2025-10-07 22:08:04
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That makes it the world’s most valuable private company, far ahead of Elon Musk’s SpaceX and TikTok’s parent ByteDance (as of October 2025).
The company’s ambition now extends far beyond paid seats. It is wiring a full-stack commerce engine into ChatGPT, aiming to convert conversational queries into direct purchases.
The goal is to master the journey from vague user intent to specific product, a place where today’s social discovery feeds still struggle. This could be a boon for Etsy and Shopify merchants that live in the long tail.
But this vision is gated by a brutal physical reality: it requires an AI power grid of unprecedented scale. This has forced a sophisticated and risky $100 billion partnership with NVIDIA, built on complex financial engineering and a high-stakes bet on the future of energy. Oh, and did we mention that new deal with AMD, where OpenAI will take up to a 10% stake?
This is a story about megawatts, money, and moats.
What’s inside:
ChatGPT goes after commerce
The OpenAI-NVIDIA deal
The OpenAI-AMD deal
Power is the moat
The cash reality of the AI bubble
Circular financing & accounting
NVIDIA’s Berkshire-sized problem
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Based on an internal forecast reported by The Information in April, OpenAI targets $125 billion in revenue by 2029.
ChatGPT alone is expected to reach $60 billion in revenue by 2029, primarily from paid subscriptions (Plus, Pro, Business, and Enterprise). It’s not unprecedented if you use Microsoft’s Productivity & Business suite as a comp ($120 billion in revenue in FY25), but it would require universal adoption in the corporate world at a time when competition is fierce in agentic work.
For perspective, Meta needed 12 years to go from ~$4 billion to ~$135 billion in annual revenue, across a family of apps used by 3+ billion people each month.
The bigger story is monetizing the free audience, starting with native shopping.
Search and social feeds push you toward what’s already popular. An assistant starts earlier in the funnel. You describe a problem, not a brand. That’s where long-tail inventory wins. The assistant can surface a perfect niche product you didn’t know to search for, and then close the loop inside the chat.
Instant Checkout inside ChatGPT: Users can discover and buy without leaving the assistant (rolling out with Etsy listings in the US, with Shopify next). Even if the first version of checkout is basic, ChatGPT would offer the shortest path to fixing a problem with a purchase. It’s the on-ramp to monetizing the free audience with commerce.
Merchant rails and payments: OpenAI published an open standard so sellers can make their products shoppable inside ChatGPT. When multiple merchants offer the same item, enabling Instant Checkout becomes the way to be the link that converts. OpenAI says results aren’t pay-to-play, but the incentive is clear: wire your catalog and let the agent complete the funnel.
Upstream supply & siting: OpenAI announced memory-supply letters in South Korea (Samsung, SK Hynix) and discussions about hosting data centers there. It’s a wafer-to-watt hedge. The goal is to lock HBM and locations so inference capacity actually shows up as adoption grows.
That brings us to the massive deal with NVIDIA.
OpenAI is building an AI factory of unprecedented scale, and NVIDIA is fronting the $100 billion bill. The two giants plan to deploy millions of GPUs, totaling at least 10 gigawatts of computing power, to train OpenAI’s next-generation models.
2025-10-04 22:01:33
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Today at a glance:
👟 Nike: Early Wins
🛳️ Carnival: Firing on All Cylinders
🎿 Vail Resorts: Strategic Reset
Nike’s turnaround showed its first tangible signs of success in its Q1 FY26 (August quarter), with revenue returning to growth, up 1% Y/Y to $11.7 billion (a massive $710 million beat). It was the first quarter of positive growth since February 2024.
The growth was driven by a sharp rebound in Wholesale (+7%) as Nike rebuilt its retail partnerships, which more than offset a continued decline in Nike Direct (-4%). EPS of $0.49 also crushed estimates ($0.22 beat). Apparel sales showed positive momentum (+9%), offsetting a continued decline in Footwear.
CEO Elliott Hill’s “Sport Offense” strategy is delivering early wins. The Running category, a key focus, grew an explosive 20%, and sport-focused store redesigns are driving double-digit sales increases. However, management warned the recovery will be uneven.
Greater China remains a major weak spot with sales falling another 9%, and the company does not expect its Nike Direct business to return to growth in FY26. Gross margin also dropped by 3 points to 42%, pressured by discounts and a worsening tariff situation, which is now expected to be a $1.5 billion annualized headwind.
Reflecting these challenges, Nike guided for another revenue decline in Q2 (November quarter) with continued significant margin pressure. While the strong beat and clear progress in Running and Wholesale are encouraging signs that the turnaround is taking hold, persistent weakness in China and digital, along with mounting tariff costs, show that Nike’s race back to greatness will be a marathon, not a sprint.
Carnival delivered a phenomenal Q3, marking its 10th consecutive quarter of record revenue. Revenue grew 3% Y/Y to $8.2 billion ($40 million beat), while adjusted EPS was $1.43 ($0.11 beat).
Adjusted EBITDA hit a record $3.0 billion, driven by strong close-in demand, higher ticket prices, and a 2.5% increase in onboard spending. Customer deposits reached a new third-quarter high of $7.1 billion, and the booking curve for the future is exceptionally strong.
2025-10-03 20:03:26
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It’s a staggering $55 billion deal, smashing the record for the largest leveraged buyout in history.
Mega-LBOs are high-wire acts by definition. They’re built on mountains of debt, leaving no room for a single misstep and sporting a notoriously mixed track record of success.
But EA isn’t a typical target. It offers critical advantages private equity craves: iconic annual sports franchises, predictable recurring revenue from live services, and a scale few rivals can match.
So, what to make of this acquisition for EA and the gaming industry?
Let’s review what we know.
At a glance:
The Deal: Why go private, and why now?
The Target: How EA became a predictable cash-flow machine.
The Arena: What this means for the future of the gaming industry.
EA is going private for $210 per share, representing a 25% premium to its pre-announcement stock price.
Buyers: Consortium led by Silver Lake, Saudi Arabia’s Public Investment Fund (PIF), and Affinity Partners.
Financing: Roughly $36 billion in equity and $20 billion in debt, with JPMorgan leading the debt package. PIF is converting its existing ~10% public stake into equity in the newly private company.
Leadership: EA says Andrew Wilson stays as CEO and HQ remains in Redwood City.
Target date: Closing is targeted for EA’s fiscal Q1 2027 (ending June 2027), pending approvals. Early reports also mention $1 billion termination fee if the deal doesn’t go through, similar to what we have seen when Adobe tried to buy Figma.
Regulatory Scrutiny: The deal requires a mandatory US foreign-investment review (CFIUS) due to the involvement of Saudi Arabia’s PIF. This is a standard process for such transactions.
The consortium is betting on recurring live-service cash flows (FC/Madden Ultimate Team-style modes, Apex Legends, Battlefield, The Sims) and the calendar certainty of annual sports releases. That combination of predictability and scale is precisely what gives the buyers confidence to use so much debt.
Licenses: NFL, F1, and the FC era (previously FIFA). Renewals and economics matter more with leverage, and the cash-cow franchises will do the heavy lifting.
Talent retention: Private ownership means less stock-based comp; keeping senior creatives is key.
Debt Service: The new EA will have significant interest payments. Any dip in performance or a broader market downturn will test its ability to service that debt. Watch for any pressure on cash flow, as the margin for error is now razor thin.
Big LBOs tend to succeed when the asset has durable, non-cyclical cash and a clear exit path (sell-down, re-IPO, or strategic sale). They stumble when deals are struck at peak cycles, when cost cuts hit the product pipeline, or when talent/licenses wobble.
EA’s test is brutally simple: Grow bookings, generate enough free cash flow to cover massive interest payments, and relentlessly expand its core franchises. Failure in any one of these areas is not an option.
Think products like Ultimate Team–style modes, microtransactions, subscriptions. They made up 73% of the overall revenue in the past 12 months, up from 64% in FY19 (ending in March).
I created the graph below using the Custom Metrics screen on Fiscal.ai, our data platform partner. It allows you to visualize any ratio or specific segment or KPI over time. In this example, I used Live Services revenue in % of overall revenue.
Net bookings = The total dollar value of what players bought from EA in the period (full games, in-game add-ons/live services, subscriptions, and mobile) whether or not EA has recognized it as GAAP revenue yet.
Plateauing: Net bookings set a high watermark of $7.5 billion in FY22 and have been flat since. Sports titles are mature at this stage of the console cycle. Apex Legends comps got tougher. Fewer ‘step-function’ launches in the past 3 years.
Industry backdrop: The global games market has been nearly flat over this stretch, from $184 billion in 2022 to a projected $189 billion in 2025, with consoles leading modest growth while mobile slowed. So EA has been in line with the industry.
LBO lens: stability is good for a leveraged buyout, but a return to growth will require new content catalysts.
Console is the anchor: Across the last decade, console has carried the bulk of revenue and captured most live-ops spend. The PS4→PS5 / Xbox One→Series transition didn’t break the model. Attach rates to Ultimate Team–style modes deepened on console.
PC is the steady No. 2: Smaller than console but meaningful, helped by Apex Legends, F1, and by frictionless digital delivery (EA Play/Steam).
Mobile grew through acquisitions: EA has struggled with mobile and most of its growth there since 2021 came from the acquisition of Glu Mobile ($2.1 billion) and Playdemic ($1.4 billion).
Physical → digital is basically done: The secular shift lifted mix, raised margin (no discs, no retail cuts), and increased the surface area for recurrent spend.
High gross margin: Digital delivery and live-ops content yield software-like gross margins. Platform fees and licensing are the big line items in cost of revenue.
Marketing is reasonable: Annual sports cycles and evergreen live services lower the need for blockbuster launch spend every year. Marketing scales with tentpoles rather than spiking unpredictably.
R&D is heavy by design: Ongoing engine work, live-ops tooling, annual sports updates, and large creative teams keep R&D as the biggest OpEx bucket. This is where cadence is funded.
Very profitable business: EA has maintained an operating margin above 20% in four of the past five fiscal years.
Predictability: Seasonal sports franchises + evergreen live-ops = steady bookings. The other IPs, like Battlefield and The Sims, offer potential for recurring entries over longer cycles.
Strong free cash flow: The digital mix and live services translated into a ~25% free cash flow margin profile, which adds a margin of safety.
License dependence: NFL, FC, F1. These games rely on sports franchises and likenesses, with royalty payments that involve lower margins. The loss of the FIFA partnership didn’t prove fatal, but it created an opening for new competitors to emerge.
Franchise concentration: Sports games and F2P title Apex Legends carry a lot. Because of this concentration, a single franchise misstep would be immediately and painfully visible in the booking trend.
Playbook contrast: Microsoft-Activision was a strategic consolidation (platform + IP + distribution). EA is a sponsor-led LBO math (leverage underwritten by predictable cash flows) with an operational focus rather than synergy headlines.
Why gaming fits LBOs now: Evergreen IP, live-ops monetization, subscriptions, and long tails dampen earnings volatility. That’s exactly what debt investors want.
Sovereign capital’s arc: PIF & Savvy Games Group have placed chips across the stack (publishers, esports, distribution). This bid extends that footprint and normalizes sovereign money in core gaming assets.
Why this capital matters: Deep pockets mean EA can fund multi-year live-ops and big bets without quarterly whiplash. That aligns with an LBO built on recurring bookings.
Liquidity & re-listing path: If Silver Lake re-lists down the road, today’s structure could morph into a more “traditional” exit later. That’s useful context for timelines.
Premium debate: A ~25% premium, as seen in this deal, can look “light” for trophy assets. Sponsors would argue that the currency is certainty and speed. But the real benefit for the company will be post-close investment pace in the roadmap, not the headline premium.
Below is a post from Eric Kress (Gossamer Consulting) that neatly frames why a take-private can be both a relief and a risk for the industry. I’m sharing it because it surfaces trade-offs across capital, cadence, and transparency, and it contrasts this deal with other recent outcomes
Activision: sold to a platform owner.
Ubisoft: independence reinforced by family/strategic holders.
Embracer: restructuring and portfolio pruning.
Follow-on LBOs: If debt markets stay open, expect more bids for IP-rich, live-ops-heavy assets and tooling companies. Big tech could also be on the case, and Take-Two has long been a rumored acquisition target as the largest independent US pure play, with GTA arguably the most valuable IP in the industry.
Sovereign money’s next moves: Where Gulf capital shows up next: Studios, sports-rights, or infrastructure. We previously discussed how Liberty Media was approached by the Saudi PIF for the F1 Group.
Regulatory stance: Outcomes of foreign-investment reviews will set the bar for future cross-border deals in gaming.
Licensing leverage: Leagues and major IP holders may seek longer terms and higher rev-shares as sponsors rely on their durability.
Platform economics: Any shift in storefront fees or promo rules at Sony/Microsoft/Steam changes third-party margins across the board.
Subscription pressure: Game Pass/PS Plus bundling is rising. Does it amplify live-ops attach or compress full-game ARPU industry-wide?
Deal supply: Restructurings (Embracer-style) feed assets into the market. Buyers will cherry-pick live-ops winners.
Exit lanes: Re-IPOs vs strategic sales, whichever reopens first, will shape sponsor behavior for the next few years.
NetEase, Take-Two, Ubisoft, SEGA, Square Enix, Capcom, Nexon, CDProjekt, and Paradox are next in line from a scale standpoint.
What do you think? Hit reply or let me know in the comments!
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I own NTES in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members. The Starter Stocks for 2025-2026 just came out.
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.
2025-10-01 04:34:09
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🔥 The September report is here!
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🚙 Auto: NIO.
🛒 Retail: Costco.
🌯 Franchises: Darden.
🥫 FMCG: General Mills.
👔 Consulting: Accenture.
🛡️ Cybersecurity: Zscaler.
💳 Fintech: Klarna, StoneCo.
🎽 Apparel: Nike, Lululemon.
⚙️ Semis: Broadcom, Micron.
⚽️ Football: Manchester United.
😎 Tourism: Carnival, Vail Resorts.
☁️ Productivity: Asana, DocuSign, GitLab, UiPath.
📊 Data & Infrastructure: C3.ai, HPE, Rubrik, Samsara.
💼 Enterprise Software: Adobe, Figma, Oracle, Salesforce.
And more, like Chewy, FedEx, GameStop, and HealthEquity.
2025-09-27 22:01:44
Welcome to the Saturday PRO edition of How They Make Money.
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📊 Monthly reports: 200+ companies visualized.
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Today at a glance:
🛒 Costco: Growth Moderates
🌐 Accenture: Federal Spending Cuts
Costco closed out FY25 (ending in August) with Q4 revenue growing 8% Y/Y to $86.2 billion ($100 million beat) and EPS of $5.87 ($0.06 beat). However, the beat was overshadowed by moderating growth in adjusted same-store sales to +6.4% globally and +6.0% in the US (down from 8.0% and 7.9% last quarter, respectively).
In contrast, the fundamentals of the business model remained strong. Membership fee income surged 14% to $1.72 billion, driven by upgrades to its Executive tier following the rollout of new perks like exclusive shopping hours. E-commerce remained a bright spot, growing 13.5%. The company continues to navigate tariff pressures by increasing the penetration of its higher-margin Kirkland Signature private label, attracting younger members.
Looking ahead, Costco announced plans to open 35 new warehouses in FY26, a significant uptick from the 25 added in FY25. That said, the stock remains priced for perfection. The deceleration in comparable sales growth is testing Costco’s premium valuation of ~49x forward earnings.
2025-09-26 20:03:34
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Every advanced piece of technology, from a supercomputer to a smartphone, is a marriage of two distinct functions: logic and memory.
🧠 Logic: These chips are the brains of devices, executing instructions and processing data, central to computers and smartphones.
🗃️ Memory: These chips focus on data storage, including DRAM for temporary storage and NAND for long-term retention.
While we recently discussed the new Intel x NVIDIA deal in the world of logic, AI demand is also creating a boom for memory.
Micron’s Q4 earnings just gave us the clearest signal yet.
Let’s review what we learned.
At a glance:
Micron’s new business units
The HBM-powered recovery
Key quotes from the earnings call
What to watch moving forward
Micron is a US-based Integrated Device Manufacturer (IDM), like Intel, but focused on designing and manufacturing memory chips.
Starting with Q4 FY25 (August quarter), Micron reorganized its entire business into four business units that mirror how customers actually buy memory chips.
Cloud Memory: $4.5 billion in revenue (+214% Y/Y). This is the AI powerhouse. It serves giant cloud companies and all High-Bandwidth Memory (HBM) needs. It’s the highest-margin segment (48% operating margin). HBM-specific revenue grew to nearly $2 billion in Q4, implying an annual run rate of ~$8 billion.
What is HBM, anyway?
Think of it like building a memory skyscraper right next to the processor, instead of a sprawling, one-story warehouse far away. By stacking DRAM chips vertically, you get incredibly high bandwidth from a smaller footprint. That’s exactly what power-hungry AI chips need. The trade-off? It’s more complex to make and costs more per bit than standard DRAM.
Core Data Center: $1.6 billion in revenue (-23% Y/Y). This is the server workhorse: This unit sells memory and storage to traditional server makers (like Dell & HP).
Mobile and Client: $3.8 billion in revenue (+25% Y/Y). This unit provides the memory and storage for all our personal gadgets, like phones and PCs.
Automotive and Embedded: $1.4 billion in revenue (+17% Y/Y). This unit supplies chips for cars, industrial machines, and other consumer electronics.
This split is designed to make Micron’s business easier to understand. It makes the economics of the all-important AI memory (HBM) business more transparent and should reduce the “lumpiness” in their quarterly results.
The only catch with the new segmentation? Year-over-year comparisons will be a bit messy for a while. Keep an eye out for when Micron releases restated historical data to make sense of the new segments.
This new structure gives us a perfect lens to view the most important story in the memory market today: the dramatic AI-driven cycle.
Numbers at a glance:
Q4 FY25 (August quarter):
Revenue grew +46%Y/Y to $11.3 billion ($0.2 billion beat).
Gross margin was 45% (+9pp Y/Y).
Non-GAAP EPS $3.03 ($0.17 beat).
Q1 FY26 guidance (November quarter):
Revenue ~$12.5 billion ($0.7 billion beat).
Gross margin > 50%.
Non-GAAP EPS ~$3.75 ($0.71 beat).
Market reaction was timid. Micron’s stock (MU) has nearly doubled so far in 2025. Wall Street’s expectations were so high that even a great report was seen as a slight letdown. This highlights the frenzy and optimism already priced into the stock.
DRAM (including HBM) is the engine. LTM DRAM revenue fell from the 2022 peak, bottomed in mid-2023, and has re-accelerated to ~$29 billion LTM (see visual). That rebound is the HBM ramp plus DDR5 strength.
NAND is stabilizing. After a long slide, NAND has climbed back to ~$9 billion LTM, helped by enterprise SSD and early AI PC tailwinds.
As HBM mix rises, DRAM dollars rise disproportionately (higher ASPs).
NAND benefits from DDR5 and client SSD recovery, smoothing cyclicality.
The memory up-cycle is here, led by HBM-driven DRAM. Micron’s new segment split reveals a clear path to higher profitability. As the mix shifts toward premium HBM products, it should raise the company’s gross margin ceiling, potentially breaking the boom-and-bust cycles of the past (see visual).
Micron’s print confirms memory remains the gating factor for AI systems in the near term. HBM inventory is tight, and gross margin is tracking to cross 50%.
Check out the post-call Q&A on Fiscal.ai here.
“The combined revenue from HBM, high-capacity DIMMs, and LP server DRAM reached $10B, more than 5× last year.”
AI data-center memory is now a franchise line, not an experiment. It’s lifting the entire data center market. It shows that the recovery is broad-based and adds another powerful (and somewhat unexpected) tailwind to the Micron story.
“We are pleased to note that our HBM share is on track to grow again and be in line with our overall DRAM share in this calendar Q3, delivering on our targets that we have discussed for several quarters now.”
Micron and SK Hynix have gained a first-mover advantage against market leader Samsung by being faster to market with the latest generations of HBM.
“As the only US-based memory manufacturer, Micron is uniquely positioned to capitalize on the AI opportunity ahead.”
Supply-chain and policy angle can resonate with US hyperscalers.
“Our HBM customer base has expanded and now includes six customers. We have pricing agreements with almost all customers for a vast majority of our HBM3E supply in calendar 2026. We are in active discussions with customers on the specifications and volumes for HBM4, and we expect to conclude agreements to sell out the remainder of our total HBM calendar 2026 supply in the coming months.”
Micron expanded its customer base from four in Q3 to six in Q4. And they are essentially sold out of their premium product more than a year in advance. It underscores the desperation of AI companies to secure memory supply. This is a real up-cycle, not a one-quarter blip.
“These supply-demand factors are there—we believe they’re durable. On the demand side, data center spend continues to increase. [...] On the supply side, customer inventory levels are healthy. Our supply is lean. Our DRAM inventories are below target.”
Murphy is making the case that strong profitability is set to continue, justifying the high expectations. However, the company notably declined to comment on whether HBM margins specifically would remain at today’s level.
The memory up-cycle is in full swing, so here’s what to watch as the story unfolds.
The HBM engine: HBM revenue is already ~$8 billion run-rate. Watch bit growth vs ASPs each quarter to see whether volume or pricing is doing the lifting.
The customization play: Watch for more news on HBM4E (coming in 2027), the next generation of memory after HBM4. Management signaled they will offer customized versions in partnership with TSMC, which could unlock higher, more defensible margins in the long run.
Production & pricing: Keep an eye on packaging throughput (the main bottleneck for HBM supply) and NAND pricing. Any sign of wavering on production discipline could signal a return to old habits.
Capex signals: Micron plans for higher CapEx in FY26, which is a bullish sign for future demand and will be updated throughout the year.
Execution bar: Higher CapEx raises the need to hit yield/throughput targets for both HBM and non-HBM DRAM.
Supply & demand hiccups: Watch for any HBM yield and cleanroom capacity, as a lack of manufacturing space will define industry-wide supply.
Pricing & customer concentration: Wall Street expects a pricing step-down for HBM3e as a few big AI buyers lock in long-term agreements, though Micron says 2026 pricing is mostly locked.
Ultimately, two clear narratives have emerged:
📈 Bull case: This is the first prolonged up-cycle since 2018, driven by broad-based strength. With HBM sold out, six customers, and the HBM4 ramp on the horizon, momentum could last for a while.
📉 Bear case: While the HBM story is strong, margin premiums may narrow next year. With the stock near peak valuation on key metrics, the risk/reward is less compelling.
The story is clear: a structural shift to high-margin HBM is underway. The data center business has shattered its old ceiling (growing from a third of overall revenue to more than half), proving that AI has reset the memory playbook.
This up-cycle could raise the industry’s margin floor and smooth future swings. But remember, cycles don’t vanish. In investing, the most dangerous words are “it’s different this time.”
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I own AMD, ASML, and NVDA 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.
