Even When They Miss, They Win

In this issue of the peel:

• ?? Nvidia earnings just dropped. So did the stock and my heart. The AI King’s Q3 numbers were stellar, but find out why the market is as hyped below.
• ?? Williams-Sonoma revenue fell, so naturally, the stock’s up ~30%. MicroStrategy caught a bid for an even dumber reason. Meanwhile, Target’s Q3 numbers missed the… and Qualcomm is going through this breakup alone.
• ???? Russian President Vladimir Putin clearly shares a gene or two with one of history’s most (in)famous schemers. Find out what’s going on in Moscow.

Market Snapshot

Banana Bits

• Mortgage applications increase for purchases and refinances… but not by much.
• Staples are up, and discretionaries are down as Walmart and Target earnings diverge more than American voters.
• Comcast will spinoff NBCUniversal’s cable programs—including CNBC, MSNBC, etc.—and related digital assets like Rotten Tomatoes into a new company.
• Legend of degeneracy and founder of Archegos Capital Bill Hwang was sentenced to 18 years in prison.

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Macro Monkey Says

Earnings Spotlight: Nvidia

Tom Brady threw 212 interceptions in his career. Michael Jordan missed 26 game-winning shots. Even The Daily Peel sometimes—sometimes—isn’t the best part of your day.

GOATs like us make mistakes, too. But when your “mistakes” look like Nvidia’s in Q3, you’re doing something right.

Let’s dive in.

The Numbers

Yesterday afternoon, Nvidia reported earnings for the previous quarter, their Q3’2025, because, like J. Cole, “even when [they] rhyme about the future, they be reminiscin’.”

Anyway, the world’s most valuable company reported earnings of $0.81/sh on revenue of $35.08bn, beating estimates for $0.75/sh on $33.16bn.

That marks the approximately one-millionth quarter in a row of beats for the AI Overlord. As revenue has exploded nearly 7x in 6 quarters, the degree to which the firm beats its own guidance has naturally fallen.

On average, Nvidia beats by 11.56%. The firm beat sales guidance in Q3 by 7.94%, less than the average but above Q2’25’s beat of 7.29%.

Guidance for Q4 implies revenue growth of 6.89%, far below >22% of the expected quarterly revenue growth from Q3 to Q4 of last year.

So, the insanity has gone from Ted Bundy levels down to somewhere around Jim Carrey. Shares sank 5% immediately after-hours but have since chilled to a 1.6% decline (as of 5:26pm).

Annual revenue growth has slowed from call-your-mom levels down to a still-insane 93.6%. The firm’s data center segment—where it sells AI chips—once again did the heavy lifting.

Data center revenue grew 17% quarterly and 112% from Q3’24. Gaming & AI PC sales were up 14% quarterly and 15% annually, while the Professional Visualization segment posted increases of 7% for the quarter and 17% for the year. Lastly, Automotive & Robotics ballooned 30% quarterly and 72% for the year.

If anything, in their immediate reaction to the report, analysts were disappointed that Nvidia’s numbers beat their expectations by less than they expected. However, they certainly can’t complain about the numbers.

The single thorn in the side of investors can be found in the firm’s gross margin, which declined from 75.1% in Q2’25 to 74.6% in Q3—not horrific—but still not the right direction, still, that remains elevated against Q3’24’s gross margin of 74.0%.

Operating margins remained relatively flat for the quarter, up to 62.3% from 62.1%, but below Q1’25’s record high of 64.9%. Net margin declined for the second quarter in a row, sitting at 55.04% from 55.12% in Q2 and 57.1% in Q1.

Meanwhile, free cash flow margins followed a similar trend. In Q3, this figure hit 47.9%, up from 44.9% in Q2 but below record highs of 57.5% in Q1.

As we said above, growth in these key operating metrics slowed on an annual basis but remained healthier than RFK’s “snack” cabinet, as we can see here:

Absolutely insane. I’m sure they’re not paid or incentivized to say this in any way, but according to CEO Jensen Huang and CFO Colette Kress, it’s only gonna get bigger and better from here.

Flipping through the slide deck that came with Q3’s results, Nvidia dedicated a few slides to the concept of “AI factories.”

I thought that term was a meme as brainrot-inducing as The Rizzler of Livvy Dunne or something, but apparently, they’re an actual thing… and they’re not like data centers.

Data centers store… data. AI factories, on the other hand, are “highly optimized systems purpose-built to process raw data, refine it into models, and produce monetizable tokens with great scale and efficiency.”

Basically, they take raw data (rather than structured in most data centers), form them into models, and convert the raw data to some kind of valuable output called a “token.”?

Your grandpa’s data centers can only spit back what’s already in them, but AI factories are meant to be able to create their own “tokens.”

The token could be anything. For example, you could upload stock price, economic indicator, and investor sentiment data into this “AI factory” and ask it to predict tomorrow’s marker moves. These predicted moves are the “token.”

Source

The Takeaway?

Nvidia absolutely crushed it again in Q3, just not to the same degree that they have in the past.

The concept of AI factories and Nvidia’s roadmap included in Q3’s presentation paints a picture of what Huang & Co. anticipate as the future of the market. Honestly, after reading it, it’d be easier to tell you what won’t radically change with the advent of AI.

We’ll find out in a few hours if Nvidia’s vice grip on the market remains as strong as it has been in recent quarters. But, if the market maintains this mild after-hours reaction, it’s gonna be tough to tell.

Career Corner

Question

I was wondering if you are allowed to use paper on IB technical interviews.

Answer

I was always given paper/pen in IB super days for math/analysis pieces (I also brought my own in case, but typically, for a case study, they would give me a specific deal/pitch deck to look at and analyze, so they would provide that).

However, if it’s an easy question (like walk me through $100 deprecation), I’d expect someone to do that without pen and paper. It will show more polish and confidence if you’re able to get to the answer using just mental math.

Head Mentor,?WSO Academy

Check out WSO Academy

What's Ripe

Williams-Sonoma (WSM) 27.54%

• Selling houseware in 2024 is like trying to sell condoms at a frat party—nobody’s looking for ‘em. But, even with very few new homebuyers, Williams-Sonoma got it done.
• Sales slipped as the home goods and furniture industry is intrinsically linked to the housing market. With few home sales in the U.S., finding demand is tough.
• But Williams-Sonoma still beat expectations. Revenue of $1.8bn fell 2.9% YoY but beat estimates for $1.77bn. Earnings grew 4.9% to an EPS of $1.96/sh, also above forecasts.
• The best part was the increase in guidance, expecting Q4 sales to hold up better. That gave the stock, which was down 20% since July, a much-needed boost.

MicroStrategy (MSTR) 10.05%

• Timing the market is always hard, but even if you paid me, I couldn’t possibly have timed my BTC purchases worse than MicroStrategy CEO Michael Saylor.
• Bro must sit in a damp, dark room crying all day when BTC isn’t near an all-time high because that’s the only time they purchase. Still, the market was pumped.
• The firm now holds 331,200 BTC, worth ~$31bn as we speak. Investors love it as the “asset” held by this overvalued levered BTC holding firm is near all-time highs.

Source

What's Rotten

Target (TGT) 21.41%

• Clearly, the mental health crisis in the U.S. has gotten out of hand if we’re giving up on our weekly pilgrimages known as Target runs. It was a tough Q3 for all of us.
• The retailer reported earnings and revenue below expectations while Q4 and FY’24 guidance underwhelmed, expecting flat sales growth during what should be the busiest quarter of the year.
• Price reductions haven’t helped much as same-store sales grew only 0.3% and foot traffic just 2.4%. Online comparable sales jumped 10%, acting as the lone bright spot.

Qualcomm (QCOM) 6.34%

• You need good friends to get through a hard breakup. Unfortunately, investors are the exact opposite of “good friends,” immediately bailing on Qualcomm.
• The chip maker specializing in mobile phone processors revealed a new plan that should’ve been titled “How We’ll Stay Alive Now That Apple is Making Its Own Chips.”
• Qualcomm will compete directly with Intel, AMD, and others as a general chip maker going forward. The firm expects $22bn in total new revenue by 2029, with $4bn coming from PC chip sales.

Thought Banana

Machiavellian Money in Moscow

Niccolo Machiavelli was a 15th and 16th-century Italian diplomat, author, and philosopher, most famous for writing The Prince.

And he must’ve been a cool-*ss dude because his last name is now an adjective that literally means “cunning, scheming, and unscrupulous”, per the Oxford Dictionary.

So sick. And it’s becoming clear he’s an idol of Vladimir Putin’s. Let’s dive in.

The Numbers

I don’t know if you guys are geopolitical analysts or anything, but..?

More than two-and-a-half years after invading Ukraine and receiving more calls for collapse than a Boeing plane, Russia’s economy is on fire.

Its fiscal budget, however, is absolutely not.

Source

Since February of 2022, wars did what wars do—create record economic growth. That’s exactly what happened in Russia, as the country’s 2023 GDP growth reached 3.6%, a 10-year high.

That growth is expected to continue in 2024 and beyond, but not without issues.

Massive economic growth has one damn, dastardly byproduct we all know far too well: inflation.

With the launch of the invasion, one of the first things Moscow did was ramp up investment in military spending, transportation, certain social benefits, salaries of soldiers and some government employees, etc.

Needless to say, this created a lot of excess demand that supply couldn’t meet, causing prices to rise. Moreover, hundreds of thousands (maybe millions) of Russians—mostly men, but some women—were either called to the front lines or fled the country.

That creates a drastic reduction in the labor force, making the unitary value of one laborer far greater than prior. As inflation reached over 15%, nominal wages grew by 18% per year.

Source

To combat inflation, the Russian Central Bank jaked interest rates through the roof—currently sitting at 21% and expected to hit 23% by year-end.

Moscow had been schemin’ to cushion the blow of high borrowing costs from consumers and businesses through subsidies and price caps, but as of this summer, those are starting to run dry.

For example, a program that provided mortgages under 8% as rates hit double-digits was axed in July, causing mortgage applications to fall more than 50% in August.

The problem now is that Moscow simply does not have the funds—especially with such a high rate on government borrowings—to keep transfusing economic growth into a bleeding-out economy.

The Takeaway?

We’re as pro-shemin’ as they come. Love the shenanigans. However, usually, shenanigans require money.

I guess now we’ll find out if Putin really is a trillionaire, as a bunch of conspiracies suggest. If so, this war could go from Russia vs Ukraine to Putin vs Ukraine.

Or, maybe the people’s patience will run dry before the money does. Stay tuned.

The Big Question: How long can Russia afford to fight? What happens if/when they run out of financing options?

Banana Brain Teaser

Previous

Bouquets are to be made using white tulips and red tulips, and the ratio of the number of white tulips to the number of red tulips is to be the same in each bouquet. If there are 15 white tulips and 85 red tulips available for the bouquets, what is the greatest number of bouquets that can be made using all the tulips available?

Answer: 5

Today

A technician makes a roundtrip to and from a certain service center by the same route. If the technician completes the drive to the center and then completes 10% of the drive from the center, what percent of the roundtrip has the technician completed?

Send your guesses to [email protected]

?

Nobody should pin their hopes on a miracle.

Vladimir Putin

How Would You Rate Today's Peel?

?? All the bananas

?? Meh

?? Rotten AF

Happy Investing,

David, Vyom, Ankit & Patrick