2025-08-15 20:03:14
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GPT-5 has become the default in ChatGPT.
OpenAI CEO Sam Altman says it’s like having a “team of PhD-level experts,” though it’s still not hallucination-proof.
This isn’t a GPT-4-style leap so much as a product gear shift. The upgrades are subtle: performance and cost optimization over headline features.
GPT-5 doesn’t dominate the benchmarks as clearly as expected, which points to a world where models are becoming commoditized. That tilts the game to pricing and distribution, not bragging rights.
As usage rises, who gets paid? Silicon, cloud, platforms, or apps?
Let’s map where the money goes and the KPIs to watch.
Today at a glance:
🧠 GPT-5 is here
🏗️ AI stack economics
☁️ CoreWeave readout
🧭 The investor lens
GPT-5 had an Apple-esque launch: High polish, tight demos, chart crimes, and a few typos. But the message was clear: faster, more capable, and better at deciding when to think longer.
Modes: Auto-switches between chat and “Thinking” for harder tasks.
Context: Up to 400k tokens in the API (with an output cap).
Focus: Better reasoning/coding, fewer hallucinations, more reliable responses.
Access: Available across ChatGPT tiers. Paid tiers keep a model picker.
Scale: ~700 million people use ChatGPT weekly, so default changes matter.
Below is the full OpenAI keynote if you missed it.
Humanity’s Last Exam is a 2,500-question benchmark from CAIS and Scale AI that tests expert-level reasoning across disciplines. OpenAI’s materials show GPT-5 Pro scoring 42%, near the top of reported runs. xAI’s Grok 4 Heavy (with tools) is cited around 44%. Because results depend heavily on tool use and setup, treat comparisons as directional.
Taken together, these results put GPT-5 among the leaders but not clearly ahead. Unlike GPT-4’s 2023 debut, it doesn’t crush the benchmarks.
If we look beyond the noise around the initial release, GPT-5 is undoubtedly a smarter model. A smarter default lowers friction. Lower friction usually drives more usage, and rising usage tends to show up in three places:
Apps monetize through seats and overage.
Clouds monetize through GPU hours and long-term commitments.
Chip suppliers monetize through capacity builds.
In the near term, the scoreboard that matters isn’t a benchmark table. It’s all about reliability, latency, and delivered cost per task. Those three KPIs determine who expands margins as shiny new model adoption spreads.
In the AI cycle, dollars flow bottom-up:
Revenue recognition hits silicon on shipment,
then clouds as utilization catches up,
then software once AI features actually monetize.
In a mature stack, a usage bump hits cloud/model API spend first. Silicon moves only when utilization stays high enough to trigger capacity adds. Apps depend entirely on pricing design (seat, usage, or outcome).
A customer pays for features or outcomes in an app or platform. That app calls a model API or a hosted model. The request runs on cloud GPUs/NPUs. Sustained demand drives capacity additions at chipmakers and equipment suppliers. One user action, many ledgers.
What changes: Engagement will increase with GPT-5 as the new default and more model releases from competitors on the horizon. Software monetization depends on pricing design (seat add-ons, usage overage, outcome fees). Speed and consistency unlock broader rollouts, while flaky UX stalls them.
P&L (where it shows):
Revenue: AI tiers, usage overage, outcome/workflow pricing, bundles.
COGS: inference (API or self-host), eval/guardrails.
Margin levers: packaging/price tests, orchestration efficiency, partial on-device.
Who’s impacted (examples): ADBE · CRM · NOW · INTU · SHOP · DUOL.
What to watch: AI products attach %, ARPU lift, $/task trend, net retention, RPO.
What changes: Newer models mean higher call volume from default routing, increasing enterprise demand for private deploys/fine-tunes, as reliability and latency drive stickiness.
P&L (where it shows):
Revenue: per-token/compute usage, fine-tuning, private tenancy, eval/guardrail add-ons.
COGS: serving infra, safety layers, data/licensing.
Margin levers: batching, quantization, caching, tokenizer/context tricks.
Who’s impacted (examples): GOOG (Gemini) · META (Llama hosting) · MSFT (Azure OpenAI) · IBM (watsonx) · BIDU (ERNIE) · and private companies like xAI (Grok) · Anthopic (Claude).
What to watch: effective $/1k tokens, latency/uptime, enterprise mix, net retention.
What changes: More GPU hours, longer commitments; better depreciation leverage as utilization rises. Energy/networking can offset gains.
P&L (where it shows):
Revenue: AI instances, GPU hours, reserved capacity; software attach.
COGS: depreciation from prior capex, power/networking.
Margin levers: utilization, scheduling, DC efficiency, software attach.
Who’s impacted (examples): MSFT · AMZN · GOOGL · ORCL · CRWV
What to watch: utilization %, backlog/commitments, GPU-hours growth, gross-margin bridge (utilization vs energy).
What changes: If elevated utilization persists, capacity adds follow (accels, HBM, networking, tools). Mix shifts (training ↔ inference SKUs) matter for margin.
P&L (where it shows):
Revenue: accelerators/networking; wafers; EUV/High-NA tools.
COGS/Cash: yields, inventory cycles; prebuys/long-lead deposits.
Margin levers: high-end mix, software/SDK attach, supply tightness.
Who’s impacted (examples): NVDA · AMD · AVGO · TSM · ASML
What to watch: Date Center revenue mix, lead times, backlog duration/quality, gross-margin trajectory.
🎓 Training hits cash first (capex at clouds), then flows into depreciation inside COGS over time. It pulls forward revenue for silicon and equipment.
🤖 Inference is an ongoing variable cost for apps/platforms (or a pass-through if priced per token). Unit cost falls with better batching, quantization, caching, and partial on-device execution. Reliability and latency shape what you can charge.
What matters next: For software companies, watch AI revenue call-outs during earnings. For cloud, watch utilization and GM bridges. For chips, watch lead times and backlog. Elsewhere, watch and $/task trend. Those tell you who’s keeping the surplus as usage scales with new models like GPT-5.
CoreWeave’s quarter had two truths at once:
Revenue surged 3x Y/Y to $1.21 billion ($130 million beat). The company had a small operating profit, but interest expense of nearly $0.3 billion on $11 billion of debt weighed on results. The loss per share (-$0.60) came in wider than expected, causing the stock to drop.
The order book is getting heavier. Management flagged a $30.1 billion revenue backlog (+16% Q/Q), and reiterated the storyline you’re hearing across AI infra: demand continues to outstrip supply. They notably added a $4 billion extension from OpenAI.
That shows up in guidance too: FY25 revenue was raised by $250 million to $5.15–$5.35 billion. The market didn’t celebrate (the new demand from OpenAI was expected), but the forward signals are positive.
CoreWeave closed the ~$1.7 billion acquisition of Weights & Biases, folding model monitoring and developer workflows into the platform. Management has been touting early Blackwell availability at scale, useful talking points when customers want both capacity and a cleaner ops experience. Meanwhile, the pending $9 billion Core Scientific deal is a straight capacity and power play: more sites, more megawatts, faster.
For now, operating expenses are outrunning revenue. But if backlog keeps building and customers keep shifting inference to specialized GPU clouds, CoreWeave remains a clean demand proxy for silicon (NVDA et al.) and a use-hours proxy for the broader cloud cycle.
What to watch next: Utilization and booked capacity (does backlog convert?), any color on pricing as Blackwell ramps, and whether the W&B integration surfaces higher-margin software attach. If those move the right way, the earnings math gets easier, long before a new data center comes online.
Benchmarks about the latest “best models” make headlines, but economics move stocks. Over the next 3 to 5 years, the winners are the companies that turn their models into durable revenue and expanding margins and can show it in the numbers, not the demos.
Distribution power. Defaults, OS/browser/device placement, and enterprise bundling decide adoption speed. A great model without distribution looks like a feature. With distribution, it looks like a standard.
The cost curve. Watch the delivered cost per task. Routing, batching, quantization, caching, and partial on-device execution push it down. Energy and networking push it up. Margin accrues to whoever bends this curve the fastest.
Reliability and latency. These unlock outcome pricing, agentic workflows, and renewal quality. If responses are slow or inconsistent, customers cap usage. Benchmarks don’t matter if the product doesn’t feel fast and dependable.
Disclosure quality. Clear KPI breakouts (utilization, attach, commitments, $/task trend) deserve a valuation premium. Vague roll-ups don’t.
Capacity cycle. If supply stays tight, pricing power and utilization support margins. But there will be a point when supply outruns demand (eventually).
Regulatory & licensing drag. Content deals, provenance audits, and safety/usage rules can shift who pays for what (and when).
Attach & ARPU: Are AI tiers creating real uplift without raising churn?
Utilization & commitments: Are GPU hours rising and contract durations extending?
Gross-margin trend: Is depreciation leverage outpacing energy/inference costs?
Lead times & backlog quality: Are orders firming or slipping?
On-device share: Any visible shift of inference away from the cloud? Are more devices shipped with a capable Neural Processing Unit?
We’ll track these KPIs in our earnings coverage in the coming quarters and show them in clean visuals. As software, cloud, and silicon leaders report their performance, you’ll see where the dollars moved.
That’s How They Make Money.
That’s it for today!
Stay healthy and invest on.
Disclosure: I own AAPL, ADBE, AMD, AMZN, ASML, CRM, DUOL, GOOG, INTU, META, NVDA, SHOP, and TSM in App Economy Portfolio, our investing service, where we identify and accumulate shares of exceptional companies—from fast-growing disruptors to proven cash machines.
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Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or the views of any other organization.
2025-08-13 00:07:53
Welcome to the Premium edition of How They Make Money.
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Circle’s splashy June debut turned into a rocket ride, fueled by USDC momentum and fresh stablecoin rules from the Genius Act. Today brings the first real scoreboard: Circle’s first earnings as a public company. After a 5× run from the IPO price, this is the market’s first test of the story.
Also in today’s roundup: visuals on Nintendo’s record Switch 2 launch, Sea’s profitable growth, On’s DTC mix, and Monday.com’s stumble.
Today at a glance:
🍄 Nintendo: Switch 2 Off to the Races?
🌊 Sea: Scaling Profitably
🪙 Circle: Stablecoin Tailwinds
👟 On: Premium Momentum
📆 Monday.com: Conservative Guide
Seven weeks into launch, the Switch 2 is rewriting Nintendo’s record books. The $450 hybrid console shipped 6 million units in June (which was Q1 fiscal FY26 for Nintendo), and they were sold through by early August. That makes it the fastest-selling home console in history. For context, the original Switch moved 2.7 million units in its first month, but it would have sold far more if supply had matched demand.
The hot start doubled Nintendo’s revenue to ¥572 billion ($3.8 billion), though operating profit was flat at ¥57 billion as marketing spend surged to promote the console and its marquee title Mario Kart World. Bundled with most hardware, the game has already sold 5.6 million units.
Nintendo left its Switch 2 FY26 forecast (12 months ending in March 2026) of 15 million units unchanged, setting up a potential underpromise-overdeliver story. Though reports of the console being easier to find on shelves may signal softening demand. The next big catalyst is Pokémon Legends: Z-A in October.
Despite a thin launch line-up, early momentum suggests Switch 2 will be “more of the same.” That’s exactly what Nintendo needs after the rough Wii-to-Wii U transition. By delivering a “better Switch” for an installed base of over 153 million, Nintendo is playing to its strengths.
Tariffs remain the wildcard. A new 20% US levy on Vietnamese-made hardware could turn the segment unprofitable, prompting talk of price hikes next fiscal year. For now, Nintendo is downplaying the impact. The focus is on keeping the Switch 2 hype rolling through the holidays.
Sea’s revenue rose 38% Y/Y to $5.3 billion ($0.3 billion beat), though GAAP EPS was only $0.65 ($0.04 miss). Operating income skyrocketed to $488 million (vs. $83 million a year ago). Adjusted EBITDA surged 85% Y/Y to $829 million.
🟠 Shopee‘s GMV accelerated, up +28% Y/Y to $29.8 billion. Revenue surged even more, +34% Y/Y to $3.8 billion. Fending off TikTok Shop’s social commerce push and Lazada’s promos, Shopee’s edge is leaning on ad monetization and logistics density. In Brazil, Shopee’s flywheel keeps spinning despite Mercado Libre’s fortress. Proof that lower subsidies and faster delivery can coexist through more efficient operations.
🔵 Monee (formerly SeaMoney) revenue jumped 70% Y/Y to $883 million.
Fintech is quietly becoming the cross-sell machine: pay-at-checkout, working-capital loans for sellers, and expanding credit to prime users. Management expects the loan book to grow faster than Shopee GMV. Watch take rates and Non-Performing Loans (NPLs) to confirm quality over volume. So far, so good, with the NPL90 ratio remaining stable at 1%.
🔴 Garena revenue rose 28% Y/Y to $559 million, as Bookings growth normalized to 23% Y/Y (the best indicator of future revenue growth). Free Fire was still the growth engine with over 100 million daily users. Guidance is now over 30% bookings growth in 2025. More IP collabs and new genres suggest a broader pipeline, not just a one-title bounce.
All told, Sea is scaling across e-commerce, fintech, and gaming without reigniting subsidy wars. In the coming quarters, watch TikTok Shop’s promo intensity, Brazil unit economics versus Mercado Libre, Monee’s credit quality, and Garena’s holiday slate. The through-line is growth and profits powered by ads, logistics density, and a fintech cross-sell that’s starting to look like a moat.
2025-08-09 22:02:12
Welcome to the Saturday PRO edition of How They Make Money.
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📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
💊 Eli Lilly: Pill Doubts
🍟 McDonald's: Reigniting Growth
🇨🇦 Shopify: Canada’s Largest Stock
🚖 Uber: Accelerating User Metrics
🇩🇰 Novo Nordisk: Growth Reset
🧬 Amgen: Obesity Trials Advance
🖥️ Sony: PlayStation Power
🌐 Arista Networks: AI Tailwinds Accelerate
💉 Pfizer: Costs in Check
📱 AppLovin: Self-Serve Era Incoming
🛖 Airbnb: International Offsets Soft US
🔒 Fortinet: Slowing Services Growth
🏨 Marriott: International To The Rescue
🏈 Flutter: FanDuel’s Winning Streak
🇰🇷 Coupang: New Verticals Deliver
☁️ Atlassian: AI Momentum
🐶 Datadog: AI Cohort Lifts Outlook
🔲 Block: Borrow Fuels Rebound
📺 The Trade Desk: Kokai at Scale
🎮 Take-Two: Raising the Bar
🌮 YUM Brands: Digital Milestone
🎤 Live Nation: Latin America in Focus
🍞 Toast: New Locations Record
📢 HubSpot: AI-First Strategy Pays Off
📌 Pinterest: Gen Z Fuels Growth
✈️ Expedia: Guidance Takes Off
👑 DraftKings: Lucky Quarter
🏠 Zillow: Rentals Surge Again
🌎 Global Payments: Ongoing Shift
💬 Twilio: Growth Accelerates
🦉 Duolingo: New Subjects Take Flight
👻 Snap: Ad Glitch Hits Growth
💻 Paycom: AI-Driven Efficiency
🗞️ New York Times: AI Boosts Bundles
🔥 Match Group: Signs of Stabilization
🏴 Klaviyo: Upmarket Gains
🧬 Tempus AI: Genomics Revs Up
🚘 Lyft: Still Trailing Uber
🚲 Peloton: Profitable Again
🌊 Digital Ocean: AI Lifts Outlook
🍽️ Tripadvisor: Marketplaces Take the Lead
🎓 Docebo: Mid-Market Momentum
Eli Lilly’s Q2 revenue surged 38% Y/Y to $15.6 billion ($0.9 billion beat), led once again by its GLP-1 duo—Mounjaro (+68% to $5.2 billion) and Zepbound (+172% to $3.4 billion). Non-GAAP EPS jumped 61% to $6.31 ($0.72 beat), with gross margin improving to 84%.
Lilly raised its full-year revenue guidance to $60–62 billion (up from $58–61 billion), and non-GAAP EPS to ~$22.25 (from ~$21.53). Performance margins are expected to reach up to 45.5%, with plans to nearly double incretin production in 2H25.
But sentiment turned. Shares dropped ~14% on underwhelming Phase 3 data for orforglipron, its once-daily oral weight-loss pill. Patients lost up to 12.4% of body weight, trailing injectables like Novo Nordisk’s Wegovy (~15%), while 10% discontinued due to gastrointestinal side effects. Rival Novo surged on the news.
CEO Dave Ricks defended the profile, emphasizing oral convenience and scalable manufacturing. Despite headwinds like CVS dropping Zepbound, Mounjaro is now the top diabetes incretin in the US. The long-term thesis remains, but the road to pill-based dominance may be bumpier than hoped.
McDonald’s returned to growth in Q2, with global same-store sales up 4%, ending a streak of weak quarters. US comps rose 2.5%, a sharp rebound from last quarter’s -3.6% decline, driven by positive check growth and strong reception to Snack Wraps, $5 bundles, and Minecraft-themed promotions. Revenue grew 5% Y/Y to $6.8 billion ($140 million beat), and EPS reached $3.19 ($0.04 beat).
International Licensed Markets (+6%) and International Operated Markets (+4%) outperformed, supported by value deals and new product launches like the Chicken Big Mac in Germany.
McDonald’s reaffirmed its full-year operating margin guidance in the mid-to-high 40% range and expects 2,200 new restaurant openings in 2025 (1,800 net adds). Digital remains a focus, with loyalty users exceeding 185 million across 60 markets and a 2027 target of 250 million.
Despite ongoing pressures on low-income consumers, management sees momentum building. CEO Chris Kempczinski cited a bifurcated consumer landscape but emphasized McDonald’s scale, affordability, and IP tie-ins as key to reengaging core customers and sustaining traffic gains.
Shopify’s Q2 revenue jumped 31% Y/Y to $2.68 billion ($130 million beat). Gross merchandise volume surged 31% to $87.8 billion ($6 billion above expectations), with notable acceleration in Europe (+42% Y/Y in constant currency). Monthly recurring revenue rose 9% Y/Y to $185 million.
Operating income came in at $291 million (vs. $248 million consensus). Net income soared to $906 million, driven by operating leverage and favorable equity investment in Affirm, Global-e, and Klaviyo after last quarter’s drag (see ‘Other” for $615 million in the top right of the visual). Free cash flow hit $422 million, or 16% of revenue (up from 15% in Q1).
Shopify regained its position as Canada’s most valuable public company, with shares surging over 20% to a new 52-week high. Wall Street celebrated large merchant adoption and international momentum. Citi called it a “blowout” quarter, suggesting market share gains more than offset macro concerns and tariff risk.
Looking ahead, Shopify expects Q3 revenue growth in the mid-to-high 20% range and gross profit growth in the low 20% range. Tariff pressures remain something to watch, but investor focus has shifted to the platform’s ability to scale across geographies and segments.
Uber’s Q2 revenue rose 18% Y/Y to $12.7 billion ($230 million beat). Gross bookings showed no sign of slowing down, rising 18% Y/Y to $46.8 billion, driven by 18% trip growth and a 15% rise in monthly active users to 180 million (an acceleration). Delivery outpaced Mobility again, with bookings up 20% vs. 16%, as Uber pushes its “barbell strategy” to serve both cost-conscious and premium users.
Adjusted EBITDA climbed 35% to a record $2.1 billion (4.5% of bookings), while free cash flow surged 44% to $2.5 billion. Net income reached $1.4 billion, aided by strong operating leverage and investment gains. Uber One membership jumped to 36 million, now contributing 40% of total bookings.
Despite the record quarter, Mobility bookings narrowly missed estimates ($23.8 billion vs. $23.9 billion). Still, Uber authorized a massive $20 billion buyback, effectively $23 billion with remaining capacity.
Looking ahead, Uber guided Q3 gross bookings to grow +17% to 21% in constant currency, and adjusted EBITDA to grow +30% to 36%. CEO Dara Khosrowshahi emphasized platform cross-sell and AV expansion, with new Waymo deployments in Atlanta and partnerships with Lucid, Nuro, and others to scale autonomous fleets over time. We covered the latest partnership in our review of Tesla’s earnings.
2025-08-08 20:04:07
Welcome to the Free edition of How They Make Money.
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The world’s most valuable sports league now owns a piece of the network that broadcasts it.
In a landmark no-cash deal, Disney is giving the NFL a 10% stake in ESPN, valued at roughly $3 billion. In return, ESPN will take over the distribution of NFL Network, RedZone, and other league content.
It’s a move for strategic control, and it comes just weeks before ESPN launches its $30-per-month standalone streaming app.
With YouTube, Amazon, Netflix, and Apple circling, Disney is doing everything it can to lock in the most valuable content in live sports: NFL games. Giving the league partial ownership ensures ESPN is aligned with its most essential partner and stays relevant as the cable bundle crumbles.
As CEO Bob Iger put it:
“This will go a long way toward improving ESPN’s prospects as it migrates to a direct-to-consumer product.”
Disney’s play is simple: mitigate churn today, gain pricing power tomorrow.
It’s building a premium streaming experience anchored by live sports, with fantasy, betting, personalized highlights, and e-commerce on deck. The endgame? Competing head-on with FanDuel, DraftKings, and Big Tech.
This summer’s biggest media move didn’t happen at the box office, but in the boardroom. And Disney’s deal with the NFL could inspire the rest of the market.
Today at a glance:
📈 Streaming subscriber trends
🏰 Disney: Parks & Streaming To The Rescue
🦚 Comcast: Broadband Slide Continues
🎥 Warner: Studio Hits Lead the Show
⛰️ Paramount: Last Quarter Before Skydance
Remember, Netflix capped 2024 with 302 million members, but has stopped sharing membership numbers. That leaves us focusing on the best of the rest. Let’s zoom in on the streaming platforms still reporting their figures.
Net additions were meager across the board. Only HBO Max gained a meaningful number of subscribers in Q2, but much of that growth came at a lower average revenue per user, driven by ad-tier distribution and international expansion.
Note: Platforms like YouTube Premium, Prime Video, and Apple TV+ don’t share subscriber numbers quarterly—if at all.
Now, let’s break down how the biggest players performed this quarter.
Disney’s fiscal year ends in September, so the June quarter was Q3 FY25.
📈 Streaming stays profitable: Direct‑to‑consumer earned $346 million in operating income, its fourth straight profitable quarter, driven by higher pricing and improved efficiency. Disney+ added 1.8 million subscribers (reaching 128 million), while Hulu gained 900,000 (reaching 56 million), both slightly below expectations. Average revenue per user for Disney+ rose 1% to $7.86. Starting next fiscal year, Disney will stop reporting subscriber counts, focusing instead on profitability metrics, following in Netflix’s footsteps.
🏰 Parks and cruises surge: Experiences revenue rose 8% to $9.1 billion, with operating income up 13% to $2.5 billion, a record Q3 for Walt Disney World despite new competition from Universal’s Epic Universe. Domestic parks and cruise demand remained strong, while China parks faced softer attendance. Disney highlighted early bookings for its new Singapore‑based cruise ship launching in December, already sold out for its first two quarters.
📺 Linear TV remains a drag: Revenue from traditional TV networks fell 15% to $2.3 billion, with operating income down 28% to $0.7 billion amid cord‑cutting and weaker ad rates. ESPN’s revenue slipped 5%, though Disney is preparing to launch its $30‑per‑month standalone ESPN streaming service in August, bundled with Hulu and Disney+ for $36.
🍿 Content sales mixed: Content Sales and Licensing revenue rose 7% to $2.3 billion, though theatrical results were uneven. Pixar’s Elio was a box office disappointment, and Thunderbolts underperformed despite a strong Marvel brand. Still, licensing and home entertainment drove segment growth, with Lilo & Stitch helping boost merchandise revenue.
🔮 Updated guidance: Disney raised its FY25 adjusted EPS growth forecast to 18% year-over-year (up from 16% previously) and expects $1.3 billion in annual streaming operating income. Experiences are projected to grow 8%, sports 18%, and entertainment DTC double digits.
What to make of all this?
Disney is betting big on bundled streaming (Disney+/Hulu/ESPN) and franchise‑driven films to carry momentum into FY26. With Lilo & Stitch topping $1 billion and Fantastic Four leading the box office, Disney has regained its blockbuster footing. But it faces the challenge of balancing nostalgia, new IP, and heavy content investments.
📸 Big picture: Revenue grew 2% to $30.3 billion ($0.5 billion beat), adjusted EPS rose 3% to $1.25 ($0.07 beat), and free cash flow reached $4.5 billion. A massive $9.4 billion gain from the Hulu sale inflated net profit to $11.0 billion.
📉 Subscriber losses widen: Comcast lost 226,000 broadband customers in Q2, deeper than Q1’s 199,000 losses but better than the 257,000 analysts expected. Pay-TV losses also eased slightly to 325,000 versus 383,000 expected. Wireless was a standout, adding a record 378,000 lines. Connectivity and platforms revenue was slightly up at $20.4 billion, supported by new pricing guarantees and bundled offers.
📈 Peacock’s losses shrink: Peacock ended the quarter flat at 41 million subscribers, with revenue up 18% to $1.2 billion (part of the Media segment). Losses narrowed to $101 million from $215 million last quarter, helped by Love Island USA engagement. A $3 monthly price hike begins in Q3, ahead of NBA streaming rights launching this fall.
🎥 Studios lift results: Universal Studios revenue rose 8% to $2.4 billion on the strength of How to Train Your Dragon. The July release of Jurassic World: Rebirth is expected to boost Q3. Content licensing also contributed to the gain, though EBITDA fell 31% due to higher costs.
🎢 Epic Universe drives parks surge: Theme parks revenue jumped 19% to $2.3 billion with the opening of Epic Universe in Orlando. Management highlighted strong pre‑bookings, higher per‑capita spending, and minimal cannibalization of other Universal parks.
📺 Versant spinoff progresses: Comcast is spinning off MSNBC, CNBC, USA Network, and other cable channels into Versant Media Group by year‑end. The move aims to streamline operations around broadband, streaming, and wireless, while freeing Versant to pursue acquisitions and turnaround strategies.
What to make of all this?
Comcast’s growth engines — wireless, parks, and Peacock — are firing, but the broadband slide overshadows the story. Even with better‑than‑expected losses, reversing the core decline remains the swing factor for sentiment. The Hulu windfall and Versant spinoff give Comcast breathing room to double down on growth bets, but investors will watch closely for proof that broadband can stabilize before the rest of the portfolio offsets the drag.
🎬 Studios rebound: Studios revenue surged 55% Y/Y to $3.8 billion, powered by hits like Minecraft, Sinners, and Final Destination: Bloodlines. Adjusted EBITDA reached $0.9 billion, with a full-year target of $2.4 billion. Management emphasized fewer, bigger films going forward—targeting 12–14 annual releases, including tentpoles like Superman, The Lord of the Rings, and Harry Potter.
📺 Linear still dragging: Global Networks revenue fell 9% Y/Y to $4.8 billion, and EBITDA declined 24% to $1.5 billion, with cord-cutting and weaker international rates driving the slump. US viewership declines, especially post-NBA and March Madness, continue to weigh on ad sales (down 13%). Warner completed six major carriage renewals and is preparing to spin off this segment as a standalone entity.
📈 More subscribers at a lower price: The “re-rebranded” HBO Max and Discovery+ added 3.4 million subscribers in Q2, reaching 126 million globally, above expectations. Streaming revenue rose 9% to $2.8 billion, and adjusted EBITDA flipped to a $293 million profit from a loss a year ago. However, ARPU fell 11% globally (-8% in the US), as growth skewed international and ad-tier wholesale deals weighed on pricing. Management remains confident in hitting $1.3 billion streaming EBITDA by 2025 and 150 million subs by 2026.
💵 Profit and debt progress: Warner had a small operating loss (see visual), compared to a $10 billion loss a year ago (which included write-downs). Free cash flow hit $700 million, despite $250 million in separation-related costs. The company reduced gross debt by $2.7 billion in the quarter to $35.6 billion, with net leverage at 3.3x. CEO David Zaslav says the company is “past peak investment mode” and shifting focus to harvesting returns.
🌍 Strategic clarity post-split: Warner Bros. Discovery is preparing to split into two by mid-2026:
Warner Bros.: Streaming and Studios (HBO, Max, DC, Gaming, IP library).
Discovery Global: Cable networks (CNN, TNT, Discovery, sports, Discovery+).
Streaming password-sharing crackdowns will begin in Q4 2025, with broader monetization efforts expected in 2026. International expansion continues, with HBO Max launching in Australia and plans for Europe (UK, Germany, Italy) in 2026.
What to make of all this?
Zaslav emphasized that “a three-year attack plan” is paying off, calling out HBO Max momentum, box office success, and disciplined IP development. CFO Wiedenfels said a “10-digit figure” of deferred intercompany profit is expected to flow into the P&L over time. Management stressed cost control and bundling as future growth levers.
📈 Streaming momentum: Direct‑to‑consumer revenue rose 15% to $2.2 billion, with Paramount+ subscribers at 78 million (down 1.3 million sequentially due to an expired international bundle). Streaming losses narrowed sharply, and adjusted operating profit improved to $157 million from $26 million a year ago, marking global profitability for the first half of 2025. Engagement rose 11% Y/Y, with churn down 70 basis points.
🎥 Film division rebounds: Filmed entertainment revenue grew 2% to $690 million, led by an 84% jump in theatrical revenue from Mission Impossible: The Final Reckoning, offset by a decline in licensing due to weaker animated content. Franchise strength is boosting library viewership across Paramount+, though the segment posted an $84 million loss amid rising production costs.
📉 TV media declines persist: TV media revenue fell 6% to $4.0 billion as cord‑cutting and weak ad markets weighed on results. Adjusted operating profit declined 15% to $863 million, with affiliate and ad revenue both under pressure despite solid sports programming.
🤝 Skydance merger: The $8 billion merger with Skydance Media received FCC approval and just closed on August 7. David Ellison will lead the new Paramount Skydance Corporation (ticker: PSKY), with Jeff Shell as president. Paramount agreed to employ an ombudsman for two years to monitor political bias at CBS as part of the approval conditions.
⚖️ Legal overhang resolved: Paramount settled the $16 million lawsuit filed by President Trump over a 60 Minutes interview. The settlement avoided further legal distraction during merger negotiations but sparked controversy, coinciding with CBS’s cancellation of The Late Show with Stephen Colbert.
What to make of all this?
The Skydance deal resets the company’s future, bringing new leadership, deeper resources, and a franchise-driven strategy. But challenges remain: linear declines, political scrutiny, and the need to sustain streaming momentum in a crowded market will determine whether Paramount Skydance can turn this pivot into lasting growth.
📊 Stay tuned for over 40 companies visualized tomorrow in our PRO coverage!
Eli Lilly, Uber, Shopify, Airbnb, Sony, Celsius, Duolingo, and more.
That’s it for today!
Stay healthy and invest on!
Disclosure: I own AAPL, AMZN, GOOG, NFLX, and ROKU in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-08-06 05:48:24
Welcome to the Premium edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
A flood of reports from the world’s most‑watched companies is rolling in, and we’re tracking the early standouts.
Coming up: Disney, Warner, Shopify, Uber, Airbnb, and more.
Today at a glance:
🦎 Berkshire: Kraft Heinz Pain
🕵️ Palantir: ‘Astonishing AI Impact’
↗️ AMD: AI Demand vs. China Curbs
🤝 Mercado Libre: Free Shipping Trade‑Off
🏎️ Ferrari: Tariff Relief
⚡️ Axon: AI and Software Propel Growth
💊 Hims & Hers: GLP‑1 Reset
Warren Buffett’s Berkshire booked a $5.0 billion write‑down on its long‑troubled Kraft Heinz stake, using the equity method (an accounting adjustment that lowers the value of its investment), cutting its carrying value to $8.4 billion.
Revenue slipped 1% Y/Y to $92.5 billion with a relatively flat operating profit as wildfire losses in its insurance arm wiped out gains at BNSF and Berkshire Energy. Net profit plunged versus last year, driven by smaller investment gains and the write-downs.
The cash hoard remains massive at $344 billion, near record highs, but Berkshire stayed cautious: no buybacks for a fourth straight quarter and net equity sales of nearly $7 billion. With Buffett set to step down as CEO at year-end, successor Greg Abel inherits both the war chest and the challenge of deploying it. For now, Berkshire is signaling patience, waiting for the right pitch rather than swinging at every opportunity.
Palantir smashed expectations again, crossing $1 billion in quarterly revenue for the first time, up 48% Y/Y and $61 million ahead of estimates. Total US revenue grew 68% to $733 million, cementing the US as Palantir’s growth engine. US commercial sales surged 93% to $306 million, while US government revenue climbed 53% to $426 million.
Management raised full‑year guidance across the board: revenue now expected to grow 43% Y/Y to ~$4.15 billion (vs. $3.9 billion prior) and free cash flow to reach $1.8–$2.0 billion. The company also posted a record Rule of 40 score of 94 and record total contract value of $2.27 billion (+140% Y/Y), reflecting surging demand for its AI platform (AIP) and a string of new federal deals, including a 10‑year, $10 billion Army contract consolidation.
CEO Alex Karp called the performance “once in a generation,” pointing to Palantir’s years‑long bet on AI infrastructure, from Ontology to embedded AI tools, finally translating into record demand across both defense and enterprise customers.
PLTR is now a 10‑bagger (up 900%) since it entered our real-money portfolio in January 2024, a sign of just how wild investor enthusiasm around Palantir and AI has become. The stock is trading at the highest multiples in the S&P 500, and valuation risk is hard to ignore, even as the company cements itself as a leader at the intersection of defense and enterprise AI.
AMD’s revenue climbed 32% Y/Y to $7.69 billion ($260 million beat), while adjusted EPS of $0.48 was in line.
Data Center rose 14% Y/Y to $3.2 billion on demand for MI300 accelerators and EPYC processors, though growth slowed and margins were hit by US export controls on the MI308 chip. Without the $800 million charge tied to these restrictions, adjusted gross margin would have been 11 points higher.
Client revenue jumped 67% Y/Y to $2.5 billion, driven by strong uptake of Ryzen 8000 and Zen 5 desktop CPUs as AMD gained share from Intel. AI‑capable laptops also boosted sales, reflecting a broader PC refresh cycle. Gaming revenue surged 73% to $1.1 billion on higher semi‑custom chip shipments for PlayStation and XBOX consoles and steady GPU demand, aided by AI‑accelerated features.
The Q3 outlook beat expectations. AMD guided revenue to $8.7 billion (midpoint), roughly $0.4 billion above consensus, with gross margin expected to rebound to 54%. The outlook excludes China AI chip shipments as licenses remain under review, making the beat even more impressive.
CEO Lisa Su expects “significant growth” in the second half, driven by computing and AI demand. AMD is still very much in the AI race.
2025-08-03 22:02:36
Welcome to the Premium edition of How They Make Money.
🔥 The July report is here!
All the key earnings visuals from the past month in one place.
✔️ Cut through the noise with clear, concise financial snapshots.
✔️ See revenue trends, profit margins, and key takeaways instantly.
Download the full report below or log in to your account.
![Screen Recording 2025-08-01 at 5.16.40 PM.mov [video-to-gif output image]](https://substackcdn.com/image/fetch/%24s_!Yhro!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd6cf561b-e231-4365-8d7e-462e496dd43d_800x450.gif "Screen Recording 2025-08-01 at 5.16.40 PM.mov [video-to-gif output image]")
Here’s a sneak peek of the 80+ companies included. 👀
💬 Social: Meta, Reddit.
🏝️ Travel: Booking, Hilton.
📦 Marketplaces: Etsy, Grab.
🚗 Automotive: Tesla, GM, Ford.
🎮 Gaming: Electronic Arts, Roblox.
📈 Investing: Coinbase, Robinhood.
💊 Biopharma: AbbVie, Merck, J&J.
🔬 Equipment: ASML, Lam Research.
🛩️ Defense: Boeing, Lockheed Martin.
🍫 Food: Hershey, Kraft Heinz, Mondelez.
👜 Luxury: LVMH, Hermès, L’Oréal, Kering.
🥤 Beverage: Coca-Cola, Constellation, Pepsi.
🌮 Franchises: Chipotle, Domino’s, Starbucks.
☁️ Big Tech: Apple, Amazon, Google, Microsoft.
✈️ Airlines: American, Delta, Southwest, United.
📞 Telecom: AT&T, Comcast, Verizon, T-Mobile US.
🍿 Entertainment: Netflix, Paramount, Roku, Spotify.
💳 Payments: Amex, Fiserv, Visa, Mastercard, PayPal.
🏥 Healthcare: UnitedHealth, Intuitive, Align, Novartis.
💰 Wealth: Morgan Stanley, Goldman Sachs, BlackRock.
⚙️ Semis: Arm, Cadence, Intel, KLA, Qualcomm, TSMC, TXN.
🏦 Banks: JPMorgan, BofA, Wells Fargo, Citigroup, Schwab, SoFi.
💻 Software: Appfolio, Confluent, Cloudflare, IBM, SAP, ServiceNow.
Plus Adidas, P&G, GE Vernova, and others.