LT Weekly: Nov 6, 2026

It was an onslaught of earnings across the sector this week with 79 companies in our LionTree Universe releasing their Q3 numbers (up from 30 last week). Similar to last week, stock reactions were biased to the downside, as 44 companies (56%) traded down after results, while 35 companies (44%) traded up. The worst performer was MNTN, which fell -55% post-earnings, and the best performer was Gogo, up +72%.

Closing out Big Tech earnings was Apple, which fell -2% (see Theme #4), and similarly closing out digital advertising was Snap, which fell -14% post its print (see Theme #7). It was a mixed week for the OTAs, with Booking up +10% while Expedia fell -14%, though Airbnb was up +12% (see Theme #9). Other key prints from this week included DraftKings, which fell -9% (see Theme #8), Shopify, down -9% (see Theme #6), Charter, down -6% (see Theme #3), Uber, down -5% (see Theme #10), Live Nation, down -3%, (see Theme #5) and Fox, down -1% (see Theme #2).

The table below includes select mid- and large-cap TMT and consumer companies in our LionTree stock universe that reported this week.

Fox brought some rays of light for the media sector this week with its better-than-expected FQ1 results as the 2026 FIFA Men’s World Cup, a record midterm political cycle, and continued Tubi and FOX One momentum drove beats across every headline metric (total revs +5.8% ahead, adj EBITDA +20.7% ahead, and adj EPS +22.1% ahead).

Our Top 5 key takeaways from results include: 1) Total ad revenue growth of +47% y/y with TV advertising up +60% y/y on the World Cup and political… and that positive momentum has carried into this qtr thus far; 2) Political ad revenue across Fox has surpassed $350mn this cycle, “a record for a mid-term cycle” (though there has been some News fatigue); 3) Including FOX One, Fox saw POSITIVE subscriber growth for the trailing 12 months, with ~97% of new FOX One subs not having a cable subscription (however this may not sustain seasonally); 4) Tubi grew rev +35% y/y on a +23% increase in total view time, with mgmt reiterating a ~20% margin at maturity; and 5) Fox has secured all shareholder and foreign regulatory approvals for the Roku deal, with DOJ HSR clearance still outstanding.

All in all, it was a strong quarter with momentum in many KPIs sustaining as we look into FQ2. See below for more of what we viewed as most important from FOX’s results.

-> FOX shares were down -0.8% following its earnings report; YTD, the stock is down -8.4%

-> Roku reported strong Q3 this week as well w/ adj EBITDA 55% ahead of the Street and revenue 6.3% ahead (both Platform& Device came in ahead); Streaming hours at 39.9bn, slightly beat cons 39.8bn and rose +9.3% y/y

Fox Posts A Record FQ1 Beat Across The Board

• Revenues BEAT cons by +5.8%: Grew +22% y/y to a FQ1 record
  • Driven by a +47% y/y surge in ad revs (World Cup, political, and Tubi), +9% distribution rev growth (cable +10%, TV +4%), with content & other rev roughly flat (-1% y/y) as lower entertainment content rev was partially offset by higher sports sublicensing

• Adj EBITDA BEAT cons by a large +20.7%: Grew +54% y/y which was also a FQ1 record
  • Total expenses incr’d +10% y/y, led by World Cup costs and higher digital content costs
• Adj EPS BEAT cons by +22.1%: Grew +68% y/y to $2.54
• FCF of +$503mn vs -$234mn in the yr-ago qtr: Largely reflects World Cup working capital timing, as rights payments landed in FY26 while ad receivables continue to be collected through 1H FY27

The Ad Market Remains Robust For Fox & Political Is Delivering A Record Midterm… Ad Momentum Is Carrying Into FQ2

• Overall ad trends are “incredibly healthy really across our portfolio” and those healthy trends are continuing into FQ2

• Total advertising revenue grew +47% y/y vs +78% y/y in FQ4
  • TV advertising rev BEAT cons by 9.5% and grew +60% y/y driven by the World Cup and early midterm political ad rev (primarily at the O&O stations), along with digital growth led by Tubi (see more below)
  • Cable advertising rev (+1.2% ahead of cons) grew +8% y/y on higher sports ad rev incl the World Cup, BUT partially offset by lower digital news advertising

• Political ad rev has surpassed $350mn this cycle, “a record for a mid-term cycle”:
  • Breakdown:
    • $250mn+ at the local stations
    • ~$50mn at Tubi (which mgmt views as effectively local rev given it is targeted)
    • $50mn+ of national political rev across sports, news, and entertainment
  • For context: Fox saw $260mn+ of political rev in the last midterm cycle and $400mn+ in the 2024 presidential cycle

• Fox News CPMs still have “a tremendous amount of upside and room to go” relative to b-cast

Sports Drive Record Engagement…And The Slate Is Strong Looking Ahead

• The FIFA Men’s World Cup final was the most-watched soccer telecast in US history: Followed by the start of the MLB postseason and the opening weekends of the NFL and college football seasons
• The 5-game Brewers vs Rays World Series averaged 12mn viewers: Capping an MLB postseason that exceeded expectations
  • “Per game revenue was robust, which is illustrative of the strength of the sports market”

• Fox’s America’s Game of the Week is the #1 show in all of TV: Averaging nearly 25mn viewers season-to-date
  • Upcoming: an NFL tripleheader on Fox in Week 15, Michigan vs Ohio State over Thanksgiving weekend, and Eagles vs Cowboys on Thanksgiving Day
• Though mgmt was noncommittal on 2030 and 2034 World Cup rights: Fox will look at the rights “in a disciplined manner as we would with all sports rights”

Fox News Has Been Hit With Some Viewer Fatigue But Still Remains #1

• Fox News audience share was above peers in both prime and total day, despite “difficult ratings comparisons” to last year
• Regarding Nielsen-reported Fox News ratings declines ahead of the midterms, mgmt cited “viewer fatigue” following an intense news cycle and tough comps vs a record news cycle last year
  • Viewers are NOT switching to MS NOW or CNN, but rather watching slightly less TV overall…”we’ve seen this playbook and we know how to move through it”

Notably, Subscriber Growth Turned Positive Given FOX One Adds Offset Traditional Sub Losses…BUT Mgmt Flags There Will Be Seasonality Ahead

• Total Distribution topped expectations…revs grew +9% y/y vs +5% y/y in FQ4
  • TV Distribution rev (+2.3% ahead of cons) grew +4% y/y on higher avg rates at FOX O&O stations and a net increase in subs
  • Cable Distribution rev (+5.3% ahead of cons) grew +10% y/y, driven by pricing from affiliate renewals and a net increase in subs (see below)

• Including FOX One’s incremental subs, Fox saw positive subscriber growth for the trailing 12 months: Alongside a “meaningful improvement in industry subscriber trends”
  • Sub declines across third-party distributors improved to “below 6%”

• Fox One September sub acquisitions incr’d 30%+ vs the start of last year’s football season: With “a very healthy engagement balance by subscribers between news and sports consumption”
  • Mgmt is “confident in its potential to drive incremental growth in the quarters ahead”

• Fox One subs have indeed been incremental…~97% of new FOX One subs do not have a cable subscription…which is the result of focused, careful marketing, since a sub migrating from pay-TV into FOX One “doesn’t do us any favors”
• BUT the FOX One subscriber base will be “somewhat seasonal” as sports seasons come and go, so it will not always be able to offset the traditional sub losses
• Bundling is still in its “infancy”: FOX One will bundle with distributors, platforms, and other content providers, with further bundles to roll out as the service develops

Tubi Growth Continues To Surprise On The Upside…Mgmt Maintains Its Targets Of ~20% Margin At Maturity

• Tubi posted another record quarter, with rev +35% y/y vs +35% y/y in FQ4: Underpinned by a +23% increase in total view time, vs +17% y/y in FQ4
  • Engagement is driven by Tubi’s library, its World Cup hub, 10 new originals, and viral content from 600+ creators

• Tubi’s strong momentum continues into FQ2, supplemented by political campaigns
  • The NFL Thanksgiving Day game (Eagles vs Cowboys) will also stream live on Tubi

• Tubi’s ad growth well exceeds that at YouTube and Netflix
  • Mgmt attributed the outperformance to Tubi’s audience being young, diverse, and majority cordless, a market that is very hard for advertisers to reach

• How high can Tubi margins reach? Mgmt reiterated it expects Tubi to be a ~20% range margin business once it reaches maturity
  • Tubi grew its y/y EBITDA contribution, “continuing on that well and truly positive EBITDA momentum”

A Few Other Key Updates

• Re Roku, Fox has received all required shareholder approvals and foreign regulatory approvals
  • The Co continues to work “cooperatively with the DOJ in order to obtain HSR clearance and expect to close the transaction as soon as we can”

• Mgmt expects share repurchases to resume in FQ2 (after being “temporarily inactive” in FQ1)
  • FY27 buybacks are guided to be in line with its historical range
  • Does the restart signal anything about the Roku deal close timing? No, “you shouldn’t draw that linkage”…these are “two separate decisions”

Charter’s annc’d new operating model was the key incremental from its Q3 as the Co is “fundamentally rethinking how we compete, how we allocate resources, and how we run our business.” The plan is built on two priorities. The first is returning to growth through an internet-first go-to-market overhaul, which is “not about an offer” but an end-to-end change. The second is becoming a leaner organization, with $2bn of annualized run-rate opex savings targeted over the next 18 months on top of $1bn+ in Cox synergies. That said, no timeline was given for a return to growth as for now, the near-term goal is to narrow the y/y gap in internet subs.

This is in response to continued challenging subscriber growth performance. Pro forma internet losses of -233k worsening from -171k a yr ago. Legacy Charter’s internet losses of -156k improved from Q2’s -172k BUT were still well below Q3:25’s -109k, driven by lower connects as competition from FWA, mobile substitution, and fiber remained intense. Mgmt acknowledge that “we’ve not generated the customer growth and performance we expect, and our customer satisfaction is not where it needs to be.”

Mobile was a bright spot though as Legacy Charter added +440k mobile lines and the Co halved its video losses y/y to -38k, while early Cox integration is off to a strong start. Since the September 16th Spectrum Day launch, the run-rate of Cox internet losses has already been cut in half and the Cox mobile net add rate has tripled.

On the financials, pro forma rev declines narrowed to -1.5% y/y, but adj EBITDA fell -4% y/y and FCF fell -58% y/y, mostly on one-time items. Looking ahead, capx continues to step down (~$13bn in FY26 and ≤$11bn in FY27), and mgmt expects “significant free cash flow growth over the next several years.” In the near term, the majority of Q4 FCF will go toward debt reduction, though buybacks will also resume this qtr.

There were a lot of moving parts this quarter. See below for the details we found most important.

-> Charter’s stock fell -6.1% in reaction to its results; The stock still ended the week up +5.9%, but is still down -43.4% YTD   

Charter’s New Operating Model Was The Main Headline…They Are “Fundamentally Rethinking How We Compete” To Return To Growth While Running A Leaner Co

• The Co annc’d a “new operating model” that is “fundamentally rethinking how we compete, how we allocate resources, and how we run our business”
  • Why? “We recognize that we’ve not generated the customer growth and performance we expect, and our customer satisfaction is not where it needs to be”

• The new model has two priorities: returning to growth + becoming a simpler, more agile, and efficient organization
  • This will be delivered through four strategic imperatives…1) winning more internet customers, 2) improving customer service, 3) upgrading networks, and 4) becoming more efficient

• Regarding returning to growth…the top priority is winning more internet customers by “reformulating our value proposition and go-to-market approach to significantly accelerate the pace of new connects and grow market share”
  • “We’ll make our offer stronger, more simple, and more transparent”
  • “Perfect” the single-play internet go-to-market (offer, marketing, distribution), then layer in mobile and video convergence
  • Modify sales channel capabilities to drive better connects while maintaining “the same or higher ARPUs” at connect
    • “It’s not lost on us the importance of internet ARPU, particularly towards investors”…average ARPU is “healthy and it’s competitive,” the opportunity is at promotional and retail rates by adding value to “earn ARPU as opposed to relying exclusively on rate increases and roll-offs”
  • Reduce churn through smarter pricing, enhanced service, and a better network b/c “too often, our most loyal long-term customers are at risk from aggressive price competition”
    • “Just because we have some of the lowest churn that we’ve ever had, that doesn’t mean it’s good…In fact, it should get better, and it’s too high”
  • Service is focused on “what drives customer calls and dissatisfaction” via a Pareto analysis of pain points, plus continued AI investment

• On efficiency…targeting $2bn in annualized run-rate opex savings over the next 18 months, incremental to Cox transaction synergies
  • Much of it will come from “simply eliminating projects that don’t contribute to internet growth,” increasing spans of control, reducing layers, and consolidating to a “more focused and a narrowed set of vendors”
  • “These savings are NOT targeted at frontline service and sales employees”
  • The goal is for the savings to “fall to EBITDA line and ultimately drive free cash flow,” with benefits beginning next yr
  • The plan does NOT assume any “significant” efficiencies from agentic AI

• Will effect a culture & leadership overhaul…”we’re building a winning culture, raising our competitive metabolism with faster execution and a stronger sense of urgency across the company”
  • Mgmt plans to find a venue (conference or earnings call) for investors to hear directly from Chris Winfrey (CEO) and Nick Jeffery on the operating strategy

• Why will this overhaul be different? (vs prior pricing & packaging and Spectrum One resets)
  • On prior pricing & packaging changes, mgmt conceded “it really was just about an offer”…”This isn’t about an offer. The consumer proposition is really about the end-to-end”
  • “It’s a complete fundamental change for distribution channels. And it’s a much more aggressive approach in terms of the focus on internet first”

• How will success be measured? Focused on a “variety” of measures of success but “the most obvious ones” are…
  • Increasing the rate of customer connects
  • Reducing churn
  • Increasing customer lifetime while maintaining ARPU
  • Increasing convergence across their existing and new footprint
  • Bringing planned cost efficiencies online

• No timeline was given for expected return to growth: “We’re not providing any guidance or outlook for exactly when we return to growth, but I want to be very clear. That’s the objective, that’s the determination of success”
  • The near-term goal at legacy Charter is to “minimize the year-over-year gap that you saw in Q3 on internet subs,” then return to growth at both the legacy Cox and legacy Charter footprints

Q3 Rev Declines Narrowed, While Adj EBITDA And FCF Fell Y/Y

• Pro forma total revs of $16.51bn fell -1.5% y/y vs -2.2% y/y in Q2 (pro forma)
  • Legacy Charter rev decr’d -0.9% y/y while legacy Cox rev decr’d -4.5% y/y, primarily due to a decline in residential customers

• Pro forma adj EBITDA of $6.59bn fell -4% y/y (-3% y/y ex $76mn of Cox transition expenses); Adj EBITDA margin of 39.9% was lower vs 40.9% in Q3:25

• Pro forma capx of $3.24bn decr’d -11% y/y (incl $33mn of transition capx): Ex transition capx, capx decr’d $440mn y/y on lower line extension spend as the subsidized rural build winds down

• FCF of $674mn fell -58% y/y: Mostly driven by 1x or temporary impacts incl working capital timing (supply chain financing benefits in the prior yr), higher cash taxes ($431mn in Q3), and cash costs related to closing the Cox transaction

$2bn Of New Savings Layers On Top Of $1bn+ In Cox Synergies While Capx Continues To Step Down

• NEW: $2bn in annualized run-rate opex savings is now targeted over the next 18 months (see above), w/ the goal that savings will fall to EBITDA and FCF

• Cox run-rate OpEx transaction synergies were RAISED to “over $1 billion” (vs “at least $800mn” previously, which mgmt had called “conservative” in Q2)
  • Synergies begin to ramp in Q4; Nearly half of the run-rate is expected to be achieved in H1:27, and 90% captured over the next 24 months
  • The Co will highlight estimates of synergies captured each qtr going forward and report progress on the $2bn program
  • Synergies do NOT include capx synergies and operating synergies (i.e., revenue upside and lower service transaction costs)

• FY26 pro forma capx GUIDANCE (ex transition capx) of ~$13bn: Well below the sum of the prior legacy Charter guide (~$11.4bn) and the $2.5bn originally expected for legacy Cox

• FY27 capx (ex transition capx) is expected at or below $11bn (vs. sum of legacy Charter’s prior ~$9.5bn guide and $1.5bn for legacy Cox)

• Expect “significant FCF growth over the next several years” from declining capx, Cox synergies, and the new cost transformation program

• Leverage sat at 3.93x at the end of Q3 (as expected) and is projected to fall below 3.9x exiting 2026…the 3.5x target within 3 yrs of the Cox and Liberty Broadband close was MAINTAINED

• The majority of Q4 FCF will go to “efficient debt reductions,” BUT buybacks will resume w/ the Co expecting to “repurchase some shares this quarter” and continue as it progresses toward 3.5x
  • Mgmt on the stock: “We see an equity security that trades at a level that I think is really difficult to justify given the cash flow”

Internet Losses Remain An Overhang

• Legacy Charter lost -156k internet customers (vs -172k in Q2 and -109k in Q3:25); pro forma internet losses were -233k (vs -171k in Q3:25)
  • Lower connects y/y drove the decline, while churn was “essentially flat”
  • Continue to see expanded FWA competition y/y, including lower sales from lower-income consumers, ongoing mobile substitution, and fiber overlap at a rate “similar to prior quarters” w/ continued aggressive promotions by certain competitors
  • “We’re not satisfied with that result and we’re taking active steps to shift momentum and gain share”

• LEO satellite competition? The impacts so far have been “very minimal,” incl in rural, BUT LEO penetration is higher in the newest rural build areas
  • “We don’t discount them whatsoever”…but Charter still sees its network as faster, lower latency, and easier to install & service

Early Cox Integration Results Are Showing Through…Spectrum Day Has Already Halved The Run-Rate Of Internet Losses

• Cox closed August 19th, adding 11mn passings and 5mn+ customers; the Co now passes over 70mn homes and businesses w/ ~50% customer penetration
  • Adds attractive growth mkts (Phoenix, Las Vegas), large adjacent mkts (Virginia, Kansas, Oklahoma, Rhode Island), and better in-market coverage in Los Angeles, San Diego, New Orleans, and North Florida

• Legacy Cox lost -77k internet and -39k video customers in Q3 and added +68k mobile lines
  • “It’s fair to think of Cox as about one-fifth the size of Legacy Charter”; Mgmt knew Cox trends and financials “were more challenged” when it agreed to the deal
  • Legacy Cox churn is ~10% higher than legacy Charter

• Since the September 16th Spectrum Day launch (Spectrum pricing & packaging), internet sales are “up significantly,” already cutting the run-rate of Cox internet losses by half
  • The “vast majority” of the improvement are coming through sales; Churn improvement “will take a little bit more time”
  • The monthly net add rate of Cox mobile lines has tripled, and Cox video customers grew slightly in October
  • BUT matching legacy Charter is not the bar: “Getting to Legacy Charter performance is not the goal. We’re not happy with the Legacy Charter performance on the internet”

• Cox B2B opens up new opportunities across both footprints
  • Cox is “pound for pound, the best cable operator as it relates to B2B”…BUT Cox small business is underpenetrated vs. Charter
  • Opportunity to bring Cox’s hospitality strength (stadiums, arenas, hotels) into Charter mkts such as Los Angeles, Orlando, and New York
  • Segra and RapidScale offer the opportunity to penetrate a much larger footprint, plus cost synergies from owned network that was previously leased

• Other opportunities include porting over Cox’s AI network reliability team and local advertising upside

Mobile & Video Remained Bright Spots As Convergence Deepens

• Legacy Charter mobile net adds of +440k lines (vs +406k in Q2 and +482k in Q3:25)
  • Higher gross adds y/y were more than offset by higher disconnects, even w/ a lower churn rate, given the larger mobile line base
  • Pro forma mobile lines of 13.45mn grew +15.4% y/y w/ +508k pro forma net adds

• Legacy Charter video losses of -38k were half of Q3:25’s -70k
  • Driven by lower video downgrades, lower customer churn, and higher upgrades y/y from seamless entertainment improvements incl the programmer app inclusion package

• Convergence continues to build…pro forma two-product penetration rose to 33.1% (vs 31.9% in Q3:25)
  • Mobile and video attached to internet reduce churn, creating “a virtuous cycle”

• CBRS (small-cell spectrum used to offload mobile traffic from Verizon’s network) strategy unchanged despite the acquisition of a “sliver more” spectrum
  • Deploying on an ROI basis; expects to be in ~50 mkts by year-end…the Cox deal “hasn’t accelerated our deployment plans for CBRS”

While John Ternus’s first earnings as Apple CEO was a clean beat vs Street expectations, memory costs quickly became the main story. Sept qtr revenue hit a record and exceeded consensus, w/ strong iPhone and Mac growth more than offsetting iPad and Wearables (difficult comps), and in-line Services. Gross margin also beat, BUT only thanks to a 1x tariff refund. Strip that out, the GM seq decline was “driven entirely by memory impacts.”

Mgmt called the memory pricing environment “unprecedented” and there is little near-term relief. Prices are expected to keep rising while the cushion from carry-in inventory fades over time. The pressure is also spreading from cost to supply. Even as constraints on advanced chip nodes ease, Mac and iPad are expected to be supply-constrained in the Dec qtr, primarily due to memory.

These pressures are reflected in the Dec qtr guide, as rev growth of +7-10% y/y implies a further decel from FQ4 given constrained supply (but still came in ahead of the Street). Gross margin guidance of 45-46% came in below cons, primarily driven by higher memory costs as well as some costs related to the ramp of Siri AI, and OpEx was guided above given continued AI investment. Services growth was also guided to +8-9% y/y, below the Street’s expectation of +10%, which was attributed to third-party licensing and FX headwinds.

See below for more on the key takeaways we found most important with Apple’s results.

-> Apple fell -1.9% on the back of its report and ended the week down -0.7%; The stock is up +25.9% YTD   

FQ4 BEAT On The Topline And Margins

• Overall rev BEAT by +1%: Up +12% y/y (decel from +16% y/y in FQ3 and +17% y/y in FQ2), a Sept qtr record
  • Despite sequential FX headwinds of nearly 2pp and supply constraints on iPhone, Mac, and iPad

• Product rev BEAT by +1.1%: Up +12% y/y (decel from +18% y/y in FQ3), driven by strong double-digit growth on iPhone and Mac
  • iPhone BEAT by +1.8%: Up +17% y/y (decel from +22% y/y in FQ3), a Sept qtr record
    • Grew double digits in the majority of mkts; Set Sept qtr rev records across both developed and emerging mkts
  • Mac BEAT by +10.4%: Up +24% y/y (decel from +29% y/y in FQ3), a Sept qtr record
    • Driven by strength of MacBook Neo and MacBook Pro
    • Saw double-digit growth in both developed and emerging mkts
  • iPad MISSED by -9.4%: Down -10% y/y (decel from -6% y/y in FQ3)
    • Driven by supply constraints and cont’d difficult compare vs the launch of the A16-powered iPad in the prior yr
  • Wearables, Home and Accessories MISSED by -3.9%: Down -8% y/y (a reversal from +6% y/y in FQ3)
    • Driven by a difficult compare vs launch of Watch SE 3 and AirPods Pro 3 in the prior yr

• Svs rev was ~IN-LINE: Up +10% y/y (decel from +12% y/y in FQ3), an all-time record, despite over 1.5pts of seq FX headwinds
  • Double-digit growth in the majority of mkts; Set all-time rev records in the Americas and Europe, and a Sept qtr record in Rest of Asia Pacific
  • Set all-time records in video, cloud services, payment services, and advertising; Sept qtr record in music

• Gross margin of 47.9% BEAT cons 47.5% but included ~1pp favorable impact from tariff refunds; Ex tariff benefit, GM was ~46.9% (down ~120bp seq from ~48.1% ex-tariff in FQ3), driven primarily by higher memory costs
  • Product gross margin of 37.2% BEAT cons 36.8%: Up +100bp y/y from 36.2%, benefiting from tariff refunds; Excluding tariff impacts, gross margin declined ~100 bps seq
  • Services gross margin of 76% BEAT cons 75.4%: Up +70bp y/y from 75.3% and up +40bp seq
• Op margin of 31.1% BEAT cons 30.5%
• EPS of $2.10 BEAT cons $1.99
  • Included 5c favorable impact from tariff refunds; Set Sept qtr records even ex the tariff refund benefit

Mixed FQ1 Guidance W/ Rev TOPPING The Street Despite Constrained Supply, But GM And Services Both MISSED & OpEx Remains Elevated  

• FQ1 total rev guidance of +7-10% y/y was AHEAD of cons +5.8% (but a decel from FQ4’s +12% y/y)
  • “Reflects our best view of constrained supply. We expect this to be the best quarter for revenue in the history of the company”

• FQ1 Services rev growth guidance of +8-9% y/y was BELOW cons +10% (a decel from FQ4’s +10% y/y)
  • Contemplates seq headwinds primarily from third-party licensing and FX (~0.5pp addtl FX headwind)

• FQ1 gross margin guidance of 45-46% was BELOW cons 46.5% (and down from FQ4’s 47.9%)
  • Primarily driven by the impact of higher memory costs, as well as some costs related to the ramp of Siri AI

• FQ1 OpEx guidance of between $20.4-20.8bn was ABOVE cons $20.23bn; Up +11-13% y/y, driven by incr’d and cont’d investment in R&D, in particular AI
  • OpEx growth rate is “coming down…from the levels of growth we had in FY 2026” but the Co continues to “significantly increase our overall investments in AI”

Memory Costs Continue To Escalate And Drive Seq Margin Pressure

• Supply constraints will persist into the Dec qtr, shifting from SoC nodes to memory availability
  • FQ4 supply constraints impacted iPhone, Mac, and iPad, driven by availability of the advanced nodes Apple’s SoCs are produced on
    • BUT constraints on advanced nodes are now “easing” as Apple has transitioned more of its lineup to the latest 2nm technology nodes
  • Looking into FQ1…expect supply constraints on Mac and iPad, primarily driven by memory availability (a shift from the prior qtr’s SoC-driven constraints)
    • “Demand has been higher than what we expected”…constraints are a demand forecast issue
  • Beyond FQ1… the Co is not providing any outlook but constraints are expected to be “primarily driven by memory” going forward
• Memory pricing continues to be “unprecedented”
  • FQ4 saw higher memory costs vs FQ3, partly offset by carry-in inventory and lower costs on certain non-memory components
  • Looking into FQ1…expect “even higher” memory costs, partly offset by pricing actions, carry-in inventory benefit, and lower non-memory component costs
  • Beyond FQ1… “we see the pricing for memory purchases continuing to increase. As we’ve said before, we do believe we’ll see a decreasing benefit from the carry-in inventory on memory over time”
• Carry-in inventory benefit is continuing to diminish: “We do believe we’ll see a decreasing benefit from the carry-in inventory on memory over time”
• Noted that manufacturing purchase obligations have incr’d by $33bn from June to Sept qtr
• How are they managing pricing?
  • Continuing to pursue lower costs on non-memory components
  • “Reluctantly” taking pricing actions…iPad and Mac prices raised end of June; iPhone prices raised in September
    • “It’s really early to really assess any elasticity impact at this stage”
  • Being “very thoughtful and deliberate” about balancing unit revenue, margin, and short/long-term considerations

Some Addtl Commentary On iPhone Duo Launch, Siri AI, And AI Agents 

• On Sept launch of iPhone Duo…”thrilled with the early response from reviewers and customers”
  • Currently supply constrained and “at this time, it’s really hard to predict when supply and demand will be in balance”

• Siri AI launched in beta for US English users in Sept; Expanded to French, Japanese, Korean, Portuguese, and Spanish in October
  • “Siri AI marks a new chapter in AI at Apple. It is a completely reimagined assistant that is powerful, personal, private, and deeply relevant to our users’ daily lives”
  • Reiterated privacy focus being a “core differentiator”: “Siri can tap into [personal data] and help you access it in a way that’s very secure and private and that nobody else has access to, not even Apple”
  • Some initial color on cost structure…
    • On-device inference has “no real costs”
    • Cloud costs flow through Services COGS but mix is “hard to predict” at this stage
    • FQ1 GM guide of 45-46% includes “some costs related to the ramp of Siri AI”

• Potential risks of AI agents encroaching on the Services biz? “We think these are promising tools for users. We just want to make sure that users are aware of what they’re giving access to. We want to make sure this is done in a way that protects security and privacy. So, we’re pushing really hard on that with Siri AI”

Live Nation is on track to deliver the back-half inflection flagged last qtr. Fan attendance reached 61mn in Q3 (easily ahead of expectations of 57mn) led by a +29% surge in intl attendance and a big global stadium qtr, with some N. American stadium shows shifting into Q3 around the World Cup. Total Co rev and AOI both beat cons, and guidance moved higher, with FY fan attendance now expected to approach ~180mn (implying ~13% y/y growth vs prior guidance of +10% growth), Ticketmaster AOI growth was also raised to HSD, and Venue Nation is now expected to host 75mn+ fans (vs ~75mn prior).

As always, consumer demand was the key question heading into the print, and once again the Co showed no signs of a pullback. Ticket sales for 2026 shows already exceed all of FY25, sell-through is ahead of last yr, and cancellations are running lower. 2027 is also off to a strong start, with primary GTV up DD and major on-sales from Harry Styles, Bruno Mars, Oasis and Metallica.

Mgmt kept the call brief and mostly focused on the quarter given that more details are set to come at its Investor Day next week. See below for what we viewed as the key incrementals from Q3

-> TKO also posted Q3 results this week; Rev MISSED cons by -1.4% (WWE and IMG missed, while UFC beat) and adj EBITDA was in-line, BUT FY guidance was raised for the second time this yr, with the rev midpt up +$10mn (+0.2%) and adj EBITDA midpt up +$15mn (+0.7%); The raised rev guide remains a touch below cons, while adj EBITDA is +0.7% ahead; The stock fell -2.2% post its print and is now down -8.6% YTD

-> Live Nation fell -3.2% post its print and ended the week down -1.5%; The stock is up +23.0% YTD

Q3 Was A Broad-Based Beat

• Revenue – BEAT by +5.3%: Up +19% y/y (+19% FXN) vs +9% y/y in Q2
  • Beat across all segments

• Adj op income – BEAT by +2.6%: Up +14% y/y (+14% FXN) vs +2% y/y in Q2
  • Both Concerts and Ticketing segments BEAT, while Sponsorship & Advertising MISSED

• Fan attendance – BEAT by +7.6%: 61mn vs cons 56.7mn, up +19% y/y vs +10% y/y in Q2

FY26 Guidance Raised Across Fans, Ticketmaster And Venue Nation

• FY26 fan attendance INCR’D to approach ~180mn, implying ~13% y/y growth (vs prior guide of +10%), ahead of cons of 175.3mn
  • The raised guidance was driven by higher sell-through and lower cancellations than planned, as well as stronger-than-expected stadium volume

• FY26 Ticketmaster AOI growth INCR’D to HSD (vs MSD guided last qtr)
• FY26 Venue Nation fans INCR’D to 75mn+ (vs ~75mn prior), up 15%+
• FY26 Concerts + Sponsorship segment AOI MAINTAINED at DD growth
• FY26 CapEx MAINTAINED at ~$1.1bn
  • ~$800mn for venue expansion, with ~$200mn offset from JV partners, sponsorship agreements and other sources

Consumer Demand Continues To Defy Macro Concerns, With 2027 Already Tracking Ahead

• Ticket sales for 2026 shows are up +13% to ~170mn through late Oct, already exceeding all of FY25, with stadium, arena and amphitheater fan counts each up mid-teens or higher
  • Ticket sales ran ahead of the prior yr in every month of 2026 through Oct, with Oct up +20%+
  • Sell-through rates are ahead of last yr and cancellations are running below last yr’s YTD pace

• “We are absolutely seeing continued strong consumer demand globally in all of these venues”
  • Mgmt pushed back on press concerns around consumer spending, noting new US amphitheaters had “just about a full slate of shows” and premium continues to perform

• On-site spend remains healthy: US amphitheater upgrade purchases and VIP rev per ticket both up DD, value menu unit sales more than doubled, and European arena on-site spend up DD
• 2027 momentum is building: Ticketmaster primary GTV for 2027 shows is up DD YTD, driven by DD growth in N. America primary volume
  • Event-related deferred revenue of $3.8bn (Q3 record), up +8% y/y
  • Q3 included major 2027 on-sales for Harry Styles, Bruno Mars, Oasis and Metallica, which “set us up now with some nice momentum heading into next year”

Stadiums And Intl Powered A Record Concerts Qtr…But Q4 Must Do The Heavy Lifting To Hit DD AOI Growth For The Full Year

• Q3 Concerts rev grew +20% y/y (vs +8% y/y in Q2) to $8.7bn and AOI grew +17% (vs -14% y/y in Q2) to $603mn
• Third-party stadium attendance grew +40%+ and drove over half of global fan growth, with stadiums up “measurably” in both N. America and intl
  • N.  America stadium growth partly reflects shows shifting into Q3 around the World Cup

• Intl attendance grew +29% y/y and drove 60% of total fan growth, with every region (LatAm, Europe, Asia) up at least +15%
• N. America attendance grew +13%, delivering the DD growth mgmt had guided to, with stadiums and amphitheaters driving 90% of that growth
  • September was the Co’s largest amphitheater month ever by both attendance and show count

• Concerts AOI is up only ~4% through 9M, putting pressure on Q4 to deliver the FY DD growth target…mgmt reiterated “no change in that overall expectation”
  • Q4 will also absorb higher prepaid advertising write-offs for 2027 tours already on sale… “that’s the best problem in the world to have”

Ticketmaster Beat Was Driven By Concert And Intl Volume Growth, While The Secondary Headwind Never Materialized

• Q3 Ticketing rev grew +9% y/y (vs +15% y/y in Q2) to $870mn and AOI grew +10% (vs +14% y/y in Q2) to $316mn
  • Fee-bearing tickets of 98mn (record), up +10% y/y (vs +8% in Q2); Fee-bearing GTV of $11.2bn, up +13% (vs +15% in Q2)
  • Concerts drove 95% of fee-bearing ticket growth (vs 90% in Q2), benefiting from record attendance

• Intl fee-bearing tickets grew +20% (vs +12% in Q2) and drove 75% of fee-bearing ticket growth
  • Net new ticketing agreements added 23mn tickets YTD, 70%+ from intl mkts

• Secondary GTV was flat y/y as sports growth offset lower concert resale from scalper enforcement…“we’re not seeing that headwind for the year”

Venue Nation Continues To Scale, Led By Intl Arenas

• Venue Nation hosted 26mn fans in Q3, up +17% y/y
  • Arenas outside the US are expected to deliver 75% of owned/operated large-venue fan growth this yr, and their attendance now exceeds US amphitheaters
  • Recently acquired European arenas are “all of them doing well,” and B2B sponsorship sales continue to do well

• Operated and third-party venues are contributing “pretty comparable” shares of the ~20mn total fan growth this yr, with operated fans carrying higher margin per fan
  • BUT the margin benefit is masked by stadium mix (“those are the highest priced tickets will tend to be a lower margin”) and pre-opening costs that will continue “for the next couple of years”

• On track to open or acquire 10 large venues (3,000+ capacity) by YE, delivering 5mn+ fans this yr and a run-rate of ~8mn
  • Part of the 25+ large-venue pipeline expected through end of 2027, adding ~15mn fans on a run-rate basis

• Mgmt deferred most questions on Venue Nation fan ramp, pre-opening investment, partner vs. LYV share of CapEx, IRRs and AI impact to next week’s Investor Day

The sell-off on the back of Shopify’s results certainly highlights how sensitive and skittish investors can be to any areas of weakness when concerns about AI’s impact have been in the background.  Of particular focus was GMV given that it was the 3^rd straight quarter of decelerating y/y growth (on a reported basis) and also the first time in 5 quarters that the Co reported an under 30% y/y growth rate. Lower than expected Subscription Services revenue and gross profit margins also caught investors’ attention though Merchant Solutions’ performance offset. On the plus side, adj op income BEAT of 6.7% and the Q4 guide for low-30s rev growth topped cons of +29.8% (and would make Q4 the 7th consecutive qtr of rev growth in the low-30s).

Thematically, agentic commerce dominated the conversation during the analyst Q&A. Mgmt sees Q3 as the qtr that personal agents “hit the mainstream,” with Shopify partnered across the major agents, AI orders up 3.3x y/y and Catalog-powered searches converting at 2x general AI search. BUT volumes remain “still small,” and the economics so far mirror existing discovery rather than adding new take rate. Agentic commerce is in the early innings, but mgmt. is confident that it will expand the overall market TAM.

Other focus areas include Sidekick, offline/enterprise and international. See below for more details on our key takeaways from Shopify’s results.

-> Shopify shares traded down as low as -12.5% in reaction to results but somewhat recovered and ended the day down -8.7%; YTD the shares are still down -7.5%

Q3 Overall Fell Short Of Street Expectations With GMV & Subscription Solutions Misses Overshadowing Better Profitability

• Total rev slightly MISSED cons by 0.2%; Grew +32% y/y (+32% FXN), a slight decel from +34% (+33% FXN) in Q2:26
• GMV MISSED cons by -0.7%…grew +29% y/y (+30% FXN), decel’ing from +32% in Q2:26
  • It was the 3rd straight quarter of decelerating y/y growth (on a reported basis) and also the first time in 5 quarters that the Co reported an under 30% y/y growth rate
  • Growth was broad-based across merchant sizes and geographies and evenly split between new and same-store sales
  • Cohorts
    • $2–25mn cohort contributed the most incremental GMV and is the largest slice, mostly from existing shops growing into the band
    • $25mn+ band fastest growing off a smaller base
  • Forward looking – the Co expects to pass $2tn in cumulative GMV by YE26, less than 2.5 yrs after crossing $1tn (which took 18 yrs)
• MRR BEAT cons by 0.5% and grew +19% y/y
  • Plus MRR was 34% of total MRR, growing +18% y/y
  • Mgmt reiterated that “MRR comparatively underrepresents the impact we’re seeing from larger GMV merchants”
• GAAP gross profit grew +28% y/y, in line with mid-to-high-20s guide
• Adj op income BEAT cons by 6.7% and grew +54% y/y
• FCF at 22% margin vs. 18% in Q3:25, above high-teens to low-20s guide
  • ~150bps of the y/y margin improvement is structural (operating discipline, expense leverage); But the remainder is temporary and split roughly equally across the marketing test, timing of tax receivables and the accounting change to merchant cash advances

Merchant Solutions Continues To Carry The Growth…As Shop, Ads And Payments Become Bigger Monetization Drivers Than Subscriptions

• Merchant Solutions’ outperformance was offset by Subscription Solutions underperformance
  • Merchant Solutions
    • Rev BEAT cons by 0.6% and grew +35% y/y, driven by GMV strength and incr’d payments penetration: FX rev “contributed nicely,” reflecting growing intl scale; advertising was the most notable contributor among broader merchant services
    • Gross profits BEAT cons by 1.8% and grew +37% y/y, with GM expanding y/y for the 3rd consecutive qtr: Reflects Shopify Payments savings negotiated with partners across the payments ecosystem, plus uplift from incr’d FX activity and advertising products
  • Subscription Solutions
    • Rev MISSED cons by 1.4% and grew +20% y/y, led by Standard plan subs with equivalent-sized incr’s in Plus subs and variable platform fees
    • Gross profit MISSED cons by 2.8% and grew +16% y/y: GM of 79% decr’d y/y on incremental Sidekick AI spend, partially offset by support efficiencies; Seq GM decline reflects higher hosting costs from capacity added ahead of BFCM and enhancements to storefront resiliency and global search

• Shop app GMV more than doubled y/y, reflecting Shop’s network effect as buyers and purchases per buyer keep growing
• Shopify Campaigns reach customers across ten channels incl. Shop, Instagram and ChatGPT, with merchants paying only when a sale happens
  • YTD orders through Shop Campaigns more than doubled y/y, accelerating in Q3

• Payments penetration surpassed 68%, up +3pts y/y; Shop Pay GMV grew +50% y/y

Q4 Guidance Points To Low-30s Rev Growth, Which is Slightly Above Cons…BUT Q4 FCF Margin Won’t Expand

• Q4 rev growth guidance in the low-thirties % rate y/y, topped cons of +29.8%
  • Reflects less than 1pt of FX headwind
  • Would mark the 7th consecutive qtr of rev growth in the low-30s

• Q4 GP growth guided at a high-twenties % rate y/y (vs. mid-to-high-20s guide for Q3)
• Q4 opex to be 29–30% of rev (vs. 33–34% guide for Q3), reflecting higher marketing expenses incl. initiatives ahead of BFCM
• Q4 FCF margin to be consistent with Q4:25 (vs typical expansion seasonally)
  • Some marketing has shifted from Q3 to Q4

Q3 Was The 1^St Quarter That Some Shoppers Experimented With Delegating Purchasing To Personal Agents  BUT Volumes Remain Small And Economics Mirror Existing Discovery

• Agents are a “brand new channel”…the “new front door”…it will increase the commerce TAM
• AI traffic grew 2.6x y/y and AI orders grew 3.3x y/y, though mgmt stressed volumes are “still small”
  • AI channels send shoppers straight to product pages at 3x the rate of organic search, with shoppers converting 64% more often

• Ai channels reward specificity which is important to long tail, niche products being found: 74% of AI-attributed purchases came from outside Shopify’s top 100 product categories
• Shopify Catalog is powering discovery across major AI channels incl. ChatGPT, Microsoft and Muse; Catalog-powered searches convert at 2x the rate of general AI search
  • The Co turned over 1bn product pages into structured data w/ live cross-merchant pricing and inventory (the Co began building Catalog three years ago)

• Other key agentic oriented comments
  • Agents are also emerging as an on-ramp for new merchants, BUT this is still “a small source of new merchants today relative to our scale”
  • On economics: a consumer starting on Muse and landing on a Shopify merchant generates “exactly the same” economics as other discovery; The Co aims to expand Shop Pay wallet economics over time
  • On Shop Pay selection within agents, mgmt said that it is “about merit”

Sidekick Usage Accelerates While Unit Costs Fall…BUT Subscription Gross Margin Sits Below The 80% Trend Line For A Second Straight Quarter

• Sidekick daily active merchants grew 3.7x y/y and daily sessions grew 4.2x y/y; Sidekick created ~two-thirds of all Shopify Flows in Q3
  • Flows now extend into supported third-party apps without manual integrations (merchants use ~8 apps on average)
  • Power users pushing into advanced design, SEO and product creation

• From Q2 to Q3, merchant conversations incr’d +14% while cost per conversation decr’d -28% and total Sidekick costs fell -18%
  • Driven by improvements in model selection, distillation and caching

• Sidekick’s new dynamic conversion guide (e.g., answering customer questions, abandoned-cart outreach) drove a 3% lift in merchants reaching their next five orders within 60 days
  • “Incrementally small” BUT applied across large cohorts

• The launch of Canvas was the biggest update to the online store builder in Shopify’s 20-year history, letting merchants build a bespoke store by describing it to Sidekick
  • Live for ~1 month; merchants launching more personalized stores 20% faster

Offline And Enterprise Momentum Builds…With POS Increasingly Winning Merchants That Are New To Shopify

• Lifetime offline GMV crossed $200bn; offline GMV grew +30% y/y
  • Large, complex multi-location merchants remain the fastest growing segment, with total locations on Shopify up +52% y/y
  • 55% of merchants adding POS in Q3 were new to Shopify; Of those already selling, half sell only in store
  • Q3 retail launches incl. Canada Goose, The Body Shop and BevMo (150+ locations); Skims launched its first intl flagship in London; MAC Cosmetics launched 84 locations just 120 days after signing

• POS now creates customer profiles when shoppers opt into digital receipts, which gives merchants purchase history and the ability to re-engage eligible customers
  • A known in-store customer has “a meaningfully higher lifetime value than an unknown one”

• Enterprise is gaining “incredible momentum”; Lululemon selected Shop Pay for its North American online store
  • Luxury wins incl. Balmain, Givenchy, Jacquemus and Acne Studios; Clinique and Burton also went live
  • Alice + Olivia are fully replatforming after seeing Shop Pay become its most-used payment method; 109-year-old Omaha Steaks migrating off a custom stack

• B2B GMV grew +74% y/y, which expands Shopify’s addressable verticals
  • Fastest growing verticals incl. home improvement and hardware, electronics and business supplies, serving retail stores, labs and medical, food service and agriculture

International Remains A Key Growth Lever…With Localized Payments And Mobile-First Tools Setting Up 2027

• International GMV grew +32% y/y; Europe GMV grew +33% FXN, aided by local payment offerings; North America grew +28% FXN for the 3rd consecutive qtr
• Launched sign in with WhatsApp plus WhatsApp marketing and messaging, which mgmt sees as “huge unlocks globally”
• Localized Shop app in Japan became the #1 shopping app in the Japan App Store the week after full rollout
• Rolled out Oxxo across Mexico, letting shoppers order online and pay in cash at Oxxo convenience stores
• Launched local currency billing in ten new countries
  • Mgmt: “There’ll be a lot more of this to come in 2027”

That is a pivotal question coming out of Q3 results where Snap’s total ad rev growth decelerated to just +4% y/y (from +9% in Q2) as upper funnel brand advertising “declined” on weaker CPG spend in the US and Middle East. Mgmt is focused on reversing this trend and is optimistic that they can affect a turnaround in 2027 by diversifying beyond CPG into verticals such as financial services in the US plus expanding available inventory and formats. Mgmt expects to “regain ground [in brand] over the course of 2027.”

Other key takeaways from Snap’s results include…1) DR is carrying the ad business (now ~77% of rev), with app purchase campaign rev up +54% and new surfaces scaling quickly (Sponsored Snaps rev up +56% seq, Promoted Places rev more than doubled seq); 2) The restructuring-driven cost discipline continued to pay off as the total cost structure grew just +1% against +14% rev growth and ~93% of incremental rev flowed through to Q3 adj EBITDA (which BEAT cons by +13%); 3) The FY26 infra cost guide was narrowed to $1.65-1.66bn from $1.65-1.70bn as the Co absorbs addt’l AI/ML investment w/o incr’g overall infra costs, after raising it last qtr; 4) Disclosure-wise, the Co will move to global MAU and MAU-based ARPU as its primary metrics starting in Q1:27 and discontinue regional DAU/ARPU, as the Co is not optimizing for daily use “at the expense of long-term value”…though the change comes in a qtr where DAUs MISSED and N. Amer DAUs remain down -6% y/y; and 5) Subscriptions remain a bright spot, with Other rev growing +84% y/y and paid subs surpassing 30mn.

So overall, Snap’s earnings power is increasingly visible and FCF/shr remains the North Star, but investors will want evidence that DR gains and new ad formats can re-accelerate ad growth before brand recovers in 2027.

See below for details on what we viewed as most important from the print.

-> Snap shares fell -14% on the back of results and is down -38.5% YTD

Snap Generated More Profitability Than Expected in Q3 While Overall Revenue Fell Just Shy Of Projections

• Q3 delivered a large profitability beat (and a slight rev miss) as the total cost structure grew just +1% y/y…the Co posted positive net income
• Revs grew +14% y/y (+14% FXN) and slightly MISSED cons by -0.4% (and a decel from +19% y/y in Q2)
  • Regionally, N. Amer was the revenue upside driver, while Europe and RoW trailed expectations
    • Growth decelerated in all three regions (from +15% in N. Amer, +33% in Europe and +17% in RoW in Q2)

• Adj EBITDA BEAT by +13% which was a key highlight…adj EBITDA margin reached 22.2% vs cons of 19.5% (+~10pts y/y)
  • ~93% of incremental rev flowed through to adj EBITDA as total cost structure grew just +1% y/y

• FCF grew +76% y/y and BEAT cons by +6%

Q4 Guidance At The Mid-Pt Was ~Inline On Revs & Slightly Better On Adj EBITDA…FY26 Infrastructure Cost Guidance Was Importantly Narrowed

• Q4 rev guidance (+0.4% above cons), implies +13.6-15.6% y/y growth (vs +14% in Q3)
• Q4 adj EBITDA guidance (+1.9% above cons), implies a ~25-26% margin (vs 21% in Q4:25)
  • Planned investment in SPECS are included, which mgmt continues “to pace against product, ecosystem, and economic milestones”

• To note, the FY26 infrastructure cost outlook was narrowed to $1.65-1.66bn from prior $1.65-1.70bn
  • The Co has been “able to increase our investments in AI and ML without increasing our overall infrastructure costs”
  • Infra costs are expected to “grow modestly” y/y in Q4

• Mgmt maintained FY26 guidance for all other cost of rev (excl infra costs) at 16-17% of rev
• The current repurchase program is expected to be completed in Q4 and the goal is to have a stable fully diluted share count in 2027

Mgmt Is Adjusting User Metric Disclosures Going Forward

• Q3 user metrics were mixed
  • DAUs of 495mn (+4% y/y) MISSED cons by -0.7%, driven by RoW (305mn, +9% y/y) which MISSED by -1.5%
    • Amer (92M, -6% y/y) and Europe (98M, -1% y/y) DAUs were in line w/ cons and flat seq
  • MAUs grew +4% y/y to 977mn
  • ARPU of $3.48 (+10% y/y) was in line w/ cons, as N. Amer upside offset misses in Europe & RoW

• Going forward, the Co will disclose global MAUs and MAU-based ARPU…regional DAU and regional ARPU will be discontinued
  • Timing: This will start with Q1:27 results
  • Global MAU, MAU-based ARPU and FCF/shr are positioned as a “clear scorecard” for the Co

• Why the change? The Co does “not intend to optimize Snapchat around daily use at the expense of long-term value for our community”

• Engagement is strengthening around Chat & Spotlight…removing AI-generated content is driving creator growth & more inventory
  • Avg daily messages sent incr’d +8% y/y and the number of people engaging in two-way communication incr’d +6% y/y
  • Globally, the number of people posting to Spotlight grew +130% y/y while daily active viewers incr’d +40% y/y
    • Earlier this year the Co removed AI-generated and reposted content to focus on “real content made by real creators,” driving growth in posters and overall inventory
    • Working on the overall ranking architecture and exploring new generative techniques, “which may help us leapfrog our current architecture”
    • Focused on Spotlight strengthening relationships between friends as people share content to start conversations

Brand Advertising Continues To Struggle & Decl’d Y/Y But A Recovery Is Expected In 2027

• Total ad rev growth decelerated to +4% y/y (from +9% in Q2) as brand advertising “declined”…mgmt is “cautiously optimistic” on Q4 & expects brand to recover over the course of 2027
  • “4% ad growth is below our ambitions”

• DR advertising grew strongly on improved purchase outcomes BUT upper funnel brand advertising declined y/y, weighing on overall growth
  • Brand declined mainly on lower CPG spending driven by macro pressures in the US and the Middle East
    • Q2 had also benefited from easier comps and World Cup-related spending, contributing to the seq decel
  • DR is now ~77% of rev, a “substantial increase” y/y, and mgmt expects DR mix to continue rising in the short term
    • Expect AI-driven ad tools & easier third-party measurement to drive share of wallet gains going forward

• What is the path to a brand recovery? Diversifying beyond CPG into verticals such as financial services in the US (seeing “very positive signs of growth”), plus expanding available inventory and formats
  • Mgmt expects to “start to see the brand business regain ground over the course of 2027”
  • Q4 to date, mgmt. is “cautiously optimistic” as the Co is “seeing a bit of acceleration on the ad side”

• New ad surfaces in Chat, Spotlight & Map are scaling quickly…Sponsored Snaps is becoming a bigger driver of rev
  • Sponsored Snaps rev grew +56% seq, w/ Chat’s share of total rev incr’g ~8pts y/y
    • Launched auction-based Sponsored Snaps in Europe; DPA is now also available in Chat, expanding the use cases and advertisers the format can serve
  • Avg Spotlight eCPM incr’d +22% y/y
  • Promoted Places (Snap Map): rev and advertiser adoption each more than doubled seq; expanded to 14 countries w/ opptys spanning restaurants, retailers and other local businesses

A Few Other Key Updates…Subscriptions, SPECS, AI Efficiencies, Regulation

• Other rev grew +84% y/y (vs +85% growth in Q2), led by Snapchat+, Memories Storage and Lens+
  • Surpassed 30mn paid subscribers (~3% of MAUs); AI-powered features helped Lens+ “exceed our expectations”
    • Paid subs “still represent a small share of our monthly community,” leaving room to grow via broader adoption and new premium experiences

• SPECS early demand indicators are encouraging ahead of shipping “later this fall”…
  • SPECS First Look pop-up opened in Oct at Westfield Century City in Los Angeles, w/ 10,000+ demos to date
  • The Co is “really looking forward to beginning to ship SPECS later this fall”
  • “SPECS represent a totally new computing paradigm”…“we think we’ve barely scratched the surface of what’s possible with SPECS”

• AI is becoming a “meaningful advantage” internally…productivity gains support a leaner cost base
  • Engineering teams more than doubled the number of merged pull requests y/y while the defect rate per merged pull request declined 71%+
  • For advertisers, AI search now resolves 92%+ of help-center sessions while support cases declined -35% y/y
  • Full-time headcount of 4,540 decr’d -13% y/y

• Regulatory scrutiny remains a watch item
  • The Co continues to monitor the evolving legal and regulatory landscape in the US and internationally, incl incr’d regulatory scrutiny on youth-related issues, which may result in product/business practice changes, higher compliance and legal costs, and negative impacts to user growth and engagement

DraftKings’ Q3 was all about Predictions… revenue missed cons by -4.4% (though grew +16% y/y) and the adj EBITDA loss of -$317mn was far wider than cons of -$64mn, as the Co sharply stepped up its Predictions investment heading into the NFL season. The Co almost tripled its FY26 Predictions adj EBITDA investment to $650-700mn (from $200-300mn) and cut FY26 adj EBITDA guidance to $175-275mn (from $700-900mn). FY27 guidance also came in below cons for adj EBITDA ($800mn-1bn vs cons $1.13bn) BUT mgmt. calls for a sharp inflection with ~$700mn of projected Predictions revenue, the Predictions investment level stepping down to ~$300mn, and Core adj EBITDA growing to ~$1.2bn (~18% margin).

Five other key takeaways that we thought were important include: 1) Predictions is scaling far faster than expected, with 1.6mn+ customers YTD (vs 600k+ at Q2), Predictions annualized total volume traded was $56.8bn in October (5x+ vs July), and DKNG now the clear #3 predictions exchange by total volume; 2) Payback math and potential regulatory rulings dominated the Q&A, with mgmt citing that the 2026 cohort pays back in ~20 months and the 2027 cohort still pays back within 4 years even if sports contracts end in July 2028; 3) Non-sports Predictions (led by crypto) is emerging as a “hidden gem” that could reach 25-30%+ of the size of sports; 4) The core sportsbook remains strong with handle +12% y/y and sportsbook net rev +36% y/y, and mgmt sees “no discernible impact” from prediction market operators; and 5) iGaming customer acq grew +76% y/y, weighing on near-term profit but setting up for accelerating growth in 2027.

Overall, the quarter was a significant reset to near-term profitability as the Co leans harder into Predictions, but mgmt was emphatic that the data supports the spend and that the core business remains on track (ex-sport outcomes). Investors will be focused on whether the FY27 Predictions ramp materializes and how the regulatory/court timeline plays out.

See below for more color on what we viewed as notable.

-> DKNG shares fell -21.3% on the back of the heavy predictions markets investments; The stock is down -46.3% YTD

Q3 Results Disappointed Investors…Revs Missed & Adj EBITDA Loss Was Far Wider Than Expected As Predictions Investment Ramped

• Q3 disappointed vs cons…
  • Q3 revs MISSED cons by -4.4%: Grew +16% y/y driven by healthy customer engagement and higher sportsbook net rev margin
  • Adj EBITDA MISSED cons by a sizable margin: The Co reported a loss of -$317mn vs cons -$64mn (vs -$126mn in Q3:25)
    • Adj EBITDA margin of -23.8% was well below cons -4.6%

• …This was primarily due to incr’d investment in Predictions
  • Predictions rev in Q3 was minimal, as new customer promos offset the “lion’s share” of gross rev generated
  • Mgmt stressed that adj opex EXCLUDING Predictions decr’d y/y

• By segment:
  • Sports rev grew +31.5% y/y to $784mn on sports consumer volume (sportsbook handle + Predictions consumer volume) of $13.9bn (+22% y/y)
    • Sports net rev margin of 5.6% vs 6.8% in Q2:26 (+0.4pts y/y), driven by higher sportsbook hold, partially offset by Predictions new customer promos
  • iGaming rev grew +2% y/y to $461mn, reflecting incr’d promotional reinvestment for new customers
  • Other rev fell -12.5% y/y to $85mn on lower interest income on player funds and lower ad sales, partially offset by Lottery growth and the DK Racing launch

KPIs Were Mixed…MUPs Beat On Strong Acquisition BUT ARPMUP Missed

• Q3 was the Co’s best acquisition qtr since 2024
• MUPs BEAT cons by +6.8%: Grew +13% y/y, reflecting strong retention and new customer acq across Sportsbook, iGaming and Predictions
• Avg rev/MUP MISSED cons by -7.5%: Grew +3% y/y, primarily due to improved sportsbook net rev margin

FY26 and FY27 Guidance Reflects A Significant Ramp In Predictions Investment

• The FY26 guidance was lowered…
  • The mid-pt of the new rev guidance was -3.2% BELOW cons (range lowered by -3.7% at the mid-pt)
  • The mid-pt of the new adj EBITDA guidance was a sizable -64.8% BELOW cons (lowered to $175-275mn range from $700-900mn)

• …This primarily reflects incr’d Predictions adj EBITDA investment of $650-700mn (vs $200-300mn previously)
  • Q4 Predictions adj EBITDA investment is expected at $175-225mn
  • But Predictions rev will be immaterial in FY26 as new customer promos offset the “lion’s share” of gross rev

• The Core FY26 adj EBITDA is now expected at $875-925mn (vs ~$1bn previously)
  • The ~$100-150mn reduction is ~60% sport outcomes (“modestly customer-friendly”) with the remainder from new customer acq in iGaming
  • Excluding outcomes, mgmt said the core is “pretty much on track”

• Mgmt introduced FY27 guidance that also bakes in more Predictions Investment…
  • Mid-pt of rev guidance modestly MISSED cons by -0.8% ($7.35-7.75bn, +17% y/y at the mid-pt)
  • Mid-pt of adj EBITDA guidance MISSED cons by a notable -20.4% ($800mn-1bn)

• …AND is confident on reaching an inflection in FY27
  • Core rev guidance is $6.7-7.0bn (+4-9% y/y vs the FY26 mid-pt)
  • Core adj EBITDA guidance is $1.15-1.25bn ($1.2bn at the mid-pt), powered by steady sportsbook growth, accelerating iGaming growth and significant operating leverage
    • Core adj EBITDA margin is projected to expand ~360bp to ~18% in FY27 at the mid-pt (after ~370bp of expansion in FY26)
  • Predictions rev guidance is $650-750mn
  • Predictions adj EBITDA investment of $250-350mn, stepping down to ~$300mn at the mid-pt as 2026 cohorts contribute meaningful gross profit
    • Mgmt will monitor regulatory developments related to sports predictions and adjust the investment level accordingly

• Predictions is expected to be a tailwind to adj EBITDA in 2028 and generate FCF in 2028
  • The Co expects to generate significant excess FCF in FY27, even after funding Predictions investment

Mgmt Remains Very Bullish On Predictions & The Return That It Will Generate On This Heightened Investment

• More than 1.6mn customers have engaged w/ Predictions YTD
  • Retention and engagement of newly acquired Predictions customers is in line w/ sportsbook levels
  • The 2026 cohort is already run-rating to ~$350mn in annualized gross profit

• Volumes have exploded in just a few months…
  • October annualized consumer volume reached $10.1bn, up nearly 3x from July
  • October annualized total volume traded reached $56.8bn, up over 5x from July, as combos grow as a share of volume
  • DKNG has become the clear #3 predictions exchange by total volume

• Combos reached 27% of consumer volume in October and more than 70% of customers traded combos in the month
• The Co will do “hundreds of millions” of Predictions gross rev in FY26 BUT net rev will be close to neutral, w/ ~90% of that due to new customer promos
  • In FY27, mgmt expects net rev of ~$700mn and gross profit of ~$500mn despite continued heavy new customer acq
  • The guide assumes status quo with no additional monetization from product improvements or acquisition efficiencies
    • Mgmt thinks it is “more likely than not that we’ll find some wins next year that could give us some upside on the predictions numbers”
  • “I’m really bullish about that part of the business. I know everyone’s a little surprised at how much we spent, and I wish you all could see every data point that we see”

• Looking to 2028, the ’26 and ’27 cohorts could generate gross profit north of $1bn if sports predictions stay in place for the full year
  • Customer acq spend would likely come down somewhat as the market matures, BUT even if flat y/y, Predictions would generate significant FCF

• Mgmt “would be surprised if we spend more” on Predictions in FY27 than the guided investment, barring major positive regulatory developments
  • Equally, mgmt doesn’t expect to spend much less barring major negative regulatory developments
  • NFL data on retention and spend levels has given the Co “a lot more conviction” that it knows the right level of spend

Predictions Payback Math & Potential Regulatory Rulings Dominated The Q&A…Mgmt Cites Positive Payback Even W/ A Negative Court Scenario

• The 2026 Predictions cohort is expected to pay back in ~20 months, which is well below the 2-year payback target
  • For context, DKNG typically targets 3-year paybacks in its core business

• The base case assumes a mid-2028 Supreme Court ruling
  • Even if sports contracts were to end in July 2028, the 2026 cohort would be fully paid back by then
  • The 2027 cohort would be over 50% paid back by that date and is expected to fully pay back within 4 years w/out sports contracts
    • This is driven by strong cross-sell into other products (Pick6, lottery, DFS, non-sports Predictions) and assumes no benefit from state legalization
  • Mgmt modeled the “most draconian likely scenario” (all sports contracts go away) as the downside case
    • A middle-ground outcomes (e.g., only some sports contracts banned) or litigation delays would be better for paybacks

• Mgmt believes DKNG is in a “win-win position no matter how any future court ruling plays out”
• Why invest all this money in predictions if OSB legalization would follow anyway? Mgmt said it can’t count on every state legalizing sports betting and the Predictions audience “is very much our brand and our core audience”
  • But the sportsbook is a better product that will attract and retain customers better

• Incremental spend has been mostly local (in Predictions states), similar to an OSB state launch playbook but at much lower levels
  • Following this week’s election results, mgmt believes certain states may now have a clear path to legalization and will weigh differentially spending in those states
  • Mgmt sees minimal brand halo to existing OSB/iGaming states since the vast majority of incremental spend was local

 Non-Sports Predictions Is Emerging As A “Hidden Gem”

• Nearly 20% of Predictions customers have already traded non-sports markets, w/ non-sports consumer volume per customer on par w/ sports
  • Crypto is leading the way, approaching DD share of total consumer volume in recent weeks
    • DKNG is targeting migration of crypto markets to DKX over the next month
  • With “basically no effort,” non-sports is already approaching ~10% of sports volume…mgmt thinks non-sports could be 25-30%+ of the size of sports today
    • “That’s sort of a hidden gem there…it wasn’t what I was thinking when we got into this”
    • Mgmt expects to have more to say on non-sports in the coming quarters

The Core Sportsbook Remains Very Strong…Handle Grew +12% y/y W/ No Visible Impact From Prediction Markets

• Sportsbook net rev grew +36% y/y w/ net rev margin expanding ~120bp y/y to 6.4%
  • Hold rate eclipsed 11% and parlay mix incr’d +300bp y/y

• Sportsbook handle grew +12% y/y…a true like-for-like comparison, as the World Cup boost was fully offset by one fewer week of college football and NFL
  • Handle growth would likely have been even higher if not for the significant incr in net rev margin

• Prediction market operators are having “no discernible impact on our sportsbook business”
• Handle share across sportsbook states improved y/y for the 4th consecutive quarter and GGR share also incr’d y/y
  • Mgmt said DKNG was basically tied w/ FanDuel for #1 in sports betting in Q3

• On concerns the Co is harvesting core margin while peers spend aggressively, mgmt said “I don’t think we’re pulling back at all”…”We are laser focused on the core”
  • FY27 guidance includes “hundreds of millions” of promo cushion to invest if attractive opportunities arise

iGaming Investment Weighed On Near-Term Profit BUT Customer Acq Grew +76% Which Should Drive Accelerating Growth In 2027

• iGaming customer acq grew +76% y/y in Q3
  • Gross rev growth accelerated to +7% y/y, while net rev grew +2% y/y due to promos for new customers
  • October gross rev growth accelerated further to +12% y/y and October paid active days (active customers x days engaged) grew +24% y/y

• The acceleration reflects a deliberate multi-quarter plan: A revamped offering, exclusive content such as the CASHINGO franchise, and new rewards and merchandising
  • Seeing strong early returns, the Co stepped up investment in marketing and new customer promos in Q3 and Q4 to date
  • Mgmt noted it found insights and efficiencies in marketing that unlocked better acquisition without increasing spend as much

• The bulk of the investment came from higher-than-expected new customer promos, which drove near-term softness BUT will lead to “much better revenue and EBITDA in future quarters”
  • As a result, mgmt raised its FY27 iGaming outlook, though the guide assumes no further acceleration from current run-rates
  • iGaming share has now been gained for 3 consecutive quarters

Cost Discipline & Operating Leverage Underpin Core Margin Expansion To ~18% In 2027

• Marketing spend for the entire business is expected to come down in FY27, despite slightly higher Predictions spend…core marketing spend is coming down
  • Driven by national marketing efficiencies as states mature

• Fixed costs have been well managed in 2026 w/ many initiatives lined up to focus on costs “all the way up and down the P&L”
  • The Co built out its Predictions product w/ mostly the same headcount, which mgmt attributed to efficiency from AI, among other things

• Mgmt expects incremental core adj EBITDA growth in FY27 consistent w/ prior years, following the playbook of states inflecting in profitability as they mature past the initial investment phase

It was a good news / bad news for Booking.com as the Co delivered a clean beat in Q3, with room nights, gross bookings, adj revenue and adj EBITDA all exceeding the high end of guidance, and room night growth accelerated to +7% from +5% in Q2 despite the continued indirect drag from the Middle East conflict. However, the Q4 outlook was well below the Street, given a moderation in international travel late in Q3 which continued into Q4, in combination with higher planned investments in AI, flights, attractions and dining. Mgmt assumes the Middle East disruption will persist through YE.  With that said, given the Q3 beat, the FY guidance was still maintained.

More specifics on the key incrementals from Booking’s results include: 1) Q4 adj EBITDA was guided to ~flat y/y vs cons growth of +9.8%, driven by planned investments in strategic initiatives, though FY targets were maintained; 2) Mgmt quantified early AI top-line uplift, incl. AI assistant users converting at ~2x the rate of non-users and ~20% higher booking values at Agoda; 3) LLM referrals have accelerated over recent weeks but remain “significantly less than 1%” of Booking.com room nights, and mgmt believes it is capturing the vast majority of agentic travel traffic as horizontal agents prefer to connect with aggregators; 4) The Co is placing new AI-native bets outside its core brands via Lola and Vayo (planned $100mn investment); and 5) It is too early to call 2027, but on-the-books stats for H1:27 look “healthy” and the Co will launch a combined B2B business on Jan 1, which will likely be broken out going forward.

All in, the qtr reinforced the resilience of underlying travel demand and showed that AI is moving “from experimentation to measurable operating value,” and at least in terms of the immediate stock reaction, investors are looking past the macro and investment-driven Q4 reset. The shares are being strongly swept up on the back of the midterm results rally as well.

See below for more.

-> Booking was down ~-3% after hours following its earnings report but ended the day up +9.8%; With that said, the stock still remains down -25.0% YTD

-> Expedia also reported and while Q3 headline results topped consensus expectations, it was helped by a pull forward from a fall sale promo and the Q4 guidance missed consensus (adj EBITDA guidance -6.7% below the Street); The stock fell -13.7% in reaction and is now down -8.5% YTD

–> Airbnb was a standout as well with better-than-expected Q3 results and better than expected Q4 guidance; The stock rallied +11.9% and ended the week up +15.6%; The stock is still up +40.0% YTD

Clean Beat Across Headline #s As Q3 Came In Above The High-End Of Guidance…BUT FCF Missed On Seasonal Working Capital Unwind

• Gross Bookings BEAT by +3.5%: Up +10% y/y or +~11% FXN
  • FXN gross bookings growth was ~4ppts higher than room night growth, primarily reflecting higher FXN ADRs (+~3% y/y) and the contribution from flights and other verticals
  • Merchant gross bookings BEAT by +3.5%: Up +14% y/y
    • Merchant represented ~75% of total gross bookings, up ~3ppts y/y
  • Agency gross bookings BEAT by +2.8%: Down -1% y/y

• Adj revenue BEAT by +2.5%: Up +9% y/y or +~10% FXN
• Adj EBITDA BEAT by +2.6%: Up +9% y/y
• Adj EPS BEAT by +3.8%: Up +17% y/y
  • EPS growth outpaced EBITDA growth, helped by a 7.5% reduction in avg share count

• But FCF MISSED by -24.7%: Down -22% y/y
  • Impacted by a working capital decr driven by a $3.6bn seasonal unwind of deferred merchant bookings

• Returned $2.4bn of capital in Q3 incl. $2.1bn of buybacks

Room Night Growth Accelerated As International Travel Improved…Though Elevated Airfares & ME Disruption Continue To Weigh On Long-Haul

• Room nights beat cons by +1.3% and grew +7% y/y, up from +5% in Q2, driven by an improvement in international travel from bookers in Europe and Asia, while domestic growth was stable at a higher level
  • Globally, domestic room nights grew HSD and international room nights grew MSD
  • Elevated airfares and reduced capacity on certain routes from the ME conflict continue to weigh on long-haul travel demand

• By region
  • Europe: Grew HSD, w/ domestic room nights up HSD
  • Asia: Grew HSD, w/ domestic room nights up LDD
    • Asia domestic travel outpaced international travel by the widest margin of any region
  • The US: Grew MSD, driven by domestic room night growth
    • Saw another consecutive qtr of direct channel growth in the US
    • Have outperformed the broader US mkt in room night growth for the last three yrs
  • RoW: Grew MSD, stable vs Q2, as the Co continues to see growth from bookers in the Middle East

• Pricing and booking behavior
  • FXN ADRs were up ~3% y/y, primarily driven by Europe but also the US and Asia
  • Booking window expanded slightly in Europe and globally, while the US modestly contracted
  • Avg length of stay incr’d y/y outside of Asia

• Alternative accommodations accelerated
  • Alt accommodation room nights grew +7% y/y, up from +4% in Q2, w/ acceleration across all major regions
  • Represented ~37% of Booking.com room nights, up ~1ppt y/y
  • Alt accommodation listings growth accel’d to +9%, an “encouraging signal” for future growth

• Other verticals also accelerated
  • Flight tickets beat by 11% and grew +19% y/y, a “strong acceleration” vs Q2 and ahead of the broader mkt, despite elevated ticket prices and reduced capacity on certain routes
  • Attraction tickets grew +24% y/y, also an acceleration vs Q2

BUT Q4 Reflects Some Slowdown In Consumer Travel Trends & Stepped Up Investments

• Q4 guidance was below the Street across the key metrics
  • Gross bookings growth of +2-4% y/y (+4-6%y/y FXN) vs Q3’s +10% y/y or +~11% FXN
  • Adj revenue growth of +0-2% (+2-4% FXN); FXN midpt of +3% MISSED cons +7%
    • Rev to grow slower than gross bookings due to flight bookings mix and timing of bookings vs travel, partially offset by higher payments rev
  • Adj EBITDA ~flat y/y (+~2% FXN) MISSED cons +9.8% y/y est
    • See more below
  • Room night growth of 1-3%, reflects the toughest prior yr comparison of 2026 and uncertainty around the impact of recent events on travel demand; no cons comparison available
  • Estimate FX will negatively impact Q4 reported growth rates by ~2ppts

• Q4 EBITDA will be impacted by incr’d planned investments behind long-term strategic priorities
  • Includes expanding capabilities across non-accommodation verticals such as flights, attractions and dining, advancing AI capabilities, and enhancing underlying technology, infrastructure and platforms
  • Expect investments to be partially offset by marketing leverage

• Mgmt characterized the backdrop as “mixed”
  • Mgmt saw “some moderation in global demand trends toward the end of Q3, driven by international travel”
  • Domestic travel continues to hold up as travelers take shorter trips and choose destinations closer to home
  • In Oct, demand was affected by disruptions to travel to and from the Middle East, the conflict’s broader indirect effects such as elevated airfares, and localized unrest in certain European cities
  • Guidance assumes both the direct and indirect impacts of the ME conflict on travel persist through YE

• Despite the weak Q4 guidance, FY26 guidance was maintained given the Q3 beat
  • Mgmt continues to expect gross bookings, adj revenue and adj EBITDA to be up HSD and adj EPS to be up low-to-mid teens “at the high end”
  • Expect FY adj EBITDA margins to be “stable”

• What about 2027? It is too early to say
  • But as a very early directional indicator, on-the-books stats for H1:27 look “healthy,” which gives mgmt confidence in the outlook for next yr
  • Analysts pressed on whether AI-driven efficiencies could allow the Co to outperform the 8/8/15 algo…mgmt said it is “a little bit too early” to determine the impact on the long-term algorithm

Cost Discipline & AI Efficiencies Are Supporting B2C Leverage…While B2B Gets More Focus Ahead Of A Combined Launch On Jan 1

• Marketing expense incr’d +11% y/y, slightly faster than gross bookings, driven primarily by faster growth in B2B affiliate marketing
  • B2B affiliate, the B2C business had marketing leverage in the qtr, driven by higher ROIs in paid channels and growth in direct traffic
  • Outlook- Mgmt is “looking at the possibility” of delivering B2C marketing leverage in Q4 as well

• The Co will launch a combined B2B business on Jan 1 and will “most likely” break out the numbers going forward
  • B2B commissions are based on rev share, so growth in B2B volumes flows through the marketing line…mgmt views this as economically healthy

• AI is driving real operating efficiencies
  • Customer svs costs declined in Q3 despite higher booking volumes, while satisfaction remained high
  • Blended cost per mn AI tokens declined by 25%+ between June and Sept across the Co, helped by price caps on higher-cost models and routing simpler tasks to more cost-effective models
  • Developer productivity continued to improve, w/ cost per merge request down double digits
  • Headcount growth has been “very minimal” over the last two yrs, mostly in lower-cost locations such as the Center of Excellence in India

• Remain on track to achieve the full $650mn of annual run-rate savings from the transformation program in 2027
  • Incurred ~$23mn of transformation costs in Q3

Early Data Shows That AI Investments Are Driving Higher Engagement, Conversion & Booking Value

• Continuing to roll out AI capabilities across the core brands
  • At Booking.com…the Co is expanding AI tools that help travelers explore destinations in greater detail at the top of the funnel, and advancing agentic capabilities that enable customers to cancel a booking or get answers about their stay w/o contacting customer svs
    • Early testing is showing encouraging customer satisfaction results and fewer escalations to svs teams
  • Agoda launched its new AI assistant, now live across 21 mkts, which helps travelers move from an initial idea to a bookable trip using Agoda’s live selection of accommodations, flights and activities
  • At Priceline…the Co is bringing more of Penny’s capabilities into the main Priceline experience so more customers can benefit

• Launched new AI-native experiences outside the existing brands, which serve as testing grounds to iterate quickly and apply learnings across Booking Holdings
  • Lola (launched in Sept)…helps people access unique travel, dining and event inventory across platforms beyond the Co through a conversational experience and a membership model
  • Vayo (launched in Oct w/ a planned $100mn investment)…a proactive AI travel agent that brings existing reservations from a traveler’s email history into one place, creates personalized offers, suggests ways to fill itinerary gaps, and monitors prices after booking
    • Early learning is that most users are willing to connect their full email history
  • Successful capabilities will be brought back to Booking.com, Agoda and Priceline, which have the scale to roll them out to partners and customers

• Measuring AI’s impact across 4 categories…“it’s early days, but we’re encouraged by the momentum”
  • Higher engagement: com daily AI search visitors were up 10x in Q3 vs Q2 w/ trip search; Seeing strong conversational engagement on Vayo w/ users connecting their email
  • Higher conversion: Priceline and Agoda AI assistant users have converted at ~2x the rate of non-users
  • Higher booking value: Agoda AI assistant users have an avg booking value ~20% higher than non-users
  • Incrementality: OpenTable’s native integration w/ OpenAI has become one of the brand’s fastest growing channels (from a small base), w/ ~190K seated covers in Sept; agentic interactions w/ Muse and other horizontal agents have brought a “significant number of completely new customers” to OpenTable

• Laid out a multi-pronged approach as agentic AI evolves:
  • 1) building its own AI agent-powered experiences
  • 2) participating in new distribution channels that bring incremental demand at attractive economics
  • 3) using AI to improve customer svs, developer productivity and operating efficiency

Agentic Channels Are Still Tiny But Accelerating & Mgmt Sees AI Agents As A Diversification Opportunity Rather Than A Threat

• LLM referrals have accelerated over the last several weeks but still account for “significantly less than 1%” of Booking.com’s room nights
  • Organic referrals incr’d following the release of the latest ChatGPT models, which improved citation rates and drove more traffic to the Co’s platforms
  • Paid referrals are also growing as the Co expands its OpenAI partnership into addtl mkts
  • Not seeing meaningful differences between traditional LLMs and newer horizontal agents…traffic is still very small in aggregate
  • Based on third-party data, the Co believes the “vast majority” of agent travel traffic is coming to Booking

• The Co is expanding partnerships w/ leading tech and AI companies incl. Meta, OpenAI, Google, Anthropic and Amazon
  • OpenTable debuted as the first dining partner w/ Meta’s Muse personal agent
  • Agoda is live on Muse as a launch partner in Asia, connecting Muse directly w/ Agoda’s new AI assistant

• Why are horizontal agents surfacing Booking? Mgmt pointed to brand credibility and the depth of its supply
  • Horizontal agents prefer to partner w/ aggregators…”It’s going to be very expensive for them to connect to 4.7 million properties directly” and get real-time pricing and availability data
  • Agentic platforms are still figuring out their economic models, and mgmt believes diversification of third-party channels will ultimately drive an economic advantage for the Co
  • If horizontal agents adopt a monetization model similar to what Booking has done over the last two decades, mgmt believes the Co would be in an even better position
  • Mgmt pushed back on concerns that agents may favor direct supplier sites, noting they see other data where OTAs are getting a greater advantage

• Emphasized the Co’s value to independent suppliers in an AI world
  • Independent hotels and alternative accommodations generate the vast majority of Booking.com room nights
    • The 10 largest global hotel chains account for only a LDD %age of room nights
  • Smaller partners are afraid that in the new world they won’t be seen at all, and Booking provides that reach on a pay-for-performance basis w/ no upfront marketing costs
  • The Co processes 100+ payment methods in 50+ currencies and provides customer svs in 40+ languages w/ both AI agents and people

• On the DMA’s impact on Google search results in Europe, the Co is not seeing any numerical benefit to the OTAs yet…”I hope it is. I haven’t seen it yet”
  • Mgmt also flagged that the regulatory framework, particularly in Europe and the UK, could mean that “the adoption of these horizontal personal agents may be much slower than is anticipated”

Connected Trip Momentum Continues To Build And Mgmt Teased An Evolved Genius Program That Leans Less On Discounts

• Connected trip transaction growth accel’d to almost +20% y/y and represented a LDD mix of Booking.com’s total transactions
  • Connected trip transactions grew 3x faster than Booking.com’s overall transactions, but from a relatively small base
  • Travelers who book across multiple verticals return more frequently
  • Expect further incr’s as the Co delivers more personalized, gen AI-powered experiences and brings offerings together more seamlessly through Genius

• Genius continues to deepen engagement
  • Over the LTM, Level 2 and Level 3 members represented 30%+ of Booking.com’s active customer base and accounted for a high-50% share of room nights, up y/y
  • Higher-tier Genius members plan further ahead, return more consistently, and book direct at a higher rate than non-Genius travelers

• Direct relationships continue to strengthen
  • B2C direct mix remained stable in the mid-60% range over the past four qtrs
  • Mobile app mix of total room nights was in the high-50% range, up from mid-50% a yr ago
  • Room nights from travelers who book direct, use the app AND are Genius Level 2/3 grew “meaningfully faster” than those booked by other travelers, both in Q3 and YTD

• How can Genius evolve w/o becoming more reliant on supplier-funded discounts?
  • Genius works well today because partners fund much of it and get a good ROI, but “there are a lot of other ways we can improve upon that tremendously”
  • Mgmt sees oppty for perks partners to offer at little or no marginal cost, or at a lesser cost the Co could help work through
  • The Co is also exploring loyalty connectivity w/ hoteliers and non-travel players to build out the network, though mgmt declined to share specifics or timing

While overall Q3 headline numbers were in-line to slightly better than Street expectations, Mobility was a drag as growth slowed and bookings missed. Most of the slowdown came from outside the US, where demand remained “healthy” but driver supply did not keep pace. Uber is responding with targeted driver investments, which mgmt doesn’t expect to drive “any kind of meaningful changes” in the Mobility margin trajectory. Early results are encouraging as supply hours growth accelerated globally in October (notably in Brazil and India), which gives the Co “confidence in a consistent YoY growth trajectory in Q4 relative to Q3.”

On autonomous vehicles, mgmt said AVs are expanding the ridesharing category, as Uber’s trip growth exceeded the national rate in US markets where AVs ran throughout Q3. Uber expects ~700 fully driverless vehicles on its platform by year-end and 2,000+ by YE27, with a larger commercial ramp beginning in 2028, and continues to expect AV fleets to be financed by third-party capital over the long run rather than its own balance sheet.

Across the rest of the business, Delivery growth remained broad-based across geographies, and mgmt is not overly concerned about a potential DoorDash/Instacart combination. Uber One reached ~55mn members, now accounting for more than half of combined Mobility and Delivery gross bookings, and the Co expects minimal to no further M&A through at least 2027 (apart from AV investment) as it focuses on integrating Delivery Hero and ezCater. On agentic AI, Uber will selectively work with third-party agents that bring incremental demand while protecting its direct consumer relationships, though agent-driven volume remains “very, very early.”

Looking ahead, Q4 guidance was in line on gross bookings and adj EPS, and slightly below on adj EBITDA. As Dara summarized, the priorities heading into Q4 are to “improve Mobility supply, build on Delivery’s momentum, and deliver against our AV milestones, all while continuing to grow profitably.”

See below for the key takeaways from Q3.

-> Uber was up +4.9% post its print and ended the week up +5.1%; YTD, the stock is still down -16.1%

Q3 Beat On Profit, But Mobility Weighed On Growth

• Q3 gross bookings were IN-LINE and grew +20% y/y (or +20% FXN vs +22% FXN in Q2) to a record
  • Mobility MISSED, while Delivery and Freight BEAT

• Q3 adj op income BEAT and grew +38% y/y…margin reached 3.9% of gross bookings (up +50bps y/y and a new record)
• Q3 revenue BEAT and grew +10% y/y (+10% FXN), vs +12% (+11% FXN) in Q2
  • UK business model change reduced rev by $1.1bn (~8pts of growth), which reflects driver payments moving from cost of rev to contra-rev…no change to underlying economics

• Q3 Trips were ~IN-LINE and grew +16% y/y (decel from +18% y/y in Q2)
  • The ~2pt decel was roughly split between Mobility supply constraints and lapping the Trendyol Go acquisition

• Q3 MAPCs of 215mn were ~IN-LINE and grew +14% y/y (decel from +16% y/y in Q2)
  • Monthly trips per MAPC grew +2% y/y to a record 6.3

• Take rate of 24.7% was ~IN-LINE w/ cons 24.6%
  • Driven by Freight, as both Mobility and Delivery came in below expectations

• FCF MISSED by -4.0%

• EPS of 88c was ABOVE cons 86c

Q4 Guidance Mixed W/ In-Line Bookings And EPS, But A Tad Light On Adj EBITDA

• Q4 gross bookings guidance was IN-LINE at the midpt: The range implies growth of +18-22% y/y FXN vs +20% y/y FXN in Q3
  • Assumes ~1pt currency headwind to total reported y/y growth
  • Mobility gross booking growth is expected to have a ~100bps headwind from the Middle East conflict during the busy travel season (vs ~75bps in Q3)
  • Freight gross bookings growth is expected to be ~consistent w/ Q3 pace (+35% y/y) which was well-above cons expectations of +15.6%

• Q4 adj EPS guidance was IN-LINE at the midpt: Implies +34-39% y/y growth vs +35% y/y in Q3

• Q4 adj EBITDA guidance SLIGHTLY MISSED at the midpt:
  • Note that Uber will stop providing the adj EBITDA reconciliation starting with Q4 results in February

International Driver Supply Is The Main Mobility Constraint But Targeted Driver Investment Is Already Showing Early Signs Of Improvement

• Q3 Mobility gross bookings grew +17% y/y FXN, which was a decel from +20% y/y in Q2…the “large majority” of that was from outside the US, where demand has remained “healthy”, but supply growth has not kept pace
  • India: Driver supply growth trailed demand
  • Brazil: Still undersupplied, though modestly better than Q2…elevated fuel prices have meaningfully impacted supply in Brazil and India
  • Canada: Tighter immigration flows have left the market meaningfully undersupplied
  • Also flagged that seasonal pressure (Sept-Dec is peak season for both Mobility and Delivery) is overlapping w/ the y/y supply pressure

• Responding w/ targeted investments in driver acquisition, retention, and reactivation
  • Rebalancing incentives…rider incentives are being reduced and those dollars are funding driver incentives, which can mean higher prices for riders in some cases
    • Incentive allocation is algorithmic, deciding across billions of trips whether a dollar is better spent on a driver in Brazil or a rider in India
  • Already seeing early results…supply hours growth accelerated globally in October, w/ notable improvements in Brazil and India

• In contrast, US Mobility growth moderated much more modestly, supported by continued benefits from insurance reform, with California trip growth accelerating
• Q3 mobility margins reached a record 8%…and the Co is not expecting “any kind of meaningful changes” in margin trajectory despite supply investments
  • Philosophy remains driving margin expansion for the total Co on a y/y basis, and ideally at the segment level as well, but there will be quarterly variability around holiday supply investments

• Looking into Q4…overall Mobility growth trends improved in Q4, “giving us confidence in a consistent YoY growth trajectory in Q4 relative to Q3”
  • Expects the UK business model accounting impact (~350bps Mobility rev margin headwind) to continue in Q4
  • Expects a ~$1.5bn cash payment in Q4 related to the previously disclosed UK VAT tax matter

AVs Are Expanding The Category, Not Cannibalizing It, As Uber Shifts From Partnerships To Commercial Scale

• AVs are expanding the category…
  • In US markets where AVs ran throughout Q3, Uber’s trip growth exceeded the national rate
  • In mature US AV markets, ridesharing has grown ~7pts faster than the rest of the country for several quarters

• Expect ~700 fully driverless vehicles on Uber by YE26 and 2,000+ by YE27 (~half US, ~half international)
  • The bigger commercial ramp is expected to start in 2028, w/ a goal of “tens of thousands” of vehicles in 2028 and beyond

Source: Uber

• The Co will be more selective on AV investment: Uber wants to maintain an open platform for AV partnerships but will focus its resources on fewer partners going forward (those that have the clearest paths to commercial scale and attractive economics at maturity)
  • “Building a broad ecosystem does not mean spreading our resources evenly”

• Unit economics were a key focus…US AV partners average ~30% more trips per vehicle per day on Uber than first-party deployments
  • Waymo and Tesla first-party deployments in markets launched this yr are seeing trips per vehicle per day in the low teens vs the high-20s on Uber’s hybrid network
    • This is a “very durable advantage”…as an illustrative example, a 30% increase in paid trips per vehicle cuts fixed cost per trip by ~23%
    • Addtl advantages over time = scale-advantaged OEM pricing plus shared charging, maintenance, and fleet infrastructure across multiple AV partners (similar to hyperscalers vs on-prem data centers)
  • Goal is for AVs to deliver margins comparable to human-driven trips over time

• Still early stages but long-run expectation continues to be that AV fleets are financed by third-party capital, not Uber’s balance sheet
  • The ~$1bn Santander financing arrangement for traditional fleet partners earlier this yr is the template…expect announcements on both infrastructure and vehicle financing over the next few months
  • Near-term capital deployment is “fairly limited,” but third-party capital will be needed as the fleet scales to 10,000+ vehicles in 2028 and beyond
  • Since AV residual values aren’t established yet, early vehicles will sit on Uber’s balance sheet…financing will be based on revenue potential, where Uber’s utilization premium is an advantage
  • Lender reaction has been positive…banks “want to diversify away from data centers”
  • “So we’re quite optimistic on it, but we do have to establish kind of the business model, the utilization advantages, demonstrate that to the banks, and then go from there”

Broad-Based Delivery Growth Continues, With Courier Supply As The Key Constraint

• Q3 Delivery gross bookings grew +23% y/y FXN w/ organic growth accelerating
  • Headline growth decel’d from +25% FXN in Q2 as the Co laps the Trendyol Go acquisition

• Growth remained broad-based…
  • “Strong” acceleration in both the U.S. and Latin America for the second consecutive qtr
  • Category position hit all-time highs in the UK, France, and Türkiye
  • Japan posted a fourth consecutive qtr of accelerating growth
  • Australia grew ~30% driven by less dense markets
  • Early traction in Argentina, Finland, and Denmark

• “Biggest challenge” right now is courier growth keeping up w/ consumer demand seen on the food side
• Grocery & Retail held at ~40% y/y growth (consistent for multiple qtrs) on a ~$15bn annualized gross bookings run rate
• NOT overly concerned about a potential DoorDash/Instacart combination… “I don’t think, honestly […] it’s going to affect us too much”
  • Merchant partners have reached out worried about the potential deal and want to work more w/ Uber to avoid dependence on a single platform
  • The combination would create a competitor w/ a large share of the online grocery market, BUT mgmt sees the overall market as large enough and will keep investing

• On dark stores, mgmt will be “selective”…the No. 1 priority remains working w/ partners and helping them grow their bizs
  • Delivery Hero has built a substantial quick commerce/dark store business (incl in the Middle East) that is at break-even and growing at attractive rates
  • The Co will consider dark stores in markets where it makes sense, but “it needs to be a business that can be run well, has to meet the market conditions, and has to have a good return on assets”

Some Additional Commentary On Uber One, M&A Pullback, And 3P Agent Oppty  

• Uber One reached ~55mn members globally, accounting for more than half of combined Mobility and Delivery gross bookings
  • Mgmt did not provide a comparable update in Q2, but “surpassed” 50mn in Q1

• Expect minimal to no further M&A through at least 2027 (apart from AV investment) as Uber prioritizes integrating Delivery Hero and ezCater
  • “We are going to shift to, I would say, more of the top two and we’re going to pull back on M&A”…the top two priorities are organic growth and AV investment (~$10bn commitment)
  • Next yr’s focus will be on organic growth, autonomous, and buying back stock opportunistically

• Uber will selectively work w/ third-party agents that bring incremental demand…evaluation criteria include customer experience, sustainable economics, and preserving direct relationships and Uber One benefits
  • “Every single AI assistant company” is talking to Uber and the Co is negotiating terms of trade…“I think the demands on our services are going to be very, very high”
  • BUT mgmt doesn’t want to become dependent on intermediaries, citing past experience in travel being “very dependent on the Googles of the world”
  • Agent-driven volume remains negligible…Halloween week saw ~320mn trips on Uber and Uber Eats, of which AI agents drove ~500 Uber Eats orders and just four rides…”very, very early and very limited traction”