Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, updates, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

Read more

Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, updates, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

Read more

Friends of NFTBC

Welcome to The NFTBC Digest - a regular email that normally goes out to full subscribers only. Since I started it last year, The Digest has essentially developed into a repository for all the material that I have decided not to make into standalone posts - generally news, earnings, links and occasional updates around my own portfolio activities. Every once in a while I’ll do a wider-circulation email, principally to ensure that newer joiners are aware that The Digest exists. This week’s will be slightly longer than usual as there were plenty of things worth writing about with regard to NFTBC stocks.

The week certainly had its ups and downs. I’ll dispense with my usual alphabetical ordering and get straight to the bad news.

Regeneron

On Friday evening Regeneron provided an update on their long-anticipated fianlimab-cemiplimab combination trial in metastatic melanoma. The trial did not reach statistical significance for the primary endpoint of improvement in progression-free survival (PFS). Regeneron has inevitably taken some heat for releasing the results on a Friday post-market close, but per the press release they only reviewed the results themselves on Friday. The press release itself contains not a single word of commentary, only headlines and data - which seems rather unusual. My guess is that Regeneron probably felt the need to get this news out as quickly as possible before having had sufficient time to process it in any helpful manner, but no doubt others will have different takes.

It’s clear that Regeneron was expecting a positive result in this trial, as was I. However, the timing of the readout was previously deferred a couple of times due to the unexpectedly slow accrual of events in the study - this has been well communicated and discussed and consequently there was already some degree of building scepticism prior to Friday. Additionally, some months ago they amended the trial protocol to include additional patients from the overall survival cohort in order to be able to accumulate more events.

Last year they provided two possible explanations for the slow rate of events - either the pembrolizumab control arm was performing better than expected or the study drug was delivering long and durable responses. They also mentioned they were looking for a PFS in the low- to mid-teens of months in order to be differentiated against the existing field - and that’s against the context of the 24 month PFS they reported from their pooled phase I cohorts.

Here are the headlines:

You can see the high-dose combination (the principal dose of interest) failed on statistical significance - and it seems to be a particularly narrow fail as indicated by the upper bound of the hazard ratio confidence interval only very marginally crossing the 1.0 threshold. In any case the 15.5% relative risk reduction likely falls short of the company’s expectations. Median PFS at 11.5 months arguably just makes it into the low- to mid-teens they were hoping for at a minimum (if we take that to mean 11 to 15).

Notably, they were only expecting the pembro arm median PFS to land somewhere in the range of 4 to 5 months when they designed the study, although they previously said the study was conservatively powered to assume 7 months. In the event it was 6.4 months - which suggests that not only did pembro outperform their expectations, but the fianlimab combination underperformed their expectations. I think our working assumption has to be that the fianlimab combination is not as good as Regeneron was hoping.

However. We are told that detailed results will be presented at an upcoming medical meeting and presumably the data will continue to mature (the study officially runs until 2031). One plausible theory is that at the cutoff date there was a high number of censored (i.e. event-free) patients in the fianlimab arm who may go on to have durable responses beyond the 11.5 months - especially in the context of the 360 overall survival cohort who were dropped in later (and enrolled January to late Summer 2025). In such a context, the study could still have been underpowered at the analysis point. With maturing data, it’s not impossible that PFS goes up and hazard ratio improves. How likely this is, I just don’t know. There’s also the overall survival data. While I’m certainly not betting that this trial delivers subsequent positive surprises, it’s probably premature to draw any strong conclusions about fianlimab before there’s more data in hand.

The good news is that fianlimab still has a further shot on goal in metastatic melanoma coming up in around 10 months - the head-to-head against Opdualag, another LAG-3 combination that’s already on the market. A convincing superiority readout against Opdivo would certainly be helpful in reviving hope of approval and a meaningful commercial opportunity. I think there’s a decent chance that the fianlimab combination could still stack up favourably against Opdualag. That’s partly because Regeneron likely has the better anti PD-1, partly due to their being able to administer their anti LAG-3 at a higher dose and partly due to the relative ORRs they’ve previously shown. We’ll just have to wait until Q1/Q2 next year to find out. But what might make the difference in commercial traction will be the eventual overall survival data, if it’s encouraging.

I wouldn’t write off fianlimab in metastatic melanoma just yet, although in the absence of further data we should downgrade our expectations and push the timeline out by another year. In my mental model, fianlimab was not one of the sizeable opportunities that was going to have a major contribution to intrinsic value. Rather, it was going to be incrementally helpful out to the end of the decade in the interim phase before before some of Regeneron’s bigger swings start to come to fruition. For some context, Regeneron recently said they believe the global metastatic melanoma market opportunity to be between $2bn and $3bn, of which Opdualag does ~$1.2bn.

A convincing win in the pembro head-to-head would certainly have been very helpful for sentiment around the stock and the company in general. But, alas, I suspect this failure will be received in a similar way to the itepekimab failure 12 months ago. As such, we should be braced for a severely negative market reaction next week with this readout being construed as another loss of confidence. The market seems to be much more of a mind to focus on Regeneron’s failures rather than the successes at this moment. But it’s important not to overlook the successes - for example the C5 program is the much more interesting commercial opportunity than fianlimab in my view and it’s coming soon.

An outstanding question is whether Regeneron blundered in designing the pembro head-to-head trial in the way they did or if they just got unlucky. I don’t know enough to have a view - if you have one, I’m happy to hear it. I’m not a clinical trials expert, but I know some of you are. I have left the comments section open, so feel free if you would like to add something or otherwise explain where I have erred.

Now back to alphabetical order…

BMW

In the last Digest I suggested the possibility of a standalone post following the AGM this week. In the end I decided against this. Last year’s AGM was unusually eventful (so far as BMW AGMs go) with the first public showing of the (camouflaged) iX3 and i3 Neue Klasse models as well as a rare speech given by controlling shareholder Stefan Quandt. This year was more business as usual, although did mark the last occasion with Oliver Zipse as chair of the executive board. The renewed plan here is to post a few combined notes and interesting quotes from the both the earnings conference calls (analysts/media) and AGM.

The most notable thing that came up was the idea of export credits in the US. Apparently BMW is in discussions with the US administration about implementing an offset agreement whereby BMW is allowed to import one vehicle for each one it exports. Per comments, the administration seems to be very supportive of the idea and “there’s a very good chance to implement it” - but it all hangs on the EU first implementing their side of last year’s trade deal first. This would clearly be tremendously positive for BMW’s margins given that they import as many vehicles into the US as they export (i.e. net imports are roughly zero) - and it would allow for a faster recovery to the 8-10% strategic automotive margin corridor.

Speaking of which, in my last BMW post I modelled a return to the 8-10% corridor in 2029 along with a potential doubling of automotive profits in the 2025-2029 period (via a dip in 2026). The corridor came up on the analyst call:

the 8% to 10% is not unreachable. Don’t forget that it is 3 x 1 EBIT point we have to achieve. One is on the performance side. We love our BMW ecosystem, and we can do even better. Not to forget Alpina to come, which is also positive for the contribution side. Not to forget that the Gen 6 Neue Klasse has a much better contribution margin than the Gen 5, as we all know for a while. So that’s the performance 1 EBT point.

Second one is, of course, we are doing our homework, working on the material cost side, on the manufacturing cost side, on the warranty cost side. If you have a better quality, you have to provision less warranty costs, which is also contributable to the EBIT margin, not to forget and of course, also logistic costs, et cetera, to be optimized with our global footprint. So that’s the second EBIT point.

The third EBIT point is also homework, is our fixed cost levels, which we are also coming down, as we mentioned already, step by step in ‘26 and ‘27 and also in ‘28. Not to forget the BBA purchase price allocation depreciation, which is always accounted for 1.1, 1.2 EBIT points. This is only lasting until mid- ‘28. So you will have already a half year effect in ‘28 and a full effect in ‘29.

So with these elements to come, there is a chance to come back to 8% to 10%. Of course, we are not naive. There is always something coming around the next corner, whether there are tariffs or other crisis points, and we mitigate as they come along. And we have plans already to do so.

“Not unreachable” / “there is a chance”. I’ve been following BMW long enough to have developed an ear for ‘BMW Speak’ which is characterised by wiggle room and conservatism. My translation is something like this: “We’re gunning hard to get back to 8-10% in the next several years and have a well-developed plan to do it - but we’re not giving guidance on it”.

On differentiation versus ‘monoculture’ in the China auto market:

when you walked over the Beijing Auto Show and compared what the BMW Group was representing and what the rest of the show was representing by and large, there was a very focused presentation of most of the players in that industry. The majority was electric. The majority was the same segment of cars, very few sedans, a lot of SAVs of larger size, focus on autonomous driving, it’s all the same. It was almost a monoculture. And of course, markets worldwide, they are not monolithic. They are widespread. They are differentiated by drivetrains. They are differentiated by size. They’re differentiated by price segments.

And then you looked at the BMW Group stand. There was a large portion of MINI with all drivetrains available. Then you look at the BMW stand, you saw individualization. You saw all drivetrains. You saw V8s. You saw, of course, the Neue Klasse, fully electric. You saw smaller cars. You saw the new 7 Series. You saw our focus on hydrogen. So the full breadth of a premium player, you saw that. And that differentiates BMW. The variety, which represents the variety of market segments. And you don’t have to look on a global scale. You see that in China as well. The markets are much more wider than you would see on that fair.

And that is a worrying thing. If the whole industry thinks they can concentrate only on one segment, larger cars, SAVs, electric, then something is wrong. On the other hand, this makes us more resilient, antifragile to offer the whole breadth. Let’s just look at the first 3 months. EV sales in China were plummeting, not only decreasing, they were plummeting. And what happened, our ICE sales went up at the same minute. So especially China shows what it means to be a full segmenter, to be technology open and at the end, also to be a global industry. That was proof that our strategy is right.

Much is being made currently of the entry of the Chinese into the premium market. When I originally wrote the deep dive, I had some of these things in mind. It’s one thing to pack in a load of features and undercut competitors on price (which gets much of the media attention in the moment), but it’s another altogether to have a desirable and successful premium brand with longevity - I think this is a really under-appreciated characteristic of BMW that gets lost in today’s noise. It’s really really hard being a successful premium automotive brand, but BMW is uniquely good at it. Zipse added some useful thoughts on the topic:

on the strategic side, what is premium in the future? Premium of the future is product quality, specifically long-term product quality. It does not make sense to push cars in the market who lose their resale value after 2 or 3 years’ time. This is not premium. So it’s not feature count in a new car, it’s what is the residual value after 1, 2, 3 or even 5 years. I’m not even talking about historic cars of 15 or 20 years. That is premium.

The second thing is premium system integration. It’s not feature count. We discussed what we saw in Beijing, again, feature count over future count. That’s not the point. How does that all play together? How does it fit? And is it for someone who drives the car, not while it’s standing, but while it’s driving, does it fulfill the function they are supposed to?

And the third one is safety. And I think that becomes one of the foremost criteria for premium of the future, safety, no casualties, no risks. Absolute promises to a brand who promises to be premium means no casualties, no risk in driving the car. And I think that will define premium of the future, and I think we are well underway to fulfill that promise.

And, relatedly, on who will be the survivors in the next five years:

I still think there’s too much focus from the media, but also from the capital markets on individual players, individual technologies, singular events. In 5 years’ time, the players who will still survive, they have the competence to system integrate, to bring all technologies into a car, who build cars who have a long-term quality, who are not falling apart after 1 or 2 years, who will still be in service after 5 years. It’s a completely different game which is happening there, and who are able to differentiate between a singular hype and an overall business model.

If you watch the industry today, actually, there are too many bets going on, too many bets on a singular technology that might happen, but this cannot be endured. So much money is lost in this industry on bets. So system integrators who are able to follow regulation and at the end, have still a business model on high-quality products, that’s the key of everything. And in 5 years from now, to follow CO2 regulations specifically and remain a profitable business will be more or less the key to everything.

Some interesting facts about BMW in Germany (that came up during the AGM):

• one in three customers who have ordered the new iX3 are new to the BMW brand

• in 2025 they built more than one million cars in Germany - the most ever. 25% of all cars built in Germany are now BMWs. I have a strong impression that few investors/observers appreciate the contrast with the wider German automotive industry here

Next - conversion of preferred shares to ordinary shares. This was approved at the AGM. One thing I actually hadn’t appreciated was the possibility of a technical benefit to the share price from the conversion and a strengthening of BMW’s weighting in the various indices.

One last thing: BMW has now unveiled its first Vision Alpina model. As a reminder, a couple of years ago BMW licensed the historic BMW-underpinned Alpina brand from the Bovensiepen family with plans to relaunch Alpina has a BMW sub-brand positioned between the highest-end BMWs and Rolls-Royce. This is presumably Bentley and Aston Martin territory with ASPs in the EUR 200,000 to 250,000 range. Alpina production models are due to hit the roads starting in 2027. It’s worth noting that CFO Walter Mertl specifically referenced their expectations of a positive margin contribution (see above). As I’ve noted before, Rolls-Royce ASPs are over EUR 500,000 and they make, I suspect, margins at least in the higher 20s percent range on 6,000 units per year - it’s potentially in the region of 15% of group automotive EBIT. Alpinas were previously very rare with around 2,000 sold per year prior to the license deal, although there’s perhaps no reason in principle why they can’t drive this to 6,000 (~Aston Martin) or even 10,000 (~Bentley) if they’re particularly shrewd in their positioning/strategy. Assuming margins in the low 20s (such as Bentley managed until recently) it becomes possible to envisage a 20-30bps automotive margin contribution by the end of the decade - hence why I assume Mertl brought it up. Here’s BMW’s video of the Vision Alpina:

Cerebras

Following my recent deep dive Cerebras has now gone public. You can watch the five founders ring the opening bell here. I will now start accounting for my shares in my listed stock portfolio and you’ll see further updates at NFTBC. Until the lock-up ends in September, effective free float is only 16% at the moment and according to comments made by the CEO, the IPO was 25x oversubscribed - in other words, some more reasonable measure of price discovery perhaps won’t come until later in the year.

Cerebras’ CFO Bob Komin was interviewed on CNBC and a couple of notable points came up:

• He said Cerebras’ valuation was probably trading in line with Nvidia on 2028 revenue. With Nvidia at ~8x calendar-2028 EV/S this might imply Cerebras is anticipating a much more aggressive revenue ramp than what I modelled in the deep dive. I said in the deep dive that the range of outcomes is particularly wide, and this also includes the possibility I was too conservative

• They are already serving one trillion parameter models, including ChatGPT 5.4 and 5.5 internally for OpenAI. These are not yet released to the public “but that’s coming very soon”. This is one of the key debates around Cerebras. A one trillion parameter model might require 46 or more CS-3s to fit it, at $1 to $1.5m each - so there are serious questions as to whether that is economical relative to the throughput. I’m assuming there are various co-designed elements to it that we can’t see from the outside including things like disaggregation. But I’m also starting to wonder if the relationship could eventually involve an element of sparse pretraining (weight sparsity) which is only possible on Cerebras hardware. It was supposed to be one of Cerebras’ USPs before the pivot inference in 2024 and everyone seems to have assumed it was a dead end - but is it..? In any case, if they start serving 5.5 at high speed soon, I think that’s going to be a really big deal - there won’t be anything else like it

Ottobock

Ottobock announced that it is acquiring Blatchford’s Norwegian patient care business. The price is EUR 110m and comes with EUR 40m in revenue. In effect, this signals Blatchford’s retreat from patient care outside of the UK. This is actually quite interesting. I discussed some of the competitive dynamics in the deep dive - I think Ottobock’s forward integration model is going to be very tough to compete with and Blatchford has apparently dropped its decade-long ambition to try the same.

Procept

Procept spoke at the Bank of America Global Healthcare Conference this week. CEO Larry Wood provided some helpful context around the prospect of a hybrid support model that they started talking about recently:

The going to a hybrid support model is really not about trying to drive leverage out of the P&L. What it’s really about is trying to drive procedure growth. And what I worry about is that we could be losing procedures here and there because a doctor sits there on a Thursday and says, I got 2 more cases tomorrow, I could do Aquablation, but I don’t want to call the rep or maybe he’s always [out of town] on Friday.

And what I don’t want to do is ever lose any cases because we can’t get somebody there. I want our team routinely visiting with our customers. I want them routinely making sure the system setup is being done properly. There’s a lot of turnover of staff in hospitals, and there’s a setup element to the robot, and we want to make sure that people are doing that right and doing it correctly.

So I always want our people in that. There’s never going to be something where we don’t see a customer for 3 months and they’re just written off cases. And I think there’s actually - at some level, there’s a risk to the business that you quit paying attention to your customer and you just open the door for other people to come in. So we’re always going to be there doing that.

I just don’t want somebody dependent on us. I don’t want somebody saying, if a rep can’t get there, if a rep is sick tomorrow, I can’t do cases and thus I’m going to have to convert them to something else. So I just see this as a lever for us to be able to continue to drive case growth more than I see it as an operational lever. Now the byproduct of it is if we can cover - if we can double the number of cases and we can keep our sales footprint the same or grow slightly, obviously, that drives tremendous leverage for us. But it’s a byproduct, it’s not the reason.

That’s it for this edition. Thanks for reading.

Get in touch if you have any comments or questions.

Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

Read more

Friends of NFTBC.

As seasoned NFTBC readers will know, I am particularly drawn to stories of unconventional business success. Naturally, these sorts of stories are rarely obvious in the beginning - so any satisfaction in the pursuit comes from following them over time and living inside the story while it writes itself. All the better, if I can make some useful investment returns along the way. Cerebras Systems is an example where I have been following the story for about five years and an investor for just over two years. With Cerebras having recently filed an S-1 and an IPO looking imminent, now seems like the right time for a post. But I have been of two minds as to whether I should write one. AI, IPOs, hype - these are certainly not the traditional NFTBC territory you’re used to, and to some extent they did put me off from wanting to involve myself. But on the other hand Cerebras is, in my view, an extraordinary business - and a fascinating one. It’s worth writing about. I’m also well aware I’m posting this at a time of especially high enthusiasm for semiconductor stocks - and this unsettles me to some degree. But equally, if ever there was a propitious moment for Cerebras to raise needed capital on the stock mark, this is it.

This post is intended for curious readers with an interest in unconventional businesses doing interesting things. It’s probably less relevant for those who want to go deep into the weeds on engineering questions. But all are welcome. Additionally, the post will be much more concerned with the business itself rather than IPO dynamics.

Let’s begin.

[NFTBC does not give investment advice. Please do your own research.]

Introduction

Since its founding a decade ago, Cerebras has been in the business of inventing, producing and selling a highly unconventional computer system with specific design intent for AI applications. What makes Cerebras’ system so unusual is the way they’ve gone about it - using an entire monolithic 300mm silicon wafer as the basis of their processor, rather than dicing their wafers up into small chips like everyone else does. Doing it this way also necessitates rethinking the entire system as well as the manufacturing process and supply chain: from packaging to power to cooling to software. And there are good reasons why no one else does this - for decades it was supposed to be a dead end. Cerebras’ founders decided to do it anyway, succeeding against all the odds - they’ve now built something unique and very hard to replicate. As to why you might even want a ‘wafer-scale’ processor, I’ll cover some of that later. But suffice to say for now that the founders came to realise in late 2015 that the future computational requirements of AI, would look very different to those that the existing architectures were designed for (e.g. the graphics processing unit). And so, the Cerebras Wafer-Scale Engine (WSE) is what you get when one of the most determined, experienced and innovative systems design teams comes together at the right time, with the right backers, a bit of luck - and with a blank sheet of paper.

Cerebras’ current system, the CS-3, was released two years ago. The CS-3 was primarily intended for model training and provided an elegant solution for simple near-linear scaling out to large clusters. I thought this was the way things were going to go. But despite impressive demonstrated performance the CS-3 has remained very niche in training - training being where Nvidia’s moat is strongest. Within months of the CS-3 launch, in mid-2024 Cerebras quickly pivoted to inference in order to capitalise on the emerging shift to inference-time compute - or smarter ‘thinking’ models. In 2026, we’re all familiar with thinking models - they’ve become mainstream. And we’re all familiar with waiting while the model thinks. To calibrate your expectations here, the CS-3 typically runs models around 10-20 times faster than GPUs - in practical terms this means that chat responses come back more or less instantly without having to wait. Seeing is believing of course, so you can try out Cerebras Chat for free at this link. Or you can just watch Cerebras code an interactive pool game in 12 seconds:

Of all places, I came to be aware of Cerebras some years ago via GSK - yes, the stodgy old big pharma! (see my GSK post here). One of the lesser-known things about GSK is that they have perhaps the leading in-house AI and machine learning capabilities in the pharma industry. They were also Cerebras’ first commercial customer. Intriguingly, it was actually GSK who sought out and approached Cerebras - a complete unknown at the time and only recently out of stealth mode. The GSK AI/ML group had some big problems they were struggling to solve with GPUs. They looked into rightsizing the hardware to their problem, rather than the other way round - Cerebras had the hardware for the job. The two companies remain partners years later.

It took Cerebras around four years to design and launch their first system - a process defined by formidable challenges that they ultimately overcame. It took another six years to get traction with hyperscale customers. But they stuck at it, kept making their case and made a couple of important pivots. And so, after years of having to promote an offbeat roster of reference customers such as GSK, TotalEnergies, Mayo Clinic and G42, Cerebras can finally point to major megawatt-scale contracts with OpenAI and AWS. The foot is now firmly in the door. It’s no coincidence that the list of chip startups with major cloud deployments is particularly short. The barriers to entry are mighty. Turning up with something just a bit better simply will not do - you have to turn up with something an order of magnitude better, and that was the plan from the start. In many respects the WSE was ahead of its time but it’s now coming into its own.

In my case, it took a good couple of years for the potential of wafer-scale computing to dawn on me. By early 2024, I had become convinced enough to buy Cerebras shares in the private market. Any early excitement around Cerebras had now been squeezed out by Nvidia’s tightening grip on the AI narrative. Private market appetite for wafer-scale was minimal - which, of course, is exactly what made it interesting.

In the domain of frontier models and the underlying infrastructure that makes it all possible, we are, of course, talking about a space that is moving with extraordinary velocity. The number of people (or more accurately, teams of people) who are able to synthesise all of the associated technologies at the leading edge and hold a useful idea of where things might be heading, is incredibly limited - and almost all such people are active participants in shaping this future rather than investors passively trying to make sense of things from the sidelines. So we should be honest with ourselves: practically all of us are mere passengers. As I have said a few times before, investing for me is sometimes about striking the right balance between knowing too much and too little. It seems to be the case that some of Cerebras’ first venture backers felt the same way1 - they knew enough to grasp the significance of what the founders were proposing, but perhaps not enough to be scared off from trying. But most importantly, the reason Cerebras got funding at all was because the VCs were backing a team - in this case, a team who had worked together for years and had founded a successful systems venture previously (SeaMicro). They’ve done it twice now, and achieved something even more challenging the second time around. So in its most simplified form, the Cerebras thesis might be stated something like this: whoever had the requisite foresight, ingenuity, experience and persistence, against all the odds, to first create the Wafer-Scale Engine and then drive its adoption into the mainstream - it’s worth betting on those people and whatever they’re going to do next in the field of AI computing.

The AI market is moving extraordinarily quickly, and we are well-positioned to anticipate its twists and turns

- Cerebras Founders Letter

It’s worth stating at the outset that the range of outcomes for Cerebras is particularly wide and, in the context of an IPO and a possible AI infrastructure bubble, this will result in highly polarised views and speculation every which way. Cerebras produced around $500m in revenue for 2025, and per the S-1/A the IPO market cap looks like it could be in the region of $26 to $27bn. As the sceptics will rightly point out, these sorts of starting valuations rarely produce attractive prospective returns. Sceptics might also point to extreme customer concentration, not to mention the constant uncertainty of when the AI capex bubble will eventually pop. But on the other hand, if Cerebras executes to the full extent of the contracts disclosed in its prospectus, it could conceivably ramp to well over $10bn in revenue over the next five years - for context, this might just sneak Cerebras into the top 10 fastest ever growing businesses from product launch (roughly similar to Facebook’s 2004-2014 run). And, let’s say, if Cerebras can make it to just 5% of Nvidia’s current revenue run-rate by the early 2030s (that’s ~$15bn), you could still be looking at a $100bn market cap business even with an extreme de-rating from 50x revenue to 7x. And I want to be clear about this: Cerebras is not an “Nvidia killer” such as you see in some of the sensationalist headlines - the thesis is more about winning a small slice of a very large pie. We’ll look at scenarios later on. For my part, I think Cerebras has a genuine shot at getting big quite quickly. But it’s by no means a dead cert and there are important risks and considerations that we’ll look at.

I have deliberately decided to try to make this post as non-technical as possible - although it does assume some base level knowledge around certain terms and concepts. I’m going to link to some of Cerebras’ technical materials/presentations and I suggest diving in for those who want to go there. From following Cerebras over time, I have encountered a good deal of punditry, typically concerning why the company will remain limited to only a highly specialised niche or why its systems will surely prove economically unviable. Some of this commentary is simply a result of insufficient familiarity with the company, and some of it seems to assume that Cerebras will not continue to adapt or make advances in future system generations. But some observations are fair and worth making note of - which we’ll touch on later. I’ll try to avoid making too many technology-related claims of my own, especially where they might be contentious - to do otherwise, I risk getting in over my head. So I’ll try to stick to claims that seem fairly robust and highlight where I’m choosing to put my faith in others. It’s inevitable I’ll get some things wrong, so I shall endeavour to clear up mistakes later on.

But if there’s only one thing you need to understand about the Cerebras thesis it’s this: speed. It’s generally uncontentious to say that the principal bottleneck in inference output speed is having to constantly move massive amounts of data from memory to compute - move the data too slowly and the processor sits idling while waiting to be fed. Cerebras’ answer is to pack an entire wafer with the very fastest type of memory (SRAM) interspersed among the compute - data travels only tiny distances and through incredibly fat pipes. If you have to move data between individual chips (like everyone else does), the distances get longer and the pipes much thinner. This is why there’s nothing else remotely as fast as the CS-3 at inference:

Moreover, it has become clear that much higher output speed is able to command a price premium. In a similar vein, Anthropic have shown they can charge 6x more for their ‘fast mode’ at 2.5x the speed.

Cerebras is the only player who can produce a wafer-scale system such is required for extreme memory bandwidth. Extreme memory bandwidth enables extreme speed. Extreme speed potentially enables a breakout from the commodity token space through premium pricing and new use cases. Competitors are, of course, lining up to enter this gigantic market. And it’s also true that barriers to entry in chip design may have come down in some respects - there’s far more venture money washing around in semiconductors compared to a decade ago and the hyperscalers have deep pockets and motivation. Thus far, there’s not much evidence of anyone else going wafer-scale and, moreover, Cerebras owns important IP in that domain, having pioneered it. And, as we shall learn, it’s by no means easy. I therefore believe that barriers to entry in wafer-scale remain intact. Most alternative approaches to wafer-scale appear to retain the ‘thin pipe’ problem, go after cost rather than speed or else sacrifice vital programmability (which has obvious limitations if the models keep changing). And perhaps most importantly it’s important to weigh up the following considerations: 1) the CS-3 wasn’t even designed principally with inference in mind and 2) no frontier lab has yet designed a model specifically to take advantage of wafer-scale benefits and to optimise around the constraints. Both of these things are about to change. It’s clear that Cerebras and its partners have big ambitions for major system improvements from here - more on that later.

But who knows? Maybe the wafer-scale critics will have the last laugh in the end. Maybe the economics won’t play out competitively or maybe Cerebras will struggle to keep up with Nvidia’s relentless pace. Maybe they’ll struggle to manufacture these systems in the necessary volumes. Or perhaps they (or their largest customer) will run out of cash. We’ll review some of the risks later on. But what excites me most is that I don’t think we’ve even seen Cerebras’ A game yet. Here’s Cerebras co-founder and Chief Architect, Michael James, speaking at the end of last year:

If you look at the next designs that we’ll come out with, they might make [the WSE-3] seem quaint.

This? Quaint?:

I’m curious to see what comes next.

The Meaning of Speed

I was reading about George Stephenson, the great steam train pioneer, earlier this year. In Great Britain the idea of travelling twice as fast as the fastest horse-drawn mail coach was once considered absurd, unfeasible and dangerous, not to mention unnecessary - a dead end. And the country had previously invested heavily in a comprehensive network of canals for the efficient horse-drawn conveyance of commercial goods - the canal network was itself a paradigm shift and a key accelerant of the industrial revolution in Britain. So when in the 1820s Stephenson proposed the world’s first intercity steam locomotive railway between Liverpool and Manchester, he faced a good deal of scepticism:

George Stephenson’s idea was at that time regarded as but the dream of a chimerical projector. It stood before the public friendless, struggling hard to gain a footing, scarcely daring to lift itself into notice for fear of ridicule. The civil engineers generally rejected the notion of a Locomotive Railway; and when no leading man of the day could be found to stand forward in support of the Killingworth mechanic, its chances of success must indeed have been pronounced but small. But, like all great truths, the time was surely to come when it was to prevail.2

I am, of course, just having a bit of fun here. But I do enjoy these stories where some maverick succeeds with an audacious groundbreaking idea against the odds - and the analogy of moving from the canal age (i.e. GPU) to the steam locomotive age (i.e. Wafer-Scale Engine) is a tempting one. Stephenson got his railway in the end and it changed the meaning of speed for the whole world:

Notions which we have received from our ancestors, and verified by our own experience, are overthrown in a day, and a new standard erected, by which to form our ideas for the future. Speed – despatch – distance – are still relative terms, but their meaning has been totally changed within a few months: what was quick is now slow; what was distant is now near; and this change in our ideas will not be limited to the environs of Liverpool and Manchester – it will pervade society at large.3

The rest is history, as they say. Back in Stephenson’s day, there were those who pointed to the efficiency of the existing canal system to demonstrate why railways were unnecessary. They weren’t wrong. But it showed a lack of imagination. Even today’s canal baron, Jensen Huang, is finally hedging his bets and ponying up for some steam engines of his own - as evidenced by Nvidia’s recent acquisition of Groq (the closest Cerebras has to a fast inference peer). The first sections of intercity track are now being laid.

Staying on the topic of speed, Cerebras co-founder and CEO Andrew Feldman likes to draw the more modern analogy between dial-up/broadband internet and slow/fast inference. I’m old enough to have had my formative internet experiences with dial-up modems. And Feldman has a point - waiting for a model to respond in 2026 conjures up old memories of loading webpages 30 years ago. For any patient youngsters or nostalgic oldies, you can see what this was like here:

What did it mean when broadband arrived and we no longer had to wait? The internet changed: websites could become far more data rich, streaming, cloud computing, you name it - entirely new business models emerged and their effects continue to ripple through our world today. And as the world moves forward, expectations change - Feldman and others like to point to research carried out by Google and Amazon some years ago showing how mere milliseconds of latency can cause a reduction in traffic or even revenue.4

So what of fast inference? Here’s how Cerebras co-founder Sean Lie put it when they announced an experimental ultra-fast coding tool with OpenAI a couple of months ago (Codex-Spark):

What excites us most about GPT-5.3-Codex-Spark is partnering with OpenAI and the developer community to discover what fast inference makes possible—new interaction patterns, new use cases, and a fundamentally different model experience. This preview is just the beginning.

-Sean Lie, CTO and Co-Founder of Cerebras

Readers may have their own views on this, but in the prospectus (p121) Cerebras cites coding as a strong example, as well as real-time insights in deep research and voice applications. We’ll just have to see what emerges in the months and years ahead. But the trend is clear: more thinking time » more inference » more waiting (unless we do something about it):

Here ends the complementary section of this post - thank you for reading! In the remainder, we will cover the following topics:

• The Road to Wafer-Scale

• Brief Thoughts & Speculations on Tokenomics

• The Roadmap: what we know + some possibilities

• Business Model & Sizing The Opportunity

• Risks & Other Considerations

• Final Thoughts: Moat

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The Road to Wafer-Scale

The Cerebras origin story gets underway around 20 years ago.

SeaMicro

At the time, Gary Lauterbach was a highly experienced architect at Sun Microsystems. He had designed Sun’s latest generations of powerful server chips. Andrew Feldman was a former network equipment executive turned entrepreneur-in-residence at a VC firm. Both had, via different paths, arrived at the same conclusion: a new kind of efficient server hardware was needed to address the massively escalating challenge of datacenter power consumption. Feldman decided to start a company, but he needed a technical founder to join him. He had the right network and VC connections, while Lauterbach had the engineering expertise. A former colleague of Feldman (who

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Friends of NFTBC

Yesterday was a busy day with four of our stocks of interest reporting. I intend to visit them all, but not necessarily in standalone posts - so keep an eye out in The NFTBC Digest. There’s also a new long-form post in the works for the coming days, so keep an eye out for that one too.

I began my BRKR deep dive last year with this 2010 quote from Nobel Prize winner Richard Ernst:

And what is the moral of the success story of the Bruker Corporation? Bruker has been active in a unique manner in a high-tech leading field over an incredibly long period of 50 years. Few other companies can match Bruker. Whatever Bruker has achieved has demanded novel technologies that in each case would have been impossible a few years earlier. For academia, such companies are ideal partners: they are highly ambitious, stimulating, and grateful for creative contributions.

This form of exchange can indeed be highly motivating for inventive entrepreneurs and for innovative researchers with endurance. Ultimately, it is courageous and creative efforts that are decisive. The example of Varian also shows that initial success can lead to complacency and the underestimation of motivated competitors. One further lesson that can be drawn concerns company leadership. One should guard oneself from companies that are managed by technically illiterate lawyers and MBAs. Technical expertise coupled to close contact with the market remains essential for avoiding flawed decisions. Bruker has in the past evaded such perils through wise personnel policies and long-term continuity. The company has produced beneficial innovations and added value for 50 years. Also investors might derive lessons: it is still the rock-solid technical expertise of a CEO together with their market awareness that offer the best guarantees against false decisions. With innovative companies, like the Bruker Corporation, the frequently forecast demise of Europe is not imminent. Even if the Bruker Corporation is of late governed by American law, the spirit of this remarkable company is still firmly European.

As I said at the time, this continues to more or less sum up the BRKR thesis, a decade and a half after it was written. Ernst was talking about Nuclear Magnetic Resonance, where BRKR now has 100% market share in high field systems - when you can do things that others cannot that’s usually a valuable proposition. A similar dynamic reaches out into numerous other fields with compelling longer-term tailwinds, whether that’s in the life science domain, semiconductor metrology, nuclear fusion, the list goes on - and it’s an eclectic list that generally goes quite under-appreciated. Over the course of the last 12 months, since I posted the deep dive, the company has continued to push in this direction by launching breakthrough instruments with the potential to open up new markets - these include timsOmni (functional proteomics), timsMetabo (4D metabolomics), PaintScape (3D genomics) and others. While it’s too early to know what the eventual financial impact of incremental innovations will be, the contribution to the order book is already showing up and the impact on intrinsic value likely to be material over time. In the context of last year’s dilution saga, things ain’t so bad then. Moreover, we can now be quite confident that the next major multi-year earnings growth story is finally underway, starting Q2 2026: back to the future.

In the remainder of this post we’ll take a look at some of takeaways from yesterday’s earnings materials. One last thing: for a limited period I have taken the paywall off the original deep dive for anyone who’d like to see it. I just ask that you kindly hit the like and share buttons.

[NFTBC does not give advice - please do your own research. I currently own Bruker shares].

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Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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For as long as I have been looking at Regeneron, investors have been fixated on Eylea - specifically on its loss of exclusivity and the threat of competitors. So it’s notable to observe that yesterday REGN reported record Q1 revenue - up 14% on the prior record set in Q1 ‘23 (actually +23% if you rightly exclude one-off COVID revenue). During the same time, Eylea sales have declined from a hair-raising 47% of revenue to 13% today.

Yet, in a clean break with all convention, REGN did not elect to buy their way out of trouble - instead, all of the offsets (Dupixent, Eylea HD, Libtayo etc) came out of their own labs. But with the Eylea LOE eventually turning out to be a relative non-event, investors have now landed on a new fixation: the 2031 Dupixent LOE. In 2031 Dupi starts to lose some of its key patents and the bears are demanding their pound of flesh five years ahead of time. No matter that Dupi is still growing 20-30% with plenty of runway to go, nor that its IP might stretch a bit longer in the end. If you look at REGN through a conventional biopharma lens, there’s no escaping the conventional diagnosis: major LOEs can only be addressed through M&A or major business development. Trying to actually innovate your way out of such a hole is recklessness of the highest order and should not go unpunished:

This exchange from yesterday captures the dynamic very well:

Analyst

Len and George, my question is for you. So Regeneron spends aggressively on R&D, but the investment community lacks confidence that the company’s candidates will move the needle commercially, in particular versus established competitors. So could you please highlight the pipeline candidates in late-stage development that we’ll have cards turning over in the near term or relative near term, i.e., in the next, I don’t know, 18 months or so that you have the greatest confidence in that can generate multibillion-dollar peak sales that investors will be able to see more clearly in the next 18 months or so.

George Yancopoulos

Can I just say that past performance should be the strongest indicator of future performance. There’s only one company in recent history that’s had its own labs produce two $10 billion-plus blockbusters. And let me remind you that I think you, and probably a lot of other investors, never saw those coming or ignored what we were saying about them. So investor confidence, I think, should in large part be reflecting historical performance and the recognition that where blockbusters come from sometimes for the investor community can’t be directly anticipated. And the best way of producing very important big drugs is by having very exciting molecules across all stages of development that have enormous opportunity.

And if you just look at our oncology programs, whether it’s fianlimab-Libtayo, whether you look at Lynozyfic, whether you also look at odronextamab in follicular lymphoma. These are all potential blockbusters. The C5 franchise is a pipeline in a product, multiple blockbuster opportunities there. Our Factor XI customized approaches are looking more and more exciting, especially based on competitor data using, we think, inferior and less convenient approaches. And we just covered the obesity opportunity, which arguably could become the preferred obesity approach that not only addresses obesity, but more aggressively addresses cardiovascular morbidity.

So I don’t know, it’s hard to think of a more exciting pipeline in the entire industry.

Which is it then: a) the indefensible squandering of company money on R&D or b) one of the most exciting pipelines in the industry? These two poles could hardly be further apart! And perhaps we won’t get a definitive answer until hindsight offers us a helping hand.

With the remainder of this post, we’ll have a look at some of the notable points that came out of REGN’s earnings yesterday as well as the recent C5 Rountable event.

[NFTBC does not give advice - please do your own research. I currently own Regeneron shares].

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Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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When I started looking at recently listed Ottobock (Ticker: OBCK) I was immediately intrigued, so I decided to write about it. Additionally, my impression is that global investors might not yet be especially aware of this German ‘hidden champion’. OBCK, with a market cap of around EUR 3.5bn, is the market leader in human bionics - most notably prosthetics, but also in tangential fields. The business itself has a long and colourful (if not especially public) history and its family owners have, I believe, built some quite compelling moats around it.

For various reasons I’m slightly behind schedule on getting this post out the door. Part of the reason for that is that I have been looking at OBCK fresh and the more I learnt, the more questions I had. There are numerous moving parts to understanding this business1 and various dynamics at play - I wanted to be sufficiently comfortable about them before writing to you about it all. Having done this now, one thing seems clear to me: OBCK is a very hard business to compete with and may even be a candidate for the most moaty business I’ve written about so far at NFTBC. In some instances, OBCK has exceptional pricing power. But I’m also pleased to note that in such instances its products bring tremendous value to their users - so long as reimbursement and access can be established. That’s all part of the story too. It’s also a largely recurring revenue business model with plenty of avenues towards durable growth - we’ll go into all of this.

My aim with this post is to try to bring OBCK newcomers up to speed in 40 minutes or so and to point you in the right directions should you decide to follow up with your own research. As a business with many thousands of SKUs, there is a lot that I won’t cover here, but I’m happy to continue the conversation elsewhere. Here’s what the basic layout will look like:

1. Introduction (free to read)

2. Background (partly free to read)

3. Basic thesis: Strategy, Moats & Optionality

4. Governance Structure & Management

5. The Business Today: Overview, Financials & Competitors

6. B2B: Products & Markets

7. B2C: Ottobock Patient Care

8. Risks / FAQ

9. Conclusions: 2026 & Beyond, Initial Thoughts on Valuation

While I do not yet currently own OBCK, I shall discuss later some of the conditions that could lead me to take action - potentially in the near term. As always, I will inform paying subscribers when and why I decide to acquire OBCK shares - should that time come. If you’re new to NFTBC, please check out this page for more information about the NFTBC approach and what to expect. I’ll no doubt make some mistakes in this post, which I shall endeavour to correct over time. With that, let’s get going.

[NFTBC does not give advice - please do your own research. I do not currently own Ottobock shares].

Introduction

For the last 100 years, OBCK has led the field in developing and commercialising next generation prosthetics. Most notably, in recent times, important developments include the microprocessor knee (MPK) - a breakthrough innovation that enables above-the-knee amputees to move with a more natural gait, safely tackle everyday tasks and even engage in much more adventurous pursuits. Today OBCK is the largest and most important prosthetics OEM by a wide margin - about 40% market share. Additionally, OBCK has been investing heavily into tangential fields in order to open up new and potentially even larger markets - more on that later.

While the company has only been listed since October 2025, we have sufficient information to know that OBCK has been a relatively consistent 7-8% top line grower for a long time. Revenue was under EUR 100m (equivalent) in 1990 - implying around 17x in 35 years or greater than 8% CAGR.

The numbers in the last several years also mask a more promising underlying story of 3-year ‘core’ organic revenue growth of 11%. With the company now close to having completed a series of non-core divestments, these revenue figures are now converging. Another compelling dynamic at play is the recent trend of margin expansion, which management expect to continue - we’ll get into some of the reasons behind that later. But first, some background…

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Background: History, the Näders, EQT & IPO

A Little History

For the particularly keen, there is a three volume book on the history of Ottobock. I’m afraid I haven’t read it - but I don’t think we need to go into deep history here.

The founder, Otto Bock, started the business in Germany in the wake of World War I. At the time, prosthetics were one-off crafted items, and as far as processes go, this one was highly inefficient given the elevated need at that time. Bock industrialised the process turning it into the serialised mass production of components. In time, the business came to be managed by Bock’s son-in-law Max Näder. Under Näder the business continued to launch a series of important innovations including the breakthrough Jupa knee joint with braking mechanism, myoelectrics that help users grab objects, plastic prosthetics as well as the modular system that underpins modern prosthetics today. In 1990, at the age of 28, Hans Georg Näder took charge as CEO - the grandson of Bock and the son of Max Näder.

Hans Georg Näder (HGN)

Given the various Näders involved in this story, I shall refer to Hans Georg as HGN from hereon to avoid confusion.

HGN has taken a fair bit of heat in the German business media over the years, for example for apparently taking cash out the business, raising debt and for buying shipyards, breweries and such others things that eccentric billionaires are wont to do. There’s even a website dedicated2 to posting largely negative content about the man - if you decide to research OBCK you’ll probably find it quite quickly. I’m inclined to leave such tittle tattle to one side. For one thing, up until the point when EQT acquired a 20% stake in OBCK, HGN basically owned the business outright and was free to run his affairs in any way he saw fit. One thing worth noting (and that OBCK commented on some years ago) is the importance of drawing a distinction between Ottobock SE & Co. KGaA (i.e. OBCK) and the family holding entity Otto Bock Holding GmbH & Co. KG - it seems journalists have not always done this. In the end, the latter changed its name to Näder Holding GmbH & Co. KG perhaps in part to help address the confusion. Needless to say, the affairs of the holding company and the other assets it owns, are not directly relevant to OBCK shareholders except to the extent I shall identify shortly.

With that out of the way, let us now consider some of the great strategic decisions made by HGN - if you’ll pardon me for going off on a brief tangent. The biggest risk with successful family owned businesses is the possibility of dilution to management quality over time. So it’s notable that the grandson of the founder has been able to act with great strategic foresight. OBCK’s most important product of the last 25 years has been the C-Leg microprocessor knee. The first ever fully adaptive MPK, it’s been fitted more than 100,000 times and continues to be the market leader (after numerous iterations and branching products). Since the turn of the century, OBCK has compounded MPK units at 20% per year. While they don’t break it out, I think we can infer that the C-Leg is a substantial percentage of total revenue. The MPK was originally pioneered by maverick Canadian engineer Kelly James in the early 1990s. Per Ottobock lore, HGN waltzed into a prosthetics trade fair and penned a deal with James there and then, having recognised the significance of the technology.

The OBCK PR department seem to make a big deal out of this in various places, which made me kind of suspicious and drove me to try and verify it. And… it’s true: Kelly James independently retold the same in an interview with his alma mater University of Alberta 15 years ago. The context is telling and worth expanding on:

[Kelly James] travelled around the world to conferences trying to sell his leg to a manufacturer. At trade shows, he walked from booth to booth with his prototype slung over his shoulder. But most manufacturers were reluctant. What James was selling was, in retrospect, ahead of its time. “They all said, ‘I don’t know, it’s pretty complicated.’ Remember, in 1992 people didn’t know anything about computers.” James persevered, even when people in the prosthetics field told him the idea was crazy. But in 1992, German prosthetics manufacturer Otto Bock approached James at a trade show. In a closed-room meeting with the company’s owner and top engineers, they made James a deal for the leg, on the spot. “What really surprised me about the meeting was that they were so respectful of the leg. After I had talked to all the American companies and they had just slammed the door in my face, I spoke to the German company and they were so, ‘Wow, this is really amazing, and how did you do it?’”

But there were obstacles to overcome along the way. Otto Bock nearly decided not to manufacture and sell the leg after one doctor’s experience. The doctor, an amputee, was impressed with the leg after wearing it around for a couple of hours. But when he took it off to put his old prosthesis back on, he fell down the stairs. The C-Leg was too good in the sense that it was dangerous for someone to readjust to a less-sophisticated prosthesis. Otto Bock executives were upset, says James. “They were saying, ‘This is a no-brainer, we’re not going to build this knee … we can’t put amputees at risk.’”

James managed to convince them otherwise. “Let’s just change the number of phases the knee goes through during a step,” he said. The idea of easily tweaking a few lines of code for the knee’s microchip was an eye-opener for Otto Bock. Over time, the phases of the knee evolved, eventually eliminating any phase where the knee is locked and anything that made the knee too complicated for users to figure out. The knee’s simplicity is one of its main selling points. “You don’t read a manual, you don’t understand it, you don’t think about it—you just walk,” says James.

It’s kind of interesting to me because HGN was still relatively young and had only been in charge a couple of years. Would a professional salaried CEO have made the same decision? Kelly seems to suggest not. In the event, OBCK spent 5 years in development and launched the C-Leg in 1997. And it’s taken decades to build the case for reimbursement and grow access - a journey that continues. It’s tough to imagine these sorts of long-range investments being made by a non-family controlled business.

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Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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First things first, I’m working on a couple of projects/posts in parallel at the moment. The first will be an under-the-radar name in the healthcare space - I’m hoping to get this one out soon-ish, so keep an eye out for that.

Second, last week I recorded a podcast with Bill Brewster on the the Business Brew - I enjoyed the conversation. We talked about NFTBC and spent a bit of time on REGN, BMW and one or two other names. You can listen here, if you would like to:

• Apple

• Spotify

Be sure to subscribe to the Business Brew if you haven’t already. Bill’s a thoughtful host and asks great questions - I can only hope that I answered some of them intelligently.

I think my weakest answer was to Bill’s question about what the process looks like at NFTBC. I sort of waved the question away by saying there’s no formula or rulebook that I follow - while this is effectively true, it’s also a bit of a cop out. As an independent analyst-writer I think I’ve elaborated pretty well by this stage on the what and the why (e.g. here, here and here). But not as much on the how - the process. I suppose the process, insofar as there is one, is just something I do without ever having formally codified it or putting much thought into explaining it. What follows, is a few brief thoughts on how I might have answered the question better.

It’s true that I don’t work formulaically. I don’t like to have too many rules, preferring the flexibility of more of a principles based approach (instructed by the what and why).

Idea generation

Most (if not all) of the ideas for businesses to write about are sourced independently. In other words, in most cases, I probably won’t have seen or read a write-up by someone else before I dive in.

In terms of leads, they really can come from anywhere. Quite often, leads arise unexpectedly when I’m looking at or reading about something tangential or maybe something altogether unrelated. Other times, when I’m at a bit of a loose end, I like to sift through long lists of stocks just to see if anything jumps out - although I don’t run screens. I quite like to work quickly and visually at this stage - bringing up lots of different stocks, displaying financials in charts, scanning through information about management etc. I pass over practically everything for one reason or another.

Research phase

Many ideas look interesting to me intuitively and quickly. The next step is then about figuring out if the intuitions were any good and unearthing important considerations that are worth understanding. My process then essentially revolves around figuring out which questions to ask and then trying to answer them in a satisfactory way. And the deeper I go, the more questions arise. When I start out I don’t even know what most of the questions are going to be. Some of these questions are undoubtedly stupid ones. Some are perhaps more intelligent. I continue in this iterative process until I’m comfortable that I’ve identified the most important aspects of the business for my purposes alongside the relevant risks and uncertainties (i.e. questions that cannot be answered, for the time being).

Similar to the output, the process is far more qualitative than quantitative. But it’s not to say the numbers are not important, they are. Actually I insist on a somewhat laborious process of extracting figures myself manually from years’ worth of financial statements. I’ve never really trusted the fidelity of third party data. But more importantly, I tend to find that the numbers tell a more instructive story when I pull them out myself. The very extraction process becomes a learning exercise and I’m more likely to notice things and ask questions along the way - rather than skipping straight to a pre-populated Excel sheet.

It’s always my ambition to rule out dead ends as quickly as possible, before I invest too much time. But, alas, very occasionally I might get quite far before I assess the opportunity to be a no-go. Actually I’ve already had one of these this year, although there’s a possibility I could revisit that one in future.

Writing phase

The writing phase usually begins well before the research phase has finished - one feeds back into the other. Putting thoughts into writing ends up generating more research questions.

As to the writing process itself, I don’t have much of a template. Each post is generally bespoke. The approach and format I end up pursuing, emerge in a bottom-up fashion as the research progresses. Every business is unique and context-specific and flexibility seems to be the most accommodating way to deal with that.

AI

I’ve touched on AI before. It will always be the NFTBC promise not to use LLMs in writing, except in a very limited fashion and always identified as such. Neither do I routinely use AI for automating data-type tasks - other than for occasional genuine chores, where there won’t be any ancillary benefits from carrying out the heavy lift myself. I do however now use AI in the research part of the process, in an iterative/dialectic way. I find it very helpful in helping to surface new questions. Insofar as the AI purports to give me the answers, I approach these with scepticism - always seeking to challenge and verify, including from original sources.

Walking

I’ve always walked a lot, out in the fresh air. Insofar as I have ever have any original insights (up for debate) they’re most likely to occur when I’m out walking rather than sitting at a desk.

My hope is that the net result of all of this is something a bit different, interesting and potentially interesting.

Thanks for Reading.

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Being an automaker is hard, really hard. Which is why there aren’t many financially successful automakers and why investors generally avoid the sector altogether. If you want to learn about what makes BMW different - please check out my free post here:

My purpose with these occasional BMW posts is to check in on the company’s progress as it undergoes a historical reinvention. If I’m right about BMW, then the company will soon enough resume its longer-term trajectory of growing volumes with a relatively steady cadence. This follows a near-decade long period of treading water:

So what happened in the last decade? In addition to global car sales peaking around 2017, two additional factors weighed on performance. These are: 1) Tesla stepping up from ~100,000 premium BEV units in 2017 to ~1.6m in 2025. And 2) a toughening of conditions in China since 2023 from increased local competition and slower business in the high-end segment. While BMW is now well ahead of other legacy carmakers in electrification, from ~2017-2022 they didn’t have a strong answer to Tesla. And from 2024, BMW’s outgoing BEV portfolio is showing its age against fast-moving Chinese competitors. Together, these two headwinds have depressed annual volumes by hundreds of thousands of units. Even still, BMW has done significantly better than its two closest peers:

The good news, as I have discussed elsewhere, is that BMW is a forward-thinking business and has spent some years reinventing its product portfolio for the future - if they get it right, the headwinds of recent years seem likely to fall away. Innovations include a Neue Klasse BEV-first architecture as well as suite of new technologies, new design language and important unit cost reductions. In addition to all-new Neue Klasse launches, over the next two years BMW is also carrying out unusually extensive mid-cycle refreshes that incorporate the new technologies - the result is a complete overhaul of the product portfolio in a very short period of time, 40 models in all. We have been told that some existing models (such as the 7 Series) will emerge as substantially new cars. Importantly, the Neue Klasse innovations apply across all drive variants, not just BEV.

Deliveries of the first Neue Klasse model, the new iX3, began in Europe about a week ago, while BMW unveiled the upcoming electric 3 Series (i3) just today:

The launch model will be the i3 50xDrive - much like the iX3 launch model with front and rear motors. The specs are impressive, including 560 mile (900km) WLTP range (BMW estimates 440 miles EPA range). If they follow the iX3 strategy, pricing will be no higher than the equivalent 3 Series ICE/PHEV models. This seems likely to be a highly competitive package - and that’s before BMW’s claimed differentiation on unique driving dynamics (see prototype test drive here). There are more model announcements coming up in the next few months, including the China-specific long wheelbase iX3, the new 7 Series, a new X5 as well as different i3/iX3 variants.

[NFTBC does not give advice - please do your own research. I currently own BMW shares].

Financials and Expectations

All told, we can expect a wave of news, journalist previews and such things throughout 2026 but we’re only in the early stages of deliveries and rollouts around the world. For this reason 2026 is too early to expect a positive financial impact - this is more likely a 2027 story.

2025

You can find BMW’s 2025 year-end materials here.

Briefly, 2025 was actually an unremarkable year financially speaking - stable group volumes, stable group margin and moderate increase in EPS. For the most part, BMW came within its outlook set at the start of 2025. But this masks a good deal of shifting beneath the surface:

Notably, performance remained strong outside of China. Automotive revenue of EUR 117.6bn was down 5.9% on FX and pricing (~1.7pp), while Automotive margin declined by 1pp to 5.3%. Excluding the effects of new 2025 tariffs as well as the non-cash BBA purchase price allocation, Automotive margin would have been 7.9% which is just below the strategic target of 8-10%. Along with tariffs, China and fluctuating effects from investment levels, there’s a lot of noise in BMW’s margins currently.

China

A year ago, BMW was hoping to be flat in China for 2025. In the end, the market continued to deteriorate in the first half, leading BMW to implement further pricing and product measures to stabilise sales. This was in addition to a thorough restructuring of the BMW China dealership network. Per BMW these various measures are starting to be more effective now and they have stabilised at around 50,000 units per month for all of 2025 - this has continued into the first two months of 2026. Additionally, per BMW, pricing has now stabilised since Q3 and even turned positive. Their current expectations are for flat sales and profitability in 2026, which would be a significant improvement on 2025 - and this is before Neue Klasse launches in China towards the end of the year. Things could, of course, get worse again - but for now the outlook is stabilising:

The German automakers certainly capture a good deal of attention currently regarding their recent performance in China. For their part, BMW have spoken about the prospect of increased local competition in China for a number of years, which I think dispels the sorts of claims you hear about the company being strategically blindsided:

The industry is facing a period of profound change. The BMW Group is not about to turn its back on its core business of building and selling premium cars and motorcycles, but the competition is getting tougher. New economic superpowers such as China and India offer opportunities and risks in equal measure. In the future, they will not only represent sales markets but at some point - probably not long from now - will also step up as providers of competitive products.

- The Next One Hundred (BMW’s 100th anniversary book, published in 2016)

When you look at the Chinese market, then the first thing you must recognize this is by far the largest car market in the world. And all along, it was clear, the largest car market in the world will be highly competitive, highly innovative and, of course, dominated by the largest local players. So what happened and is still happening in this market is not a surprise. It’s normalizing. So when you say normalizing, that means there is competition in a saturated market, like we have in Europe and in the United States.

- Oliver Zipse speaking at BMW’s Annual Conference, March 2026

What matters next, is what they do about it - and preparations actually began some years ago. It’s abundantly clear BMW is upping their game: “High local content, super innovative and highly competitive”. Chinese reviews for the iX3 prototype seem to be similarly positive to European/American ones so far - we’ll see how it goes.

2026 Outlook

BMW have left themselves a fair bit of wiggle room on guidance for this year, briefly:

• Group deliveries flat (in BMW-speak that could mean +/- a few percent)

• Automotive EBIT margin 4-6%

• Automotive free cash flow “more than” EUR 4.5bn

• Group EBT down ‘moderately’ (could mean ~10% in BMW-speak)

• Continuing buy backs (currently reducing share count by ~3% per year)

Notably, Automotive margin assumes a 125bps tariff headwind this year (vs 150bps in 2025 and 175bps annualised in H2 2025). BMW are working on the assumption of finalised/implemented EU-US and US-Canada-Mexico agreements by July, but the outlook also includes mitigations if these do not materialise. Note that the 125bps (if it happens), seems to imply a still lower annualised rate for 2027. The outlook apparently does not appear to include the possibility of a negotiated exemption from the EU-China BEV anti-subsidiary tariff of 20.7% that BMW currently faces on imports from China into Europe - recent reports suggest that such a negotiation is ongoing following a similar deal struck by VW. I would estimate this could be around a 30bps margin benefit if it comes through.

The other principal margin headwinds would include lapping some of the China measures from 2025 as well as increased depreciation and amortization from prior investments as new products come to market. Partially offsetting this is the ongoing ramp-down in R&D expenditure - in 2025 the R&D ratio was 6.2% as against a strategic corridor of 4-5% which BMW intends to return to by 2027.

One thing to keep an eye on is consumer behaviour surrounding the ongoing launches. It’s easy to envisage a scenario where purchasing is delayed due to the significant upgrade in capability coming from newer models. Partly as a result of product cycling, BMW is not projecting an increase in BEV share for this year (18%).

Longer-term outlook

As I’ve noted previously, 2026 is a year of transition at BMW. We should not take it therefore as a point from which to draw strong inferences about the future. I’m currently looking at BMW on a multi-year view to capture the future effects of all the efforts currently underway.

Frankly it’s pretty tough to model BMW with precision, but nevertheless I think we can make a solid case directionally - and that’s good enough given where the valuation is (7.5x consensus EPS on depressed margins, also see here). BMW confirmed this week that they intend to return to their strategic Automotive margin target of 8-10% within the ‘medium term’ - and for the reasons I’ve discussed previously I’m inclined to take this as a sort of North Star given its centrality in how they manage the business. While they haven’t given a specific timeframe, it’s a very fair bet they are planning around this internally. Four years, or year-end 2029, seems like a reasonable point to take as ‘medium term’.

So I think you can reasonably assume a trajectory something like this:

Naturally, the stronger the growth in volumes, the easier and faster it will be to normalise margin through operating leverage. Note that by 2029 the BBA purchase price allocation effect (dotted line) will drop out following completion of the allocation. With a margin normalisation, you don’t have to be especially aggressive on your revenue growth assumptions: 5% seems reasonable from a combination of volume/price/mix:

Am I being wildly optimistic? BMW have a soft target of 3m vehicles a year in 2030 which would imply something in the region of 5% annual volume growth 2026-2030.

Whether or not they do indeed achieve this remains to be seen. But one thing is emphatically clear - they do intend to grow and this is what they’ve been planning for.

Thanks for reading

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From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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Friends of NFTBC.

It’s been seven months since I last wrote anything about WPP. It feels like the right time for a new post. Seven months ago I wondered whether WPP’s new CEO, Cindy Rose, would continue with some version of the strategy in motion at the time, or whether she would pivot to something else. The answer has now landed, and I shall come to that shortly. The stock is, of course, more or less a write-off yet WPP remains a really interesting business to think about - positioned on one of the first stretches of beach to face the AI tidal wave. That’s the perception anyway.

Even before generative AI washed onto the scene, there were some serious doubts about the sustainability of the agency holding company model, for example:

• low switching costs: agencies constantly have to battle it out in competitive pitches to retain business

• time and materials model: agencies capture little of the upside, even when they create major client value

• pressure on client budgets: marketing came to be viewed more as a potential efficiency saving rather than a long-term growth investment. This drove expenditure to channels defined by ‘metrics’ that could be easily quantified, rather than the less quickly measurable outcomes and fat-tailed nature of creative brand and marketing campaigns. The result was ever greater share of spend captured by the digital ad platforms

Tight budgets, low switching costs and ever-greater workload for limited pay has meant generally anaemic growth and capped margins. Yet in 2026 the agency holding companies face two further existential questions:

• What does it mean for a time and materials industry when work takes less time and fewer people?

• Will professional marketing services even be required at all?

It should be fairly clear to most investors that we are still only in the foothills of whatever disruptive changes will be brought upon the world of business by generative AI. But we are already far enough in such that investors are beginning to ask questions about terminal values in those industries perceived to be losers - most notably, this includes software in 2026. But the marketing services industry was singled out as an obvious casualty even earlier on in the process. After all, what is the point of paying for professional marketing services in a world with Zuckerberg’s ‘black box’, Claude for Marketing, Veo and Pomelli.

Putting it all together, WPP’s highly distressed valuation implies that investors don’t hold out any hope at all. And even within this swirling tempest of uncertainties, WPP is perceived by investors to have adopted the absolute worst strategy and to be the most chronically mismanaged of the bunch:

On a comparable EV/Revenue multiple WPP is at ~0.45x, compared to ~1.1x for OMC and PUB.1 This effectively puts WPP in the same valuation territory as supermarkets, notwithstanding even-currently-depressed margins that are 3-4x higher. “Perhaps there’s a looming debt crisis to cause such distress?”, I hear you ask. Nope! WPP has no covenants on its debt and all maturities in the next 12 months are covered by cash already on hand. There has been a complete collapse in confidence as to WPP’s prospects of doing anything other than spiral into rapid and terminal decline.

But what if, rather than what I outlined above, things start evolving in a direction that looks even just a bit more like this?:

I think it’s an interesting question to entertain at least, even if it’s very hard to imagine right now.

What follows is some of my musings on the current state of affairs, reflections on what went wrong last year and thoughts about where things could go next.

[NFTBC does not give advice - please do your own research. I currently have a small holding in WPP shares].

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What Went Wrong

Last year, I outlined WPP’s strategy here. With hindsight I think I was perhaps around two years too early!2 Briefly, the company had undergone years of simplification in order to transition from the historic holdco model into one that is more integrated and future-facing. From around 2020/2021 they started to build their WPP Open software platform - an end-to-end AI-powered “operating system” for marketing. When ChatGPT launched in November 2022, WPP’s AI strategy was already somewhat defined and in motion - which is actually kind of impressive when you consider how many businesses still haven’t reached this stage in 2026. I won’t repeat a full description here (see the above link), except to say there’s not much else like WPP Open on the market in terms of completeness and capabilities (both internally derived and externally partnered). Already a year ago the system was rapidly maturing (see demo) and it’s now mature enough to offer as a unique self-serve SaaS end-to-end marketing platform. More recently they went live with AgentHub - a central library of verified/validated AI agents for use in internal and client workflows. WPP Open is one of two foundational layers to the business today. The problem is, I missed the other one…

I hadn’t yet fully appreciated just how incomplete WPP’s data strategy had become in the eye of clients - especially relative to Publicis which owns some of the largest identity assets in the world for the purposes of customer ID resolution and targeting. WPP, all of a sudden, found itself looking uncompetitive in a number of defensive pitches last year and lost important accounts to Publicis. The most important step towards closing this competitiveness gap was last May’s acquisition of InfoSum, which I wrote about in detail here. InfoSum (which WPP was already partnered with) is an innovative data collaboration platform, that allows partners to collaborate on their datasets without having to move their proprietary data anywhere or upload it into a third party environment - thereby overcoming previous barriers around trust and privacy. And by breaking down the trust/privacy barrier you can bring together disparate and essentially unlimited datasets, of which traditional ID might only be one part. WPP calls this approach federated learning.

In theory, this makes for a potentially much more context-rich array of signals than ID-first approaches. From these signals WPP and clients can makes new kinds of predictions: Instead of determining “this user is X”, you can ask “given the current context, what is the probability of conversion?” You can move from targeting known customers to predicting unknown audiences.

A month after the acquisition, WPP announced Open Intelligence, which integrates InfoSum into WPP Open to make it accessible to clients and embed it into the workflow. Such an approach is, as you would expect, only limited by the number of collaboration partners you have - so they made sure to pair the launch with a decent name drop at the time. The more data partners they have, the more valuable Open Intelligence becomes.

But the thing is, Open Intelligence didn’t exactly go live in June, there was a staggered rollout over the remainder of 2025. WPP lost the Coca-Cola US media account to Publicis in March 2025, months too early to be saved. The Mars media account went right at the beginning of June - again too late. Together these two accounted for perhaps $2.5bn in billings lost to Publicis.

Also at the end of May 2025, WPP announced yet another restructuring in its media organisation to transition it to a single operating model (“WPP Media”), entailing yet more layoffs and disruption. They admitted on their recent Q4 results call this caused some unquantified disruption to revenue performance last year, and that’s in a year where clients were generally cutting spend due to the uncertainty around tariffs and where pitching activity was down 10% year-on-year. In 2025 WPP’s like-for-like revenue declined by 5.4%, of which 150bps was net client losses and another 400bps in cuts from existing clients - ~11pp worse than PUB!

2025 was supposed to be a transition year - roughly flat margins and growth while they made some additional technology investments and cycled some remaining client losses from the prior year. In the end growth was almost 450bps behind initial guidance, and operating margin 200bps behind (operating deleverage and 100bps in severance costs):

The impact of gross client losses in 2026 (i.e. excluding impact from wins) is expected to be a 500-600bps headwind, so from a revenue perspective WPP will have its hands tied behind its back this year. But the more important question is: can they turn their win-rate around?

In the end, pitch performance started to turn around dramatically starting from August 2025 with the Mastercard media account, followed by Reckitt and Henkel in November and the UK Government and Jaguar Land Rover in December - among others. And this has continued into 2026 with SC Johnson and Norwegian Cruise Lines in January and Estée Lauder in February. Per JP Morgan estimates (cited by WPP), WPP had the strongest billings quarter among all of its peers in Q4 2025:

WPP say that Q4 2025 saw their strongest billings in five years. And just two months into the year the expected 2026 revenue impact from the current win pipeline already exceeds the total win-driven revenue impact seen in 2025. However, given the delayed revenue impact of all the wins and losses, H1 2026 looks like it’s going to be very ugly, with a recovery from H2 when the new business finally kicks in. The swing factor will be spend from existing clients and whether or not we see a recovery. I’ll come to guidance later.

Naturally, the next question becomes: is the recent winning streak a one-off or fluke?

Cindy’s Strategy: a single operating company

Putting on my hindsight hat once again, it now seems clear that what the previous CEO Mark Read was talking about a year ago was more of a strategic vision rather than a pitch-ready proposition. But to give him credit, he perhaps wasn’t too far off by the time he “retired” last Summer. To help demonstrate the point graphically, this is where he had got to at the time of the Capital Markets Day in early 2024:

Six months into the job, this is what Cindy Rose is presenting today:

As a reminder, Rose is a Microsoft alumnus (COO Global Enterprise Sales) who has been on the WPP board since 2019. I wondered last Summer whether she would pivot to more of Publicis-type strategy or continue some version of Read’s strategy. The answer is: a bit of both. What definitely remains is the WPP Open and federated learning foundation. I’ll talk here about what’s changed.

About a decade ago Publicis’ previous CEO announced a new strategy called The Power of One - a strategy that his successor Arthur Sadoun has pursued relentlessly and very successfully. The basic idea was to break down the traditional agency company silos and be able to offer clients more integrated and holistic solutions - all while hanging onto many of the individual agency brand names. Get it right and you can re-bundle3 creative and media, drive better client outcomes and win pitches more consistency. It’s worked fantastically well. Mark Read actually, in many respects, set off in a similar direction - OpenX is a successful example of this. But he never quite managed to land the strategy into a winning proposition that could consistently win in pitches - we discussed the data part earlier, but what else did he get wrong?

Rose believes she knows the answer:

Clients pointed to the fact that our complexity got in the way of true client obsession. We were siloed. We were hard to navigate. We haven’t been intentional enough about evolving our integrated proposition to adapt to the changing needs of our clients.

Now the good news from my perspective is that all of these issues are fixable. And as I said, we’ve already started to do so.

To build on our current momentum and make it sustainable, we need to radically simplify our organization really to unlock true client centricity. So to do that, WPP will no longer be a holding company. We will no longer be a shopping basket full of stand-alone businesses, hundreds of stand-alone businesses.

We’re going to move to a single company model. with 4 operating units across 4 regions with incentives that closely align to the overall performance of WPP. Being a single company with a simpler structure and common incentives are critical enablers of our strategy.

If WPP was only setting off on this simplification journey today, I think the business would most likely be in serious trouble. But, despite Rose’s dramatic terminology (“radically simplify”) the heavy lifting has already been done - we’re mostly talking about tweaks here. I think you can roughly split these fixes/tweaks into several overlapping flavours:

• Narrative

• Structural

• Incentives

At the most basic/obvious level it seems pretty clear that Rose just wants to tell the story better than her predecessor did - and she does seem to be better at this, I would argue (as is Arthur Sadoun). From listening to others, she seems to have been received reasonably well internally so far, in contrast to declining morale under Read. And I wouldn’t be surprised to see a similar spillover effect into client attitudes. And it’s clear that WPP is now increasingly going into pitches as a unified “WPP” rather than a collection of siloed agencies - story telling.

On structure, the main change to call out here is the creation of WPP Creative which unifies the various creative agencies into single regional P&Ls with more shared corporate function - all while maintaining the individual identities. Per WPP, the simplified corporate structure allows for new common incentives:

At the heart of WPP’s relationship with our largest clients are our global client leaders, our GCLs -- and our GCLs are already masters of creating value. But our existing operating model and our incentives and our internal processes have not always afforded them the agility needed to deliver seamless client-centric services that unlock new avenues for growth.

We’re transforming our approach. We’re going to empower our GCLs with the authority and the resources to function as true leaders for their client portfolios, exercising strategic leadership rather than merely orchestrating a bunch of activities. This is going to include greater control over client P&Ls and the authority to make the best strategic decisions supported by streamlined internal processes designed to eliminate organizational friction and provide access to the right resource at the right time.

We’re also establishing a new team of client solution architects. This team will apply deep industry expertise to develop winning growth strategies for clients and then architect tailored solutions to deliver on those strategies, unifying technology, media data, all of our marketing capabilities to really drive successful execution.

Now here’s the interesting part:

If you’re sitting in an operating unit, your incentives are 50% tied to your operating unit and 50% tied to WPP. If you’re in WPP as part of a corporate function, you’re 100% WPP. If you’re a GCL, you’re paid on your client growth. It’s that simple. And it’s dramatically different from where we are today, where if you’re in an agency, you’re paid on your agency results primarily.

So that is very, very different. And that’s why I think it’s going to unlock very different behavior, much different collaboration. In the past, our agencies competed with each other. That was the model. Today, when we go into a pitch, we cast the right resource for the right client at the right time and -- it enables that.

It enables a much more client-centric approach to the business. Just to add, we’re implementing that in 2026.

Client growth was a topic that came up a lot in WPP’s latest investor presentation - much more than in the past. And it’s an important point. Brands haven’t been growing as fast as they used to and you have to ask if part of the reason is the time-and-materials model that does away with upside capture. Upside capture kills two birds with one stone: 1) aligned incentives: WPP wins when the client wins and 2) it solves for the time-and-materials problem in the world of AI. In 2024 this was the vision, whereas in 2026 they’re pushing it as the reality. So here we come to the crux of it all: is WPP now in a strong enough position to be able to pitch client outcomes linked to outcomes-based pricing?

When WPP won the Jaguar Land Rover pitch in December, they won the whole lot: creative and media. Getting both accounts at once hasn’t been the norm in a long time (since the days of bundled creative and media), although Publicis has been making inroads with its Power of One strategy. Here’s what Johnny Horny said (who led the JLR pitch):

So starting with Open Intelligence to be able to build cohorts and understand audiences in a way that doesn’t require us to do simply old-fashioned ID matching, but to keep the data where it is, keep it safe and secure and then put that into a team that we’re going to build with JLR, where we and they are all together on the open platform end-to-end. And it’s the end-to-end integrated nature of this offer that I think then allows us to make what I think are becoming genuinely competitive offers when it comes to outcomes.

So those outcomes aren’t do you like the agency you work with, those outcomes are, are we selling more product? And will we get paid on being able to sell more product by being able to build their brands and measurably show that there’s greater levels of desire for their products and the crown jewels of brands that they’ve got. So we haven’t finished contracting, but those are the defining - and that pitch was against all the major holding companies - I think those are going to be the integrated propositions that will see us win JLR and hopefully many more JLRs pulling these ingredients together.

And CFO, Joanne Wilson :

Navigating through what is an incredibly and ever more complex ecosystem is incredibly challenging for CMOs. It’s getting tougher and tougher. And that’s what they’re paying us for. It’s no longer they’re paying for us to create 5 ads.

In fact, we can create 1,000 ads, but it’s how do you get those ads into the right audiences.

And that’s really what they’re paying for, which is really enabling this output-based pricing, it’s outcome-based pricing, and it’s also shifting more to tech fees and licensing fees as well. So this will be an evolution, but we’re making lots of progress in this area.

Part of the key to outcomes is “closing the loop” on measurement. And they cited Heineken as an example:

Consider our work with Heineken. They needed a way to connect their first-party consumer data with ITV’s on-demand viewing audience and Tesco shoppers.

Powered by InfoSum, Heineken was able to identify relevant audience segments based on age and real-time drinking preferences. Crucially, Tesco provided closed-loop measurement of sales impact, all without moving or sharing any customer data out of Heineken’s environment. In a world where measurable outcomes truly matter, the campaign success wasn’t measured in brand uplift or impressions, but in real sales data from Tesco stores, which increased by an impressive 189%.

If they can turn this into a repeatable process, then the prospect of an emerging moat might not seem so farfetched after all. But it remains, of course, too soon to tell and much will depend on execution.

Loose Ends / FAQs

Is WPP Open easily replicable? Could it be vibe coded?

I think there are two answers to this. The first one is yes - the bare bones of a marketing software tool with API links to model providers would be easy to get up and running. But it’s a lot more complicated than that. To start with there’s WPP’s proprietary IP which includes decades of brand and campaign data used to train proprietary models and inform proprietary agents (outside of the newly enlarged Omnicom it’s doubtful anyone has more of this). Then there’s WPP Media and Open Intelligence. A startup software effort on the creative and production side, for example, isn’t going to have any of the media and data infrastructure that are necessary for buying the right ad inventory - and that’s half the battle. Then there’s the challenge of getting to stable release with ongoing support and maintenance - WPP Open is now serving more than 70,000 regular users. There are barriers to entry.

Importantly, most of the putative WPP Open alternatives (including those emerging from the AI labs) are essentially point solutions and frequently tied to some kind of data or technology platform. Whereas WPP Open covers the entire marketing workflow (planning » creative » production » media + commerce) and it’s ‘open’ (you choose which data, third-party tools and models to use) - for the needs of your typical large brand-based business it’s arguably very differentiated.

Could InfoSum be vibe coded?

I think this could be more challenging given InfoSum’s higher complexity - moreover, a number of the innovations behind it are patented. But even then, anyone starting afresh would have to rebuild the network effects that come from onboarding increasing numbers of partners.

Existing client spend - is something broken?

As noted, existing clients cut spending with WPP in 2025 resulting in a 400bps headwind. Other than the WPP Media disruption, WPP attributes this to sudden cuts in discretionary project spend, especially beginning in Q2 at the time of the ‘Liberation Day’ tariff announcement. WPP has tended to have a disproportionate share of project spend in agencies such as AKQA. Qualitatively, peers such as Omnicom and Dentsu have reported similar trends in 2025. But one might be tempted to ask: did something change in 2025, e.g. are clients using AI for some work instead? I’m somewhat suspicious. I think we’ll have to wait and see.

Do we even need professional marketing services anymore?

The risk, perhaps, is that the trend towards viewing marketing as a discretionary expense to be squeezed (i.e. rather than a necessary growth investment) continues to snowball from here. This could push an increasing proportion of share either to Zuckerberg-style black boxes or to in-sourcing (“we’ll do it ourselves”). But it seems to me that black boxes are likely to be most relevant to small businesses merely looking to increase their surface area, in contrast to the more demanding complex nature of brand campaigns (Zuckerberg himself has essentially said as much himself). On in-sourcing, I kind of view this argument as related to the ongoing software debates. Many businesses already do some degree of marketing and software work in-house, and yet continue to outsource these functions in large part. Perhaps the main difference is that while software is near-term mission-critical, marketing is medium- to long-term mission critical. Ultimately we’ll have to see how this develops over time. My general feeling is that those brands that squeeze efficiency too hard, try to do too much themselves or surrender entirely to automation will seriously struggle - if anything, the incoming tidal wave of AI-generated content is going to make imaginative and innovative marketing campaigns more important than ever for those advertisers who wish to stand out in a sea of undifferentiated ‘AI slop’. For all the automation that WPP Open provides, it centres around keeping talented creative professionals very much inside and driving the process. But I fully expect this point to remain contentious for some time and readers will undoubtedly have their own views.

Where next? / thoughts on valuation

Given the distressed valuation, my working assumption remains that WPP is highly vulnerable to takeover - probably by private equity. But if they do manage to remain independent, the basic announced plan is this:

• 2026: Stabilise the business. LFL revenue growth to decline mid- to high-single digit in H1 and improve thereafter. Operating margin 12-13% (-100bps to flat)

• 2027: Return to positive LFL growth and start to rebuild margins

• 2028: Accelerate growth and margins

2026 is shaping up to be another rough year but, let’s face it, the bar is low at this stage. In order to work out reasonably well from here I think WPP merely needs to persuade investors of its right to exist. If they can continue to win client pitches and simply stop shrinking, I think that should be sufficient - and it could be on the cards for the second half of 2026. Quarterly comps get much easier in the second half of 2026, especially in the context of Q4 2025 which was the strongest billings quarter since 2020.

The last time WPP faced sentiment and performance somewhat comparable to today was in 2020 - weak project work and declining revenue masked strong net billings that took a couple of quarters to start showing up. From Summer 2020 the shares surged by 100% to the end of 2021.

There are other considerations too. First, for 11 out of 12 months in 2025 there were four major holding companies until Interpublic was engulfed by Omnicom in November. Not only will there be significantly reduced competition in pitches, but it’s hard to imagine Omnicom being able to fight its best game during a year of heavy integration work. Second, perhaps the big swing factor for 2026 will be existing client activity. Given guidance (gross losses 500-600bps and >250bps of gross wins already baked in), we can start to think about scenarios:

Consensus is currently sitting nearer to the bear case - but the range of possible outcomes is actually kind of wide. For a stock trading at 5x consensus 2026 EPS, it’s intriguing. If something like the bear case does indeed prove to be the terminal state, then the shares might be fairly valued after all - or maybe even too high. But if it’s something more like the bull case and we exit 2026 on a healthy trajectory, I would expect a rapid normalisation to an Omnicom-like valuation or about +90% (~8x P/E on potentially stable earnings). To be clear, I think WPP is very hard to value currently, given the range of outcomes. Personally, I’m hopeful that WPP will re-establish its right to survive but I couldn’t yet tell you what a steady state might look like. If things did go well there’s no reason in principle why a path to Publicis-like performance (18% margins and consistent MSD growth) shouldn’t be the aspiration - over time. My inclination for now is to view WPP more like an option - a cheap option.

Other things to look out for in 2026:

• They more or less confirmed they’ll be doing some divestments this year. For me, the lead candidate seems to be Burson, their public relations business, which I see as peripheral to the strategy. If they can get just 1x revenue for it, that would be around 25% of the market cap and 7% of net revenue. Even after some degree of net debt reduction, there could be scope for a significant buyback that more than offsets the divested earnings.

• Rose made clear that she want to keeps the narrative going with investors throughout the year: there will be three webinars on each of WPP Media, Production and Enterprise.

That’s it. Thanks for reading!

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When I sent my PRCT post last month, my intention had been to publish it with ample time for you to read it before the 2025 results as well the previously announced Investor Day - both took place this week. I was particularly interested in the Investor Day where new CEO Larry Wood was to outline his strategy. I highlighted the possibility of jitters:

Perhaps the bigger concerns in 2026 are 1) the possibility of a growth slowdown while Larry puts into effect his strategy adjustment and 2) impact from increased investments. Larry has already hinted at the possibility of both. While it’s possible that such things are already priced in, headwinds do not seem to be well-tolerated in the current stock market environment even when underpinned by a sound strategy. Something to watch out for then as a dislocation may create buying opportunities for investors with longer time horizons.

And jitters is exactly what we got. At one stage on Thursday the shares were down more than 25%. Stock price violence of this magnitude used to be quite rare, but we’re all used to these sorts of things now - welcome to the Beauty Contest.

I promised you an update following the Investor Day, and that’s the purpose of this post. This will be slightly longer than a typical earnings update, given its nature as a validation event following the deep dive. But with around three hours of conference call this week, two press releases, a 100 page slide deck and a 10K, I’m not going to cover every detail here. My intention is to focus on: 1) those areas where PRCT is doing what they said they would (execution), 2) those areas where they’ve departed from my previous expectations and 3) what all this could mean for the future. When it comes to PRCT’s future, I think there are really two issues of standout concern:

1. Sustainability of growth

2. Operating leverage

We’ll talk about both here. Consensus numbers remain pretty cautious on both counts, and not unreasonably so. Hypergrowth always fades eventually, while PRCT has shown relatively slow progress on operating leverage so far. Even fast growing companies have to demonstrate that they can make money in the end - what’s the point otherwise? But Larry is proposing to run the company in a different way than in the past - if he gets it right then there’s no particular reason why we shouldn’t see growth remain at a relatively high level for while and see margins shoot up faster than expected. The proof will be in the pudding, as they say.

You can find the 2025 earnings release here and the Investor Day press release and slide deck here and here.

Let’s get going.

[NFTBC does not give advice - please do your own research. I currently own shares in PRCT].

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Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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When I started writing to you about BRKR 10 months ago, the company was entering a period of profound policy-induced uncertainty - specifically around government-sponsored scientific research in the US as well as a looming trade war. I left open the possibility that BRKR could face some major, albeit temporary, headwinds. In the event, the headwinds proved to be worse than I had feared, but fortunately more acute rather than chronic in nature.

Following some self-help and hard work, BRKR was heading in the right direction again in the latter part of 2025 and by year-end it felt like the stock might be starting to reach escape velocity, even if it was not yet close to being fully valued. But following yesterday’s results and a wobbly beginning to 2026 for markets in general, we’re now right back where we started 10 months ago:

The good news is that we can now see the light at the end of the tunnel. This year BRKR will grow EPS higher than 20% in constant currency, and we should probably expect something similar for 2027 too - and even beyond. As noted in my year-end review, BRKR is massively under-earning on margins and the upwards climb is just getting going. You can check out my various BRKR posts here (paywall with previews).

Time to talk about yesterday’s earnings.

[NFTBC does not give advice - please do your own research. I currently own shares in BRKR]

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Welcome to The NFTBC Digest, an email received by full NFTBC subscribers only.

From week-to-week, there is all manner of news, links, marginalia and other curiosities concerning NFTBC stocks that I might not otherwise share with you. So this is what The NFTBC Digest is all about. My thinking here is that you can simply scroll to whichever company you’re interested in and see very quickly if there’s anything notable that tickles your fancy and that you haven’t already seen. There won’t be a set frequency - I don’t want to publish for the sake of publishing. Sometimes The Digest might be weekly when there’s plenty happening, but there could be fewer Digests during earnings season or if news is slower.

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It has been a particularly dramatic couple of weeks for software stocks since I wrote to you with my musings about PTC and AI. As I wrote at the time, with the rise of generative AI it’s clear that some species of software could be more at risk than others. No doubt the debates among investors will continue to rage on for quite some time. I have made the case that in the near- to medium-term AI is more complementary to PTC’s business model rather than threat. And then for the medium- to longer-term, PTC starts from a position of strength: “I would argue AI is their game to lose even if success is yet to be secured”.

Since the software-AI drama began this year, it feels as though PTC could be receiving some benefit of the doubt. But we’ll have to see how this evolves over time.

There will be further things to say on this topic in the months ahead, but this post will be more directly about the progress in PTC’s ongoing go-to-market transformation and the prospect of a durable business re-acceleration in the near future. PTC reported earnings this week and there are a few points worth noting for those of you with an interest in the stock. For those who are new to the story, feel free to check out my previous PTC posts here (behind paywall, but with previews).

[NFTBC does not give advice - please do your own research. I currently own shares in PTC]

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