Guidance warning season
Despite rising geopolitical risk, European corporate guidance has yet to reflect the potential economic impact. In AIR’s recent management meetings, discussion focused almost entirely on AI, with little attention paid to the Iran conflict despite surging energy prices and supply-chain stress that historically drive earnings revisions. The combination of unpriced macro risk and AI-driven sectoral disruption creates a credible basis for expecting a meaningful wave of 2026 earnings guidance revisions across European equities in the coming weeks. And the performance gap between the companies on the right side of these structural shifts and those on the wrong side will broaden. Stock winners include AI infrastructure beneficiaries such as Arm, Elmos, Aixtron and STM, alongside defence exposure at Exosens and Indra Sistemas. Euronext and Auto1 are also seen as largely insulated. Under pressure are Stroeer, Freenet and SES. In IT services, the sector is splitting between “The Conquerors” (Accenture, Cognizant, Reply) and “The Endangered” (Capgemini, Atos, Sage, Dassault Systemes, SAP).
Edition: 232
- 20 March, 2026
Technology
Richard Windsor says MediaTek’s Kompanio Ultra chip sets a new standard for the high end of the Chromebook market and looks to be merely a stone’s throw from Intel and Advanced Micro Devices facing another newcomer in the PC Market. The biggest winner will be Arm, which will see its penetration of PCs accelerate and it will earn higher royalties from MediaTek which buys the processor design and licences the IP. This is neutral for Qualcomm because competition in this space is healthy and will keep the firm on its toes and push it to continue to lead when it comes to performance. INTC and AMD are the real losers here as the x86 architecture looks increasingly obsolete.
Edition: 209
- 18 April, 2025
Communications
SoftBank to invest up to $40bn in OpenAI starting with a $10bn tranche this month of which it will fund 75% itself. It will source the funds from Mizuho Bank although the group has sufficient cash on hand already. SoftBank's LTV ratio increases from 12.9% at Q3 end to c.17%. It should be able to raise up to $46bn in funding through asset-backed finance and borrowing up to the 25% LTV level relative to commitments of c.$47bn (OpenAI, Ampere, Aug payment to SVF for ARM and the initial Stargate push). SoftBank will probably lose money this quarter but not so much it doesn’t end the year in the black. Vision Fund was down $1.1bn, largely on India weakness (-$1.2bn across its four public investments) with the rest of the portfolio moving sideways. The discount to NAV has widened slightly to 55% but remains well within the recent trading range. TP ¥11,000 (65% upside).
Edition: 208
- 04 April, 2025
Communications
A surge in the value of Arm Holdings has provided some support for SoftBank shares since an early Dec swoon although the discount has also widened as markets have been hesitant to allocate full value to short-term changes in NAV and (probably) an uncertain yen. Kirk Boodry expects the long-term story for SoftBank will be aligned more with Vision Fund activity, both monetisation and a step up in investment pace, but the discount here provides an attractive entry point (discount to NAV currently stands at 50% - the largest it has been since the Covid sell-off in Mar 20). In Kirk’s latest report he updates his model for Q3 (Dec) including forecasts for the quarter.
Edition: 177
- 12 January, 2024
Communications
Galliano's Financials Research
Victor Galliano continues to be cautious on SoftBank due to its 1) WeWork exposure (estimated at USD 1.8bn and looks increasingly to be at risk of being written off), 2) the risk of over-valuation of private companies in the Vision Funds (private companies accounted for 64% of SVF1’s fair value with SVF2’s private companies accounting for 84% of the fund’s total equity value) and 3) Masa’s debts to SoftBank (USD 5.1bn). In the near term, the upside potential to equity value rests largely with the Arm IPO, but Victor is concerned that its AI credentials may well be being overstated by SoftBank's management.
Edition: 167
- 18 August, 2023