Good morning. QQQ’s -67bps as the indexes flirt with crossing trendlines from Apr 16 lows (h/t M. James at Rosenblatt):
Two names we are watching as broader tea leaves are PLTR and CVNA - two names that led us off the bottom and two names which are flirting with failed breakouts to new highs.
Yields popping again today with 10 yr +5bps. BTC flat. China +44bps.
We’ll hit up PANW and BIDU first then dive into Research/News/3p…
PANW -5%: Mixed q as NGS ARR inline, RPO of 19% slightly light of bogeys (20-21%) and at low end of guide and Q3 rev growth of 15% light of buyside bar looking for 16%. Subscription revs light vs stret.
Reiterated RPO and NGS ARR full year guide (some were hoping for a slight raise). Rev guide raised slightly at the low end.
Lots of debate on this one post the q especially given sentiment/positioning was high heading in.
Bears were louder overnight and say that the print was a miss vs expectations (RPO, GM, subscription revs) and Q4 NGS ARR implies a hockey stick which isn’t conservative. Bears will also say that subscription/support growth below street foreshadows a broader deceleration and F3Q gross-margin compression and a sub-consensus FCF print hint at sustained cost pressure just as competitive intensity in SASE, firewall refresh, and AI security heats up.
Bulls will say PANW stock always gets bought up and mgmt continues to sound good. PANW remains best in class cyber company benefitting from tailwinds and argue that accelerating platformization and XSIAM adoption, combined with disciplined opex, set the stage for durable mid-teens revenue growth and expansion to a 37 %+ FCF margin.
How quickly the newer platform modules (Prisma AI, Protect-AI) translate early wins into meaningful ARR—and whether management can convert the April “pause” into a clean FY25 exit—remain the fulcrum issues for both sides.
Couple other key takeaways:
PANW added ~90 incremental “platformization” deals (to ~1,250 total). AI-related ARR has already reached ~$400 m, roughly doubling in nine months.
Management called early-April order pauses tied to tariff uncertainty “anomalous” and said activity normalised by May; the 4Q pipeline is described as “robust.”
Subscription gross margin hit a multi-year low (75.4 %), and the shift toward SaaS/AI workloads is pressuring blended margin while negotiations with hyperscalers play out.
BIDU +3%: Solid q with results ahead of expectations across revs and profitability
Revenue came in at CNY32.45B, ahead of consensus at CNY31.03B, representing +3% YoY growth, supported by a 5% beat in Cloud.
Adjusted EBITDA reached CNY7.21B, beating consensus of CNY6.62B.
Baidu Core revenue grew 7% YoY, led by a 42% YoY increase in AI Cloud, significantly accelerating from +26% in Q4. Marketing revenue declined 6% YoY (slight miss), while non-marketing revenue rose 40%.
Non-GAAP operating profit for Baidu Core declined 13% YoY, but still came in 6–10% above expectations, with core OPM at 19.1%, down 4.3 points YoY but in line with consensus.
iQIYI revenue declined 9% YoY, but beat by 2%; non-GAAP operating profit of Rmb459M was down 58% YoY, yet ahead of the Rmb413M consensus and well above the Rmb573M cons estimate.
Share repurchase: Baidu returned US$445M to shareholders in Q1 (vs. US$356M in Q4), bringing total buybacks under its US$5B program to US$2.1B.
Management Commentary:
“The strong performance of our AI Cloud business underscores the growing market recognition of our distinctive strength in providing full-stack AI products and solutions with a highly competitive price-performance advantage.”
TECH RESEARCH/NEWS/3p
AMD: BofA recaps bull case and calls out $8.50+ in EPS power in CY26, 20% upside vs street.
BofA projects potential sales power reaching $50bn+ by CY27, with upside across multiple segments including Data Center CPU/GPU, Client/PC CPU, Gaming Consoles, and Embedded markets, collectively representing approximately $5.6bn in additional sales opportunity. They anticipate AMD could achieve EPS of $6.44/$8.52 in CY26/27E, representing 15%/20% upside to current consensus estimates, which would yield forward PE multiples of 17.5x/13.2x in their upside scenario. BofA emphasizes that AMD presents an attractive investment opportunity with a sub-20x PE ratio for a company projected to grow EPS by over 30%. BofA notes that AMD appears undervalued with institutional ownership at only 20% and relative SPX weighting of just 0.2x compared to previous peaks of 40%/0.8x.
Third Party Data:
CVNA: Yipit said w/w units grew 36%, although QTD still tracking to 40%. Street is at 38% and Yipit says “retail mktplace vehicles are taking longer to sell in Q2” which could reflect softer demand. On the other hand, M-sci said retail volumes 1 ppts from prior week’s growth. TMTB: Now we know why stock was weak mid day yesterday. This is the first time I’ve seen Yip call out longer retail sale times and 2 straight weeks units growing lower than street which is first time I remember that happening in over a year and half. Stock sits at highs…
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