. Financial Highlights

• Revenue: $310 million (+51% YoY)

• Gross Profit: $246 million (+64% YoY)

• Operating Loss: ($94 million) vs ($164 million) YoY

2. Wall Street Expectations

• Revenue: $282 million (beat by 10%)

• EPS: ($0.74) (beat by 33%)

3. Business Activity

Customers with $100K+ in Subscription ARR

Rubrik’s customers with $100K or more in Subscription ARR reached 2,505, representing 27% YoY growth. These larger customers have become increasingly strategic partners, contributing 85% of total subscription ARR, up from 82% in the prior year.

Average Subscription-Based Net Retention Rate

Rubrik’s subscription Dollar-Based Net Retention Rate (NRR) remained above 120%, underscoring the strength of its land-and-expand model.

Expansion drivers included:

• Growing data within existing applications

• Securing additional applications or identities

• Adding more security functionality

Notably, 35% of subscription NRR came from adoption of additional security features this quarter.

Customer Wins

CEO Bipul Sinha noted he held 125+ meetings with customers and prospects during Q2 FY26, signaling strong market engagement. Highlights include:

• A major North American oil and gas company selected Rubrik after a cyber-attack exposed the limitations of its legacy backup provider. Rubrik was chosen for faster recovery times and simplified, comprehensive cyber recovery across workloads.

• A Fortune 50 pharma leader replaced a 20-year legacy vendor and cloud-native backup tools with Rubrik, citing greater cyber resiliency and lower cloud storage costs.

• A global Fortune 500 transportation company expanded its Rubrik investment, adding M365 protection for Azure, cold-based recovery for GitHub and Azure DevOps, and broader cloud protections. This enhanced cyber resilience and shortened recovery times.

• A Fortune 500 logistics firm expanded protection to Azure and M365 apps and added identity recovery functionality, reducing Active Directory and Entra ID recovery from weeks to hours. This potentially prevented $65 million in daily downtime losses.

• A leading U.K. financial services company consolidated data and identity protection with Rubrik after industry attacks raised concerns over Active Directory. Rubrik is now one of its top three IT vendors.

• A U.S. Fortune 500 financial institution adopted identity recovery after an audit showed seven-day recovery times for Active Directory. Rubrik reduced this to under two hours.

• A U.S. federal agency replaced a new-gen competitor to protect mission-critical databases, citing Rubrik’s faster recovery.

• A European multinational replaced a legacy vendor after a third-party audit flagged poor cyber-attack recovery readiness.

Rubrik continues to win the majority of deals against both legacy and new-gen competitors thanks to its Rubrik Security Cloud and preemptive recovery engine.

Product Expansion and Innovation

• Cyber Resilience and Cloud Data Protection: Expanded coverage for AWS RDS and DynamoDB, plus new protection for GCP and OCI. Rubrik now offers multi-cloud simplicity with a single pane for IaaS, PaaS, and SaaS workloads.

• Identity Resilience: Over 200 customers have adopted Rubrik’s Identity Recovery since launch. Rubrik remains the only vendor offering rapid recovery of both Active Directory and Entra ID in hybrid environments. The general availability of Rubrik Identity Resilience integrates data security context with identity intelligence.

• GenAI Acceleration: Acquired Predibase to enhance secure, efficient GenAI. Predibase specializes in fine-tuning AI models and optimizing inference. Rubrik also launched Agent Rewind, a solution that lets customers undo AI agent mistakes without full rollbacks, enabling safer large-scale AI adoption.

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4. Financial Analysis

Revenue

Total revenue for the quarter was $310 million, up 51% YoY. This exceeded management’s guidance and marks the fourth consecutive quarter of accelerating revenue growth.

Subscription revenue reached $297 million, a 55% increase YoY, and now accounts for 96% of total revenue. Growth was driven by strong Subscription ARR, which rose 36% YoY to $1.25 billion. Net new subscription ARR added in the quarter was $71 million. If we look for weaknesses in the report, this metric has decelerated for two consecutive quarters and is now growing slower than total revenue. So what else is driving growth?

A significant factor this quarter was non-recurring revenue from material rights, which added ~7 percentage points to total revenue growth, a few points above management’s expectations. Material rights relate to subscription credits offered to qualified customers with "Refresh Rights" in exchange for giving up their entitlement to next-generation Rubrik appliances at no cost. As these credits expired, customers either used them to purchase new products or let them lapse, impacting accounting treatment and driving variability.

Adjusting for this benefit, total revenue grew ~44%. While Rubrik beat Wall Street’s revenue estimate by 10%, excluding this non-recurring boost, the beat would have been 5%. This is important given Rubrik’s ongoing shift toward subscription-based offerings.

Gross Margin

Rubrik reported gross profit of $246 million, up 65% YoY, far outpacing revenue growth. Gross margin expanded to 80% from 73% a year ago.

Key drivers of margin improvement included:

• Revenue outperformance, including higher non-recurring revenue.

• Reduced hosting costs from new cloud contracts (including a one-time hosting credit).

• Improved efficiency in customer support.

Based on these factors, the margin expansion appears more one-off than structural.

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Operating Margin

Rubrik reported an operating loss of $95 million, an improvement from a $168 million loss YoY. Operating margin improved to -30% from -82% YoY, and from -33% in the prior quarter.

Despite still being in the red, these improvements show Rubrik’s ability to scale profitably over time. Total operating expenses increased only 7% YoY, compared to 51% revenue growth. Sales & Marketing (S&M) remains the largest expense, accounting for more than half of total opex. S&M expenses rose just 8% YoY, reducing the S&M ratio from 82% to 59%. These ratios should continue trending downward as the business matures.

Another encouraging sign is the Subscription ARR Contribution Margin, which reached 9.4% over the past 12 months, up from (8.2%) YoY. This ~1,800 basis point swing highlights operating leverage, a metric management views as critical in its cloud transformation.

Cash Flow

Rubrik turned free cash flow (FCF) positive, generating $61 million compared to ($30 million) YoY. FCF margin improved from -14% to 20%, marking the fourth straight quarter of positive FCF.

Key drivers included:

• Early renewals, including multi-year contracts, often co-termed with customer expansions.

• Capital structure optimisation, where Rubrik refinanced higher-cost private debt with a 0% convertible, boosting cash and reducing interest expense.

The gap between negative operating margin and positive FCF is largely due to stock-based compensation (SBC). Rubrik recorded $88 million in SBC, down from $105 million YoY, reducing SBC as a share of revenue from 51% to 29%. While still high, this was inflated by IPO-related equity awards and should moderate over time.

As a result of SBC, weighted-average shares outstanding rose 8% YoY to 195 million. In other words, shareholders from 12 months ago now own 8% less of the company. However, with shares up over 200% during the same period, most investors are unlikely to complain.

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5. Guidance

Rubrik’s strong quarter led management to raise guidance across several metrics.

Q3 FY26

• Revenue: $319–321 million (+35–36% YoY), including a slightly higher material rights benefit.

• Subscription ARR contribution margin: 6.5%, seasonally lowest in Q3 due to expense timing and Predibase integration.

• Non-GAAP EPS: ($0.18) to ($0.16).

• Weighted-average shares outstanding: 200 million.

Full Year FY26

• Subscription ARR: $1.408–1.416 billion (+29–30% YoY), raised 2% from prior guidance.

• Total Revenue: $1.227–1.237 billion (+38–40% YoY, or +32–34% ex-material rights), raised 4% from prior guidance.

• Subscription ARR contribution margin: 7.0%, raised 100 bps from 6.0%.

• Non-GAAP EPS: ($0.50) to ($0.44), up sharply from prior ($1.02) to ($0.96).

• Weighted-average shares outstanding: 197 million, improved from 198 million prior.

• Free cash flow: $145–155 million, more than double prior guidance of $65–75 million.

Wall Street FY 26 estimates:

• Revenue: $1.217 billion

• Non-GAAP EPS: $(0.97)

Given the beat-and-raise quarter, analysts will likely revise estimates higher, continuing the quarterly trend since Rubrik went public.

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6. Conclusion

This was the first earnings release from Rubrik that I observed as an investor. I pitched the stock as a new idea in August, and it had run hot into this report, up almost 20% in less than a month. After the sell off yesterday, it’s back to where it was a month ago. In the Rubrik Quick Pitch link below, you will find my original investment thesis if you missed it.

Appraising management can be difficult and subjective, but one approach I use is comparing what management say they will do to what they actually deliver. In this quarter, Rubrik handsomely exceeded all guided metrics and raised forward guidance.

While it is hard to find fault in this report, there are some structural improvements and temporary tailwinds that merit attention.

Exceptional Free Cash Flow Performance (with a caveat): Rubrik’s 20% FCF margin is a standout metric despite the impact of SBC. The quarter benefited from favorable contract duration and more early renewals, including multi-year contracts often co-termed with active customer expansions. While positive for current cash flow, these timing benefits may not be consistently repeatable at the same magnitude in future quarters. Understanding the one-time vs. recurring nature of these drivers is crucial for projecting future FCF quality.

Non-Recurring Material Rights Revenue Tailwind: Q2 revenue was boosted by strong ARR growth, the cloud transformation journey, and higher non-recurring revenue accounted for as material rights. These contributed roughly 7 percentage points to revenue growth this quarter. Investors should strip out this non-recurring benefit when modelling organic revenue growth. While positive now, this tailwind will disappear in FY27, making YoY comparisons tougher and potentially slowing reported revenue growth. Subscription ARR growth is the more sustainable top-line indicator, though it showed minor deceleration.

Sales Compensation Changes and Seasonality Shift: Rubrik moved from half-yearly to annual sales compensation plans at the start of FY26. As a result, Q2 and Q3 should look more alike in terms of net new ARR contribution, without the Q2 accelerator seen previously. Q4, however, is projected to be seasonally strong, meaning investors should adjust quarterly expectations and watch closely how the new structure impacts Q4 performance.

While Rubrik trades at a premium valuation on conventional metrics, this may prove less demanding if the company continues to execute its beat-and-raise playbook over the coming quarters. With a differentiated platform, high win rates in cyber resilience, and a clear vision to evolve into a security and AI company, Rubrik’s long-term story is just beginning.

Rating: 4 out of 5. Exceeds expectations.

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Wolf of Harcourt Street

Contact me

Twitter: @wolfofharcourt

Email: wolfofharcourtstreet@gmail.com

• InPost delivered 324 million parcels, up 23% YoY, continuing to outpace e-commerce market growth across its core regions. In Poland, volumes rose 6% to 181 million, the slowest rate since the 2021 IPO, though diversification was evident with non-marketplace parcels up 17%. In the Eurozone, volumes increased 10% to 78 million, driven by B2C growth and 59% YoY APM adoption. The UK was the standout, with volumes up 177% to 65 million, largely due to Yodel’s integration. On a pro-forma basis, growth was 24% against a contracting market.

• InPost achieved record network expansion in Q2 2025, cementing its position as Europe’s leading OOH delivery provider. The total network grew 20% YoY to over 88,000 points, with APMs up 31% to 53,287. For the first time, international lockers surpassed those in Poland. Alongside organic expansion, InPost advanced internationally through acquisitions and partnerships. The Yodel integration has made the UK InPost’s second-largest market, while the Sending acquisition in Iberia adds full-service logistics capabilities. A minority stake in Bloq.it supports further growth, with battery-powered lockers enabling flexible deployment, 2,000 targeted by end-2025 and 20,000 within five years.

• Revenue rose 35% YoY to PLN 3.5 billion, with more than half now coming from outside Poland, highlighting the success of international expansion. In Poland, revenue increased 7% to PLN 1.7 billion, supported by repricing and a favorable parcel mix. The Eurozone grew 10% to PLN 885 million, driven by cross-border and to-door deliveries. The UK stood out with a 303% surge to PLN 954 million, now accounting for 27% of Group revenue, thanks to Yodel’s consolidation and network growth. International operations are boosting unit prices, with average revenue per parcel rising to PLN 10.91 from PLN 9.92 a year earlier.

• Adjusted EBITDA increased 13% YoY to PLN 1.0 billion, with a 28% margin, or a record ~35% margin excluding Yodel. Poland remained the standout, with EBITDA up 12% and margins improving to 49% on better cost control and mix shift. However, Group profit per parcel fell 8% to PLN 3.08, with a 25% international decline reflecting the trade-off between rapid expansion and near-term profitability. Net profit dropped 60% YoY to PLN 133 million, as integration costs, higher depreciation, financing expenses, and FX impacts outweighed operating gains. Management emphasised these headwinds are front-loaded and tied to Yodel integration, rebranding, and automation, with profitability expected to normalise by Q2 2026 as synergies take hold.

Contents

1. Financial Highlights

2. Wall Street Expectations

3. Business Activity

4. Financial Analysis

5. Guidance

6. Conclusion

1. Financial Highlights

• Revenue: PLN 3.53 billion (+35% YoY)

• Adjusted EBITDA: PLN 1.00 billion (+13% YoY)

• Operating Profit: PLN 382 million (-21% YoY)

2. Wall Street Expectations

• Revenue: PLN 3.47 billion (beat by 2%)

• Net Profit: PLN 303 million (miss by 56%)

3. Business Activity

Parcel Volume

InPost delivered 324 million parcels, a 23% YoY increase.

This growth once again outpaced the general e-commerce market across its key regions.

Poland

Parcel volumes grew 6% YoY to 181 million, slightly above the local market growth of 5%. However, this marked the third consecutive quarter of deceleration and the slowest growth rate since the 2021 IPO. Growth was driven primarily by a 17% YoY increase in non-marketplace volumes, highlighting successful diversification.

The company added about 2,500 new merchants YoY, bringing the total to over 55,000. These merchants contributed more than half of the non-marketplace growth.

Management noted a wave of attempted delivery preference changes on marketplaces in Q2 2025. For Allegro, most parcels were redirected to Allegro OneBox. Over 30% of Allegro volume was initially subject to these changes, with more than 80% of redirections going to Allegro OneBox and smaller portions to Orlen and DHL. Despite this, the estimated impact on InPost’s Q2 2025 volume was less than 2%, thanks to a loyal user base.

InPost Pay expanded to more than 9 million registered users and integrated with over 2,400 merchants by Q2 2025. The loyalty program grew to 12.4 million users, adding about 14 million incremental parcels since launch. NPS remains strong at 50 for merchants and 77 for customers, well ahead of competitors. Heavy users who order from more than 10 or 20 shops drive a significant share of Automated Parcel Machine (APM) volume.

Eurozone

Volumes increased 10% YoY to 78 million, double the e-commerce market growth of 5%. Growth came mainly from a 27% YoY increase in B2C, now 49% of total Eurozone volumes.

APM adoption continued to rise, with APM volumes up 59% YoY, while PUDO volumes declined after a strategic cut in pick-up points. Mobile app downloads reached 4.9 million, with launches planned in Spain (Q4 2025) and Italy (2026).

UK

The UK delivered the fastest growth, with volumes up 177% YoY to 65 million. This surge was largely due to the integration of Yodel in May and June 2025. On a pro-forma basis, organic UK volumes grew 24% YoY, far above the market decline of -1%.

With Yodel, to-door and B2C volumes now represent over 50% of UK volume, creating a major opportunity for Out-of-Home (OOH) conversion. InPost already holds the highest NPS among UK peers. A pilot program redirecting Yodel parcels to InPost APMs has been launched to accelerate OOH adoption.

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Network Development

InPost achieved record expansion in Q2 2025, reinforcing its position as Europe’s OOH delivery leader. The OOH network grew to 88,000+ points, up 20% YoY from 73,636. APMs reached 53,287, up 31% YoY from 40,671. For the first time, international APMs outnumbered those in Poland.

• Poland: The APM network expanded to 26,807 units (14% YoY growth), equal to about 70% market share. Pick Up Drop Off (PUDO) points declined slightly by 1% to 3,830.

• Eurozone: APMs rose 59% YoY to 15,392, while the broader OOH network reached 40,459 points (10% YoY growth). PUDO declined 7% YoY to 25,067 as focus shifted toward lockers. APM share of OOH volumes rose to 43% from 28% a year earlier.

• UK: PMs surpassed 11,000, a 48% YoY increase, with +3.6k added in 12 months (about 85 per week in Q2). Coverage now reaches over 50% of the UK population, and in the top three cities, 75% of residents are within a 7-minute walk of an InPost OOH point. PUDO points increased 175% YoY to 5,866.

Acquisitions and Partnerships

Management described 2025 as a year of strategic acquisitions and investments to strengthen InPost’s international reach.

• Yodel (UK): Integration was a key milestone, boosting UK volumes and making the market InPost’s second largest. Work continues on last-mile upgrades, process alignment, and depot consolidation (16 closed so far), with completion expected in 2026.

• Sending (Iberia): Acquired in July, this Spanish to-door logistics company adds a full-service offering in Iberia, including OOH, to-door, fulfillment, and cross-border solutions, along with valuable merchant relationships.

• Bloq.it (Battery-powered APMs): InPost took a minority stake in Bloq.it, whose lockers require no infrastructure or solar panels and last 6–12 months on battery power. Plans call for 2,000 new lockers by end-2025 and 20,000 within five years, enabling deployment in previously hard-to-reach urban areas.

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4. Financial Analysis

Revenue

InPost’s revenue reached PLN 3.5 billion, a substantial 35% YoY increase. Notably, more than half of the Group's Q2 2025 revenue was generated outside Poland, underscoring the success of its international strategy.

Poland

Revenue in Poland grew 7% YoY to PLN 1,694 million in Q2 2025. This outpaced parcel volume growth, supported by single-digit repricing and a favorable shift in volume mix.

Eurozone

Revenue rose 10% YoY to PLN 885 million in Q2 2025, or 11% YoY in local currency. Performance was driven by a favorable volume mix, including more cross-border and to-door deliveries, partly offset by higher returns.

UK

The UK posted the strongest growth, with revenue surging 303% YoY to PLN 954 million in Q2 2025. This made the UK the Group’s second-largest revenue contributor at 27% of total sales. Growth was fueled by the Yodel consolidation and continued network expansion.

There is a clear gap in average revenue per parcel (RPP) between Poland and international markets. In Q2 2025, Poland’s RPP was PLN 9.36 (up from 9.27 in Q2 2024). Internationally, RPP reached PLN 12.85 (up from 11.11). As a result, the Group’s average RPP rose to PLN 10.91 from 9.92 a year earlier, reflecting the strategic shift toward higher-priced international services.

Adjusted EBITDA

Adjusted EBITDA increased 13% YoY to PLN 1.0 billion in Q2 2025, with a margin of 28%. Excluding Yodel, the Group achieved a record-high margin of ~35%, a 120 bps YoY increase.

Poland

Adjusted EBITDA grew 12% YoY to PLN 83 million, with margin up 220 bps to 49%. Gains came from effective cost-per-parcel management (-2% YoY) and a greater share of non-marketplace volumes.

Eurozone

Adjusted EBITDA rose 7% YoY to PLN 145 million, with margin steady at 16%. Adoption of APMs reduced cost-per-parcel, though this was partly offset by higher SG&A expenses in sales and IT.

UK

Adjusted EBITDA increased 44% YoY to PLN 48 million. However, margin fell to 5% (down 920 bps YoY) due to transitional Yodel consolidation impacts. Excluding Yodel, the core UK business achieved a record-high margin above 20%.

Using Adjusted EBITDA as a proxy for average profit per parcel (PPP) shows that the Group's average PPP declined by 8%, from PLN 3.36 in Q2 2024 to PLN 3.08 in Q2 2025. The International segment saw a 25% decrease, falling from PLN 1.80 to PLN 1.35. This sharp decline reinforces the narrative of aggressive international expansion and the impact of the Yodle acquisition, which added significant volume but also brought initial losses in the UK. In contrast, Poland's average PPP increased by 5.7%, from PLN 4.36 to PLN 4.61. This highlights the continued strength and efficiency of InPost's mature Polish market.

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Net Profit

Net profit from continuing operations was PLN 133 million, a 60% YoY decline (vs PLN 336 million in Q2 2024). The margin dropped to 4%, down from 13% a year earlier.

This sharp decline occurred despite Adjusted EBITDA growth and caught the market off guard, with consensus estimates more than double the actual result. The drivers included:

• Heavy investments in international expansion (notably Yodel)

• Integration and restructuring costs

• Higher depreciation and amortisation

• Adverse FX movements

Depreciation and amortisation rose to PLN 528 million (from 354 million) due to Yodel consolidation, APM network expansion, and automation.
Net financial costs increased to PLN 130 million (from 74 million), driven by higher interest expenses and unrealized FX losses. A stronger PLN against the EUR also weighed on intercompany loan valuations at the Luxembourg parent level.

Additional non-cash and one-off costs also pressured results:

• Incentive programs: PLN 17 million (vs 1 million in Q2 2024)

• Restructuring: PLN 41 million (vs 23 million) from UK integration and Yodel

• M&A costs: PLN 7 million (vs 1 million)

Management noted these costs are front-loaded, tied to rebranding, operational rationalisation, and redundancies.

While the accounting impact is severe, the underlying operations remain solid. InPost is absorbing integration costs now, while benefits will accrue over the next several quarters. Management expects net profit margins to recover to pre-acquisition levels by Q2 2026.

Cash Flow

In H1 2025, InPost delivered positive free cash flow (FCF) of PLN 54 million, despite elevated Capex. However, in Q2 alone, FCF was negative PLN 9 million, compared to positive PLN 154 million in Q2 2024, reflecting intense investment activity.

Total Capex in Q2 2025 was PLN 471 million (+38% YoY). For H1 2025, Capex reached PLN 812 million (+38% YoY). Roughly 60% of FY 2025 Capex (~PLN 1.9 billion) is earmarked for APM production and deployment.

• Poland: Generated strong FCF of PLN 477 million, a 170% YoY increase, with FCF-to-EBITDA conversion of 57%.

• International: Recorded negative FCF of PLN 421 million, reflecting heavy upfront investment in network buildout, operations, and IT.

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5. Guidance

Management provided an updated outlook for FY 2025 and a trading update for Q3 2025, which includes revisions to prior guidance.

Parcel volume growth in the high 20s percent range for FY 2025 (+25–30% YoY).

• High single-digit growth in Poland.

• Mid-double-digit growth in Eurozone markets.

• UK volumes to almost triple, driven by Yodel consolidation and APM expansion.

Revenue growth in the high 30s percent range for FY 2025 (+35–40% YoY).

Adjusted EBITDA increase in the low to mid-20s percent range (+20–25% YoY). Overall margin will be lower YoY due to the rising share of UK operations.

• Poland margins at a high 40s level.

• Eurozone margins higher YoY due to core business profitability, slightly offset by Sending consolidation.

• UK margins temporarily lower YoY due to Yodel consolidation.

Management also plans to accelerate deployment of 15,000 new APMs across all markets.

In summary, guidance reflects dynamic market conditions and the push for international expansion, particularly the impact of Yodel and continued network rollout. While these investments weigh on margins and cash flow in the short term, underlying profitability in Poland and the Eurozone remains strong, and international growth is accelerating.

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6. Conclusion

Having reviewed countless earnings reports over the years, InPost’s Q2 2025 results tell a familiar story: strategic investment for future dominance at the expense of near-term profit.

The company delivered robust growth with group volume up 23% and revenue up 35% YoY. For the first time, more than half of revenue originated from its international business, underscoring the success of diversification efforts. Adjusted EBITDA reached PLN 1 billion. However, reported net profit fell sharply, down 60% YoY, reflecting front-loaded integration costs from the Yodel acquisition, along with higher depreciation and amortisation from aggressive network expansion and acquisitions.

Management reiterated confidence in restoring profit margins to pre-acquisition levels by Q2 2026. Strong underlying performance in Poland (49% Adjusted EBITDA margin) and across the Eurozone suggests these short-term sacrifices are the foundation for long-term leadership and profitability. Mature margins in Poland hint at what could be achieved as international operations scale, which is the key reason investors should remain excited about InPost.

Taking a step back, InPost is clearly executing a consumer-centric strategy, built on brand loyalty, innovative technology, and a measurable unit cost advantage that enables rapid pan-European expansion:

• Loyalization as a Core Asset: Management views loyalization as the company’s real asset and the foundation of growth, profitability, and long-term leadership. This is a sharp contrast to traditional logistics providers that prioritize B2B relationships. The metrics are striking: APM NPS of 77, an internal NPS of 96, and 14.6 million loyal app users who represent over 70% of APM customers and drive roughly 80% of total volume. These users are highly engaged, and their loyalty is a competitive edge.

• Innovative Network Expansion via Battery-Powered APMs: InPost’s minority investment in Bloq.it, a battery-powered APM technology company, is described as an “offensive play.” This removes infrastructure and solar panel constraints, unlocking highly attractive yet previously inaccessible urban locations in the Eurozone and UK. Deployment costs also fall significantly. InPost plans to roll out 20,000 units in the next five years, with 2,000 scheduled for this year.

• Focus on Out-of-Home Conversion: The Yodel acquisition is not about building a traditional to-door business in the UK. Instead, the strategy is to convert existing to-door volume into APM deliveries, which offer both higher customer satisfaction and lower costs. Integration has been swift, with logistics networks being consolidated into “one network,” operational discipline tightened, and 16 depots closed since the deal.

• Quantifiable Unit Cost Advantage: InPost highlights the significant unit cost gap between APM and to-door delivery. In Poland, APM is roughly 30% cheaper; in the UK, the gap is 20–25%. This structural cost advantage fuels the company’s aggressive rollout and provides confidence in its ability to disrupt mature markets. It not only supports competitive pricing but also strengthens profitability as volumes scale.

InPost is prioritizing market disruption and customer loyalty over short-term profitability. While this approach depresses earnings today, history shows that such strategies often lay the groundwork for outsized long-term success. Encouragingly, InPost’s organic growth already outpaces market growth in every region where it operates.

After falling 13% following the earnings, the stock now trades at a forward EV/EBITDA multiple of just 6. The implied expectations are consequently very undemanding, and with the business less reliant on Allegro due to its diversification efforts, the residual risk feels more than compensated for. From here, not much has to go right for the stock to perform.

Rating: 3 out of 5. Meets expectations.

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Wolf of Harcourt Street

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