The market liked the results, with the stock ending the day up 3.7% and 29% in the past week.

• Rebranding to Meridian is completed.

• Best revenue growth in 4 quarters.

• Strong ADJ EBITDA growth of 26%.

• Net leverage ratio down to 0.53x.

After a complex merger and a major rebranding effort, the company has proven that its diverse business model can generate cash while expanding into some of the most valuable gaming markets in the world.

This report provides a detailed look at the results of Q1 2026, exploring the performance of individual business segments and the broader strategic moves that have strengthened the company’s position.

Disclosure: This is Issuer-Sponsored Research

Let’s begin.

1. Overall Performance

• Revenue: $50.1M +17.3% Y/Y

• Gross Profit: $28.1M +16%, margin of 56%

• ADJ EBITDA: $6.3M +26%, margin of 12.6%

• EBIT: $3.2M vs -$0.11M last year

• Net Income: $2.3M vs -$0.26M last year

• EPS: $0.18 vs -$0.02 last year

• OCF: $5.2M -33.4% Y/Y

The narrative for the Q1 2026 is one of growth, efficiency, and a successful return to profitability.

1.1. Revenue

Meridian reported total revenue of $50.1M, which is a 17.3% increase from $42.7M in Q1 2025.

As you can see in the chart above, this is the fastest growth in 4 quarters and the best performance since the merger consolidation!

This growth is quite impressive, considering it occurred while the company was undergoing a reorganization and merger integration.

The ability to grow sales by double digits while reorganizing the company suggests that the underlying business is very healthy and that customers are increasingly attracted to its betting and gaming products.

1.2. Profitability

Meridian reported an ADJ EBITDA of $6.3M for the quarter, a 26% Y/Y increase and a beat of the company’s guidance of $6.1M.

As you can see in the graph above, this was the best result in 5 quarters!

The ADJ EBITDA margin rose to 12.6%, up from about 11.7% in Q1 2025. This margin expansion is a clear indicator that the company is becoming more efficient and its growth strategy is delivering results.

However, the most important news is that GAAP net income reached $2.3M.

One year ago, the company recorded a net loss of $230K.

This is a welcome development after the large loss last quarter, driven by goodwill and intangible asset impairment.

A reminder that last quarter, Meridian recorded an impairment charge that reduced the balance sheet value of goodwill and intangible assets by $91.8M.

This was a non-cash accounting entry, meaning it does not impact the company’s actual bank balance or daily operations.

When a business gets acquired, it is usually for a premium to the accounting value of its net assets. In such situations, the acquirer records the difference between the purchase price and the net asset value of the acquired business as goodwill on the consolidated balance sheet.

Companies pay a premium to the accounting value of net assets because they expect the acquired business to grow earnings. And we are seeing that the Meridian is now delivering strong earnings growth.

As of Q3 2025, Meridian had $129M of goodwill and other intangible assets on the balance sheet.

US GAAP requires yearly tests to assess whether that goodwill position is appropriate. Rules require that the goodwill position be reduced in certain situations when the share price goes down, interest rates increase, or some business units underperform. This reduction appears on the income statement as a loss.

These impairments, while disappointing, don’t change the core investment thesis of the company as they mostly affect the less interesting parts of the business.

We see that the company has reached a tipping point where revenue is growing faster than expenses, allowing more money to flow to the bottom line.

Let’s see what enabled Meridian to achieve such an improvement.

To understand how the company makes money, we must look at its gross profit, which rose 16% to $28.1M.

For a company like Meridian, gross margin shows what’s left after paying the winnings and the direct costs of serving the games and bets.

As we can see in the chart above, compared to Q1 2025, gross margin remained steady at 56%, while gross profit improved by $4M.

This stability demonstrates that the company is managing its costs well, even as it grows in new B2C markets like Brazil and Mexico, and B2B markets like the US and Canada, which incur very high startup costs.

Moreover, the operating profit was $3.1M, a massive turnaround from the small operating loss seen in Q1 2025.

This improvement happened because the SG&A increased only by 2.8% to $25M, compared to the revenue growth of 17%.

This is a clear example of Meridian improving its operating leverage, as it uses its existing infrastructure, technology, and staff to handle more business without linear expense growth.

1.3. Balance Sheet

Meridian significantly improved its balance sheet stability, countering a key bear narrative of excessive debt.

The company has been aggressively paying down the debt it took on to merge Meridianbet with Golden Matrix.

As of Q1 2026, the company’s total debt was $29.7M, down 54% from $64.4M.

If we look at net debt, which is the total debt minus the cash the company has in the bank, the figure fell by 62% to just $13.4M.

Meridian now has a net debt leverage ratio of 0.53x, which is very healthy.

Simply put, the company is generating more than enough income to cover debt obligations, giving it meaningful financial flexibility to invest in its business or new M&A.

The company ended the quarter with $16.2M in cash, which is down 45.3% Y/Y as it pays down debt.

1.4. Cash Flow

Meanwhile, operating cash flow fell by $2.58M, -33.4% Y/Y to $5.16M!

As you can see in the chart above, OCF is a very lumpy metric that fluctuates a lot depending on profitability and cash outflow.

While this quarter, net income grew by $2M, Meridian paid $1.72M in accounts payable compared to last year, when it built up $4.3M in additional accounts payable during the quarter.

ADJ EBITDA is a great proxy for OCF, as it essentially shows what OCF would be if we ignored the timing of receivables and payables.

1.5. Guidance

Based on this strong performance, the company has issued positive guidance for the second quarter of 2026.

Management expects revenue to be between $51-53M, which would represent Y/Y growth of 18% to 23%.

This is slightly above the analyst consensus estimate of $51.6M.

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2. Meridianbet

Meridianbet segment is the core engine of the company, accounting for 70% of total group revenue.

This segment runs online sports betting and casino games across more than 18 regulated countries in Europe, Africa, and South America.

In Q1 2026, Meridianbet generated $34.9M in revenue +26% Y/Y!

This growth is coming from both the online side of the business and the company’s network of 740 betting shops.

The success of Meridianbet is driven by a massive increase in the number of people using the platform.

During this quarter, the brand signed up 428K new customers, a 41% increase compared to the same quarter in 2025.

This is a clear sign that the company’s marketing efforts are working well.

More importantly, these new users are becoming active players with the number of depositors rising by 27% to 283K, and the total number of active users grew by 21% to 334K.

This segment is also highly profitable, with a gross margin of 69.3% and an operating income of $6.6M. The 37% Y/Y growth in operating income for this segment suggests that the company is getting more value out of each customer.

3. Expanse Studios

Expanse Studios is the creative core of the company. While Meridianbet focuses on letting people bet, Expanse Studios focuses on building the actual online casino games.

In Q1 2026, Expanse continued to grow its footprint.

Its games are now available on 1,519 different operator sites, which is 175 more than at the end of last year.

The studio launched six new proprietary games this quarter, bringing its total collection of titles to 77.

Additionally:

• The number of players grew by 156%

• Revenue grew by 345%

• Pay-ins grew by 218%

• Gross gaming revenues grew by 133%

It is clear that this segment is delivering explosive growth. The revenues of Expanse are included in the Meridiabet segment revenues.

Furthermore, one of the most important moves this quarter was a new partnership with QTech Games, a leading distributor in emerging markets. This deal allows Expanse’s games to be offered to millions of new players in the Americas, where online gaming is just starting to take off.

The studio also introduced social casino versions of its games, which allow people to play for fun without betting real money, helping to build brand awareness and letting people test their gaming strategies.

To sell games in new regions, a studio must have its software tested and certified by the local government.

Expanse has been very successful in getting these stamps of approval.

During the first quarter, the studio secured new certifications in:

• Latvia

• Estonia

• Sweden

• Portugal

Furthermore, it is also waiting for certification in Ontario, Canada, and New Jersey, US, which are some of the biggest gaming markets in the world.

This business is very scalable, as by obtaining these certificates, Expanse can grow its revenue with limited capital investment.

Once scaled, the studio could become a potentially high-margin part of the business.

4. RKings and Classics

The RKings and Classics for a Cause segments are focused on prize competitions.

This is a unique type of e-commerce where people pay a small fee to enter contests to win luxury items like sports cars, houses, or vacations.

RKings is Meridian’s competition business based in the United Kingdom.

In Q1 2026, it generated $7.7M in revenue, a 12% increase over the previous year.

This was driven by the average order value, rising 29% to $16.91.

Furthermore, the value the company gets from each new person who registers went up by 15% to $17.72.

This segment is undergoing a transition in strategy, where they focus on attracting fewer but higher-value customers.

These improvements show that the company is getting better at marketing and is attracting these higher-value customers who are more engaged with the platform.

Classics for a Cause is an Australian business that focuses on car raffles.

Unlike RKings, which mostly sells single tickets, Classics for a Cause has built a promising subscription model.

People pay a monthly fee to be VIP members, which gives them regular entries into prize draws.

During Q1 2026, the number of VIP subscribers passed 10,000 for the first time in a year, ending the quarter at 10,750.

Meanwhile, the number of new users rose 18% to nearly 10,000, and the total number of transactions increased by 12% compared to Q4 2025.

Overall, this segment grew revenues by 4.3% to $4.4M!

5. GMAG

GMAG is the company’s casino game aggregator business focused on Asia, that’s been underperforming lately.

In Q1, the GMAG segment reported revenue of $3.1M, which was a 18.4% drop from the $3.8M it earned a year earlier.

This segment is not only a drag on the group’s revenue growth, but also on profitability. Gross margin is 33.9%, and the segment lost $0.4M this quarter.

To counter this slump, the company is focused on improving the GMAG offering.

During the quarter, the segment added 12 new game providers, which is a huge increase from only adding 2 providers in the same period last year.

It also added 1,382 new games to its platform.

By adding more providers and more games, GMAG is aiming to become more valuable to casino operators.

6. Mexplay

Mexplay is the company’s Mexican online casino and sports betting brand.

While it is currently a small part of the overall group, it is growing at an incredibly fast pace.

The number of people signing up for Mexplay grew by a staggering 271%, reaching a total of 74,000 registered users.

Even more important is that the number of first-time depositors rose by nearly 200% to 6,101 people, while first-time deposit value grew by 183% to $61K.

This shows that Mexplay is successfully converting people into paying customers.

The success of Mexplay is not just about the money it makes in Mexico, it is a test case for how the company can enter other Spanish-speaking countries.

By learning how to market to Mexican players and follow the local rules, the company is building a playbook that it can use as it expands across Central and South America.

7. Valuation

A market cap of $95M, TTM revenues of $190M, and adjusted EBITDA of $20M implies that the company is trading for 0.5x P/S and 4.4x EV/ADJ EBITDA.

That compares favorably to competitors.

In the above picture, you see the P/S, EV/EBITDA, and revenue growth of some key gambling companies.

Flutter trades for 2.5x the Meridian’s P/S multiple and 3x the EV/EBITDA multiple, despite comparable revenue growth.

Meanwhile, Draftkings are signficiantly more expensive than Meridian, despite growing top-line only slightly faster.

Looking at a few years in the future, the analyst consensus 2028 estimate revenue sits at $263M, EBITDA at $44.9M, and OCF at $44.6M.

Implying a 2028 P/S of 0.3, EV/EBITDA of 2, and EV/OCF of 2.

A key catalyst that could bridge the valuation gap between peers is full-year GAAP net profitability. Once that is reached, Meridian will begin to appear in stock screeners that demand it.

As a small-cap with a market cap below $100M, the company is hard to discover in a sea of thousands of publicly traded companies. Screeners are a crucial tool that investors use to discover such companies.

If the current financial trajectory continues, that could happen after Q4 2026 results.

And institutions are front-running this possible catalyst.

As you can see in the chart above, per Fintel.io, while there was a small decrease post Q4 2025 results, overall institutional ownership has been growing steadily as the share price has gone down, up from 1.5M shares in August of 2024, to over 6M by April 2026.

Smart money is seeing value here!

8. Valuation Model

Let’s build a quick valuation model.

It is hard to adequately estimate the growth of the RKings, Classics, and GMAG segments. So, I am going to model a modest 5% CAGR.

For Meridian, they reported $5.33M in revenues from Latin America in 2024, so I am assuming that all of it relates to MexPlay and the recent entry into Brazil.

Meridian, excluding Brazil and Mexico, I model them growing with a 9% CAGR till 2030. This mostly consists of the core business in Europe and the expansion in Africa.

Regarding Mexico and Brazil, I model a rapid expansion, reaching revenues of $68M in 2030.

As per the 2030 forecasts, the Mexican industry would generate $2.52B in revenues, the Brazilian $3.9B. So to get revenues of $68M, Meridian would only need a market share of 1.1%. This seems a very reasonable and achievable market share target.

In such a scenario, total revenue could reach $312.6M, a CAGR of 11%!

Modeling the operating margin reaching 14%, and tax, interest, and other expenses of 30% of operating income.

Net income could reach $30.6M in 2030, a margin of 9.8%!

Next dilution. I am going to model 15.168M shares outstanding in 2030, an increase of 20% in 5 years. This assumes that a significant portion of the remaining acquisition debt gets converted into equity.

If the Meridian trades for a P/E of 15-20, we could be looking at a $460-613M market cap company and a $30-40 stock in 2030.

That would be an upside of 304-439% from today’s share price of $6.85!

Discounting it back at 15% per year to calculate a fair value per share, we get $15-20, implying that currently the company might be trading for a 50-63% discount to its fair value.

9. Conclusion

Q1 2026 has been a period of remarkable progress for Meridian.

The company has successfully moved from a period of heavy investment and occasional losses into a state of steady, GAAP profitability.

By growing its revenue 17% and returning over $2.2Min profit, the company has proven that its strategy of integrating successful brands like Meridianbet, Mexplay, Expnase, and RKings, and Classics is working.

Furthermore, the company’s decision to focus on its strongest brand, pay down its debt, and invest in AI technology has made its financial position the strongest in its history.

With a net debt leverage of only 0.53x and $16.2M in cash, the company is well-prepared to handle the required investments to achieve its growth strategy.

Looking ahead, the company is well-positioned for continued success. The upcoming 2026 World Cup and the full launch in the Brazilian market provide huge opportunities for more growth.

So, in conclusion, Meridian appears to be undervalued compared to what its peers are trading at. As the valuation model showed, there is further potential for strong upside.

But execution is the key!

• Integration needs to go smoothly, and operational synergies must be achieved.

• Legacy markets in Europe must continue to grow.

• The company shouldn’t experience any issues in Africa, Brazil, or Mexico.

If that happens, Meridian Holdings could make its shareholders very happy.

The company has gone through a transformation, from a largely B2B driven to B2C. The synergies that this vertical integration can deliver have yet to be realized by the market.

However, as always, investing in small caps comes with additional risks, and this is not a guaranteed slam dunk.

Nevertheless, the business does look promising.

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Disclosure:

This report is Issuer-Sponsored Research. Global Equity Briefing has entered into a research and distribution agreement with Meridian Holdings Inc ($MRDN). The compensation may create a conflict of interest; however, the Analyst maintains editorial independence and all opinions expressed in this report are strictly his own. The Analyst agrees not to trade Meridian securities during the period of the agreement. The compensation received is a fixed fee and is not contingent upon the content of the report or the performance of the issuer’s securities. This is not a recommendation to buy or sell any security. Global Equity Briefing is not a registered broker-dealer or investment adviser.

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I am Ray, a passionate investor and equity analyst. And today I am covering an extremely interesting AI infrastructure business.

We are currently in the midst of an AI boom, with many predicting that it will have a bigger impact on the economy and the stock market than electricity did!

Nvidia has been the poster child of this new AI revolution, as AI start-ups and cloud hyperscalers are spending hundreds of billions of dollars on GPUs.

While Nvidia became rich by selling AI picks and shovels, Nebius aims to become rich by being an AI refinery and processor.

In gold mining, after miners have used picks and shovels, before gold can be of any use, it must be refined and processed.

Similarly, raw GPU power (picks and shovels) is not enough. To deliver great AI services, companies need to refine AI to make it faster, more accurate, and cheaper.

This is what Nebius helps with.

In a sense, Nebius is hoping to become the AWS of AI!

AWS became a $100B+ revenue business by riding the wave of global digitization. The company provided general-purpose cloud computing, enabling most of the 2010s tech success stories, such as Uber, Netflix, Airbnb, and Spotify, to scale without having to host expensive servers themselves.

Nebius wants to do the same by providing AI-ready cloud computing to the next generation of tech leaders, the newest and fastest-growing start-ups!

Known clients include fast-growing start-ups such as Higgsflied AI, Cursor, and Revolut, and Hyperscalers Microsoft and Meta.

If successful, Nebius could 100x their current business, becoming one of the largest tech companies in the world, making their shareholders extremely happy.

This is my longest Deep Dive to date, consisting of 60 pages and over 11,000 words.

In this Deep Dive, I will explain how Nebius plans to become one of the largest success stories of the current AI boom!

Let’s dig in.

1. Brief History

2. Business Model

3. AI Cloud

4. Data Centers

5. Customer Deals

6. Subsidiaries

7. Competitors

8. Risks

9. Opportunities

10. Valuation

11. Valuation Model

12. Conclusion

1. Brief History

Yandex is one of Europe’s largest internet technology companies. It was founded in Russia in 1989 and became extremely popular, and is essentially Russia’s answer to Google.

In the 2010s, the company began expanding outside Russia and built various internet businesses in Europe and the US.

However, if you haven’t lived under a rock, you know that in 2022, Russia invaded Ukraine.

Yandex founder and CEO, Arkady Volozh, didn’t agree with this decision and openly spoke out against the invasion. Despite that, his company, Yandex Group, was put on the sanction list by the US, and thus it was delisted from the Nasdaq.

Shortly after, in part due to pressure and in part from his own desire, he sold all of Yandex’s core Russian assets for about $5.4B and kept the foreign assets.

He renamed the remaining company Nebius and announced an ambitious goal to create a large AI infrastructure company.

After the split was completed, Nebius was removed from the sanction list and listed back on the Nasdaq.

2. Business Model

In the simplest of terms, Nebius is a data center business, similar to Amazon Web Services, Google Cloud, and Microsoft Azure. The company makes money by selling access to its data center infrastructure.

However, Nebius doesn’t handle general computing as their data centers specialize in AI workloads!

Nebius has tailored everything in its data centers to the very specific requirements that AI workloads have.

However, not all AI data center businesses are the same, as there are 3 key ways in which they earn revenue.

• Colocation

• Bare Metal

• AI Cloud

Let’s expand on the differences.

2.1. AI Cloud vs Bare Metal vs Colocation

AI requires fundamentally different infrastructure than general-purpose cloud infrastructure.

Simply put, AI data centers use a higher number of powerful GPUs that eat a lot of electricity, requiring meaningful grid upgrades. Additionally, these GPUs generate more heat than a conventional data center, demanding improved cooling systems. This means that, unfortunately, using existing general-purpose data centers for AI workloads is just not economically viable.

This is why we are witnessing this extreme data center buildout boom!

In a colocation model, a company such as Cipher Digital builds the data center, secures energy, and equips it with cooling, networking, and other equipment. Then they secure a customer who signs a long-term lease agreement of 10+ years and brings their own GPUs to the facility. This model has the lowest value added and thus has the worst economics, generating the lowest price per MW.

Meanwhile, in a bare metal model, the owner of the data center is responsible for fully equipping the facility with all equipment, including GPUs. It then finds a customer who negotiates access to a pre-agreed number of GPUs for a set per-hour rental price. Bare metal customers use their own software to run AI workloads on these GPUs. As the data center operator provides the GPUs, the bare metal model has a higher value added than colocation, and thus has better economics, generating a higher price per MW.

However, the most profitable AI data center model is the AI cloud provider!

In this model, the data center operator provides advanced AI training and inference software. Purpose-built AI training clusters, model hosting, managed inference services, AI APIs, storage, networking, developer support, and more. An AI cloud doesn’t simply rent out space, like colocation, or rent out GPUs like in bare metal. An AI cloud is essentially an AI development, optimization, inference, and deployment partner for AI start-ups and large enterprises.

As revenues are software-driven, this model has the highest value added and thus generates the highest price per MW!

Each of the operating models has its own advantages and disadvantages.

In colocation, the data center operator is essentially a landlord, and such a model can be highly profitable if operated well. The key advantage is that it requires less capital to start, is easier to operate, and generates a more stable and predictable rental income from a small number of key tenants.

A bare metal is similar to colocation. But, if we use the analogy of a rental apartment, colocation is comparable to renting an apartment without any furniture, whilst bare metal is a fully furnished apartment. Meanwhile, an AI cloud could be comparable to a fully serviced apartment, with furniture, maids, a personal chef, nanny, tutor, and chauffeur.

An AI cloud might have the highest margins in theory, but it is also the most difficult model to operate. Companies must employ highly skilled software engineers to build the digital environment that AI start-ups need. This requires a lot of upfront capital and years of research and development. Furthermore, AI clouds must have big sales and customer management teams that manage a large number of small customers.

Most importantly, this area of the industry is highly competitive, filled with highly skilled start-ups, and it is led by Hyperscaler clouds with hundreds of billions of dollars at their disposal, such as Google, Amazon, and Microsoft.

Nebius has chosen a mixed business model, where it provides Bare Metal services to Hyperscalers Meta and Microsoft, while it provides AI Cloud services to others!

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3. AI Cloud

I already touched on the difference between AI workloads and general cloud computing, but now let’s discuss it in more detail.

There are huge differences in each layer:

• Infrastructure Layer

• Platform Layer

• Application Layer

Let me explain.

3.1. Infrastructure Layer

The infrastructure layer for AI is the actual physical equipment that does the work. In a normal cloud, you might not care much about what the physical server looks like, as long as it works. But in the world of AI, the physical design is everything.

The infrastructure layer includes

• CPUs

• GPUs

• Server Design

• Networking

• Cooling

Because LLM’s and other AI models are so big, they require a level of power and speed that traditional data centers simply cannot provide.

The most important part of the infrastructure layer is the Graphics Processing Unit.

Originally, these chips were made for video games to help create pictures on a screen. However, scientists discovered that GPUs are much better at doing the specific kind of math needed for AI than the traditional CPUs found in most computers.

The core difference is that, while a CPU is like a very smart professor who can solve one hard problem at a time, a GPU is like a thousand students who can solve a thousand simple math problems all at once.

Since AI is mostly doing billions of math problems, the GPU has become the engine of the AI revolution. Nebius core business provides access to the most advanced GPUs made by Nvidia.

These chips are organized into different categories based on the blueprint of how the chip is built.

The most famous architectures currently used are called Hopper and Blackwell. The Hopper architecture includes the H100 and H200 chips, which have been the gold standard for AI training over the last few years. The Blackwell architecture is the newer, even more powerful version, including the B200 and B300 chips.

The table above shows that as you move to newer chips like the B300, the amount of memory and the speed of that memory increase dramatically. This is important because the intelligence of an AI model is stored in its memory.

If a model is too big to fit in the memory of the GPU, it will run very slowly or not work at all.

By offering many different types of GPUs, the platform allows users to choose the right balance between cost and performance. For example, the H100 is great for training, but the newer H200 or B200 models are better when the AI is actually being used by customers and needs to respond quickly.

A data center is basically a large building filled with rows and rows of computers. Most data centers are designed to be general-purpose, meaning they can run many different types of tasks.

However, Nebius builds AI-optimized data centers. Their first major facility is located in Mäntsälä, Finland. This location was built during Yandex’s time and was chosen for a few reasons, including the cold climate, which helps keep the computers cool without using too much electricity.

A core differentiator is that instead of buying standard servers from other companies, Nebius designs and assembles its own servers and racks.

This is a critical part of their full-stack approach. By designing the hardware themselves, they can make sure that every part of the server is optimized for the exact use case they are looking for.

An AI server is basically a Lego.

It contains GPUs, CPUs, memory, networking equipment, cooling systems, and more.

Nebius engineers decide how many Nvidia GPUs, AMD CPUs, Micron memory chips, and Broadcom networking chips each server needs, where they will be positioned, and how the liquid cooling system will reduce temperature.

The actual equipment assembly is done by outsourced electronics contractors such as Foxconn, Wistron, Inventec, or others.

Nebius engineers learn from each installation and modify designs to improve output and reduce costs!

This approach could potentially allow Nebius to have lower operating costs. The company claims that its servers use up to 20% less electricity than off-the-shelf servers.

Also, the liquid cooling system enables servers to operate at higher temperatures without damaging the system. Heat is a big issue for data centers, as hot servers are much slower than cold ones.

The performance of these custom-designed servers is so high that they have been used to build some of the most powerful computers in the world. The ISEG supercomputer, which is housed in the Finland data center, was ranked as the 13th most powerful supercomputer in the world and the 4th most powerful in Europe.

This shows that the platform is not just a place to rent some compute.

They make supercomputer-class infrastructure designed for the biggest AI projects on the planet.

When you are training a very large AI model, you cannot do it on just one.

You need thousands and even hundreds of thousands of GPUs all working on the same problem at the same time.

For this to work, the systems need to be able to talk to each other almost instantly. If the connection between the computers is slow, the GPUs will spend most of their time waiting for data to arrive, which wastes time and money.

This is why high-speed networking is a core part of the infrastructure layer.

Nebius platform uses Nvidia Quantum-2 InfiniBand.

This is much faster than the Ethernet cables used in most instances. In a Nebius GPU cluster, each server has a total network speed of 3.2 Terabits per second. This is made possible by giving each individual GPU its own 400 Gigabits per second connection.

This allows the GPUs to share information as if they were all part of the same giant chip.

Lastly, AI requires a massive amount of electricity and cooling!

According to some estimates, by 2028, data centers in the United States could use as much electricity as the entire country of Germany uses today.

This has made energy efficiency a very important topic for AI cloud providers. Nebius addresses this through a framework they call the Four Layers of Efficiency.

These layers are the model layer, the cluster layer, the fabric layer, and the data center layer.

At the data center layer, the focus is on a metric called Power Usage Effectiveness.

PUE measures how much energy is used for things like cooling and lights compared to the energy used by the core computing infrastructure. A perfect score is 1.0. While the global average for data centers is around 1.54, the Mäntsälä data center in Finland achieves a PUE of 1.13, demonstrating Nebius ability to design and operate energy-efficient data centers.

One of the most interesting parts of their energy strategy is heat recovery. When thousands of GPUs are working, they create a lot of heat.

Instead of just blowing this hot air into the sky, the Finland data center captures the heat and sends it into the local city’s heating pipes.

This hot water is then used to warm the homes of about 2,500 families in the city of Mäntsälä. Between 2022 and 2024, the facility provided over 50 GWh of heat to the community, which helped reduce the city’s carbon emissions and save costs.

This demonstrates Nebius’s ability to find clever solutions to difficult problems.

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3.2. Platform Layer

While the infrastructure layer is the physical body of the cloud, the platform layer is the software that tells it how to behave.

For an AI developer, the platform layer is what they actually interact with to start their work. It handles the difficult task of organizing thousands of chips, making sure the right software is installed, and keeping everything running even if a piece of hardware breaks.

The platform layer includes:

• Cluster Orchestration

• Tools for Training AI

• Optimizing GPU Performance

• Systems for Managing Data

Orchestration is a fancy word for managing many computers as if they were one single system.

The most common tool for this is called Kubernetes.

However, standard Kubernetes can be very hard to set up for AI because it needs to know how to talk to GPUs and high-speed InfiniBand networks. Nebius provides a managed service for Kubernetes that does all this work automatically. When a user starts a Kubernetes cluster on Nebius, the system automatically installs the correct drivers and networking software.

This saves developers time that they would otherwise spend setting up the environment.

The platform also supports auto-healing, which is a very important feature for AI. If a training job is running for a long time and one GPU suddenly stops working, the auto-healing system will detect the problem and automatically restart the work on a new, healthy GPU. This ensures that the expensive training process is not wasted because of a small hardware glitch.

While Kubernetes is popular for many tasks, many AI developers prefer a different system called Slurm.

Slurm was originally built for supercomputers and is very good at scheduling large batch jobs where many computers must work together in a very specific way. To help these scientists, Nebius created a special tool called Soperator.

The Soperator is an open-source tool that allows Slurm to run inside a Kubernetes cluster. This gives users the best of both worlds, the modern flexibility of Kubernetes and the powerful scheduling of Slurm.

Users can use a configuration wizard to define how they want their cluster to look, including choosing which GPUs to use and how to prioritize different tasks. This allows for lots of control, where teams can fine-tune every part of their setup to get the most performance out of the hardware.

An advanced AI model is so big that it must be distributed across many machines.

This is like building a massive Lego set where a hundred people are all working on different parts of the same instruction book at the same time. For this to work, the people (or the computers) need to constantly talk to each other to make sure the pieces fit together.

The platform is designed to support the most popular distributed training frameworks, such as PyTorch and various Nvidia tools. Because Nebius is an official Nvidia Partner, they use a tested and optimized architecture that Nvidia has approved.

This means that the software and hardware are perfectly tuned to work together, which helps users get its absolute maximum speed, with no slowdowns caused by the cloud’s management software.

When a team of engineers is building an AI model, they don’t just do it once. They might try a hundred or a thousand different versions, changing small things each time to see what works best. Keeping track of all these versions, the data used, and the results can be a nightmare.

This is what model management is for.

Nebius provides a Managed Service for MLflow to solve this problem.

MLflow is an open-source platform that helps teams track their experiments and manage the lifecycle of their models. It allows developers to see all their training results in one single interface, compare different versions of a model, and choose the best one to use in a real product.

By providing this as a managed service, the platform takes care of all the technical setup, so the engineers can focus on the science of AI instead of the logistics of managing files.

Next, GPU computers are very expensive to run. For many companies, they don’t need the same number of GPUs all the time. They might need 1,000 GPUs during the day to run experiments, but only 10 at night to handle simple tasks.

Auto-scaling is a feature that automatically adds more computing power when there is a lot of work to do and removes it when it is not needed.

The platform’s autoscaler is integrated directly with the Kubernetes service. It makes decisions based on whether there are tasks waiting in line.

When the line gets too long, the system automatically creates more GPU nodes. To save even more money, the platform suggests using a small group of cheap CPU computers to run background tasks like networking and monitoring. This allows the expensive GPU nodes to be turned off completely when they aren’t doing actual AI work, which can significantly reduce the total cost of the project.

Most importantly, an AI model is only as good as the data used to train it.

Before the training starts, a huge amount of raw data must be collected, cleaned, and organized. This is called data preparation, and it often requires its own complex computer system.

Nebius provides a managed service for Apache Spark to help with this.

Spark is a tool that can process massive datasets by splitting the work across many machines.

In the Nebius ecosystem, developers can build an entire data pipeline, which is like an assembly line for data, all on the same platform. This includes fast storage for training, object storage for holding billions of files, and specialized databases for searching through data.

They also offer a Data Transfer Service that makes it easy to move large amounts of information from other cloud providers, like AWS into the Nebius cloud.

This is critical because moving petabytes of data can often be the slowest part of starting a new AI project.

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3.3. Application Layer

The application layer is the final piece of the puzzle.

This is where the work of the engineers and the power of the hardware finally turn into something useful for end users. The focus of the application layer at Nebius is to make everything as simple and automated as possible.

The Application Layer consists of:

• Model Training

• Inference

• Model Deployment

• Developer Tools

Training is the most well-known part of the AI process. It is when a model learns by looking at millions of examples. On the Nebius platform, training is supported by a team of experts who help customers. Because training is so expensive and difficult, having experts who can help with the setup is a major benefit.

One unique part of the training offering is that the platform’s own internal AI researchers use the same tools as the customers.

They call this dogfooding the platform. When the internal team trains their own models, they find and fix problems before a customer ever sees them. This ensures that the platform is actually built for the way real AI practitioners work.

For example, Nebius provided Higgsfield with its fully managed AI cloud platform, enabling them to launch model training in under one hour and run stable, large-scale jobs. Their infrastructure handled scheduling, scaling, and networking, allowing Higgsfield to support 5M video generations per day and reach 22M+ users without performance issues.

As a result, Higgsfield dramatically accelerated iteration and growth, reaching a $200M run rate in just 9 months.

However, after a model is trained, it needs to be put to work. This is called inference.

If you ask a chatbot a question, the time it takes to get an answer is the inference time. For a business, inference is often the most important part because it is what their customers actually see.

The Nebius platform has a strong focus on making inference super-efficient and economically viable.

Simply put, Nebius wants it to be fast and cheap. They use specialized software like vLLM to optimize how the models run on the GPUs. This has allowed companies like Brave Search to provide real-time AI summaries for millions of users every day with very low delay.

By optimizing the entire stack, the chips and the software, Nebius aims to deliver inference speeds that are much faster and cheaper than competitors.

Previously, to run an AI model, you had to rent a whole server and manage it yourself. This is a lot of work. To fix this, Nebius introduced Serverless AI services.

Serverless means the developer doesn’t have to worry about the computers, as they just provide their code or their model, and Nebius handles everything else. There are three main serverless services:

• DevPods

• Jobs

• Endpoints

DevPods are like a developer playground. They provide a ready-to-use environment where a programmer can start writing code immediately without setting up any drivers or software.

Jobs are for running a single task, like training a model for a few hours. Once the task is done, the computer is automatically turned off, so the user doesn’t have to pay for it anymore.

Endpoints are for serving models. They provide a web address where an app can send a question and get an answer from the AI model in seconds.

Next, to make the cloud easy to use, the platform provides several different interfaces.

The most basic way is through a web console, which is like a website where you can click buttons to start servers.

However, for large projects, developers prefer to use a command-line interface. This is a tool where you can type commands to manage your cloud resources.

For even more advanced users, the platform supports Infrastructure as Code using a tool called Terraform.

This allows a team to write a document that describes their entire AI system, how many GPUs, how much storage, and what network settings they need. They can then run this document, and the cloud will build the entire system automatically in minutes. They also offer software development kits for languages like Go, which allow developers to build the cloud features directly into their own software.

But one of the most powerful parts of the application layer is the Nebius Token Factory.

This is a managed inference service.

Instead of renting a GPU, you simply pay for every token that the model generates. An AI token is a small unit of text (like part of a word) that a model processes as a single piece of input or output during computation.

This is a very popular way for startups to use AI because they don’t have to worry about managing any hardware at all.

The Token Factory gives users access to over 60 different models, including famous ones like Llama, Mistral, OpenAI, and DeepSeek.

It also includes auto-scaling, so if a million people suddenly start using your app, the Token Factory will automatically add more power to handle the traffic without you having to do anything.

Another crucial piece of Nebius offering is Tavily, which was acquired recently for $275M.

This is a big step toward Agentic AI. To understand why this is important, you have to understand the difference between a chatbot and an AI agent.

A chatbot just talks to you based on what you ask and what it already knows.

An AI agent is a digital assistant that can actually go out and do things for you, like researching a topic on the web, finding relevant information in your ERP, or booking an invoice in the accounting system.

The problem with most AI is that it only knows what was in its training data. If you ask it about a news story from today, it won’t know the answer. Tavily solves this by providing agentic search.

This is a search engine built specifically for AI agents.

When an AI agent needs more information, it uses Tavily to search the internet and get back a response in a format that’s purposefully designed for AI agents to understand.

By combining the reasoning power of the Token Factory with the real-time search power of Tavily, the platform allows developers to build agents that are grounded in facts and never have out-of-date information.

This is critical for use cases where having the 100% correct information is crucial for a successful outcome.

4. Data Centers

Per Nebius Q4 2025 earnings report, the company plans to have 16 data centers with contracted 3GW of energy capacity by the end of 2026.

Let’s look at the largest and most important of these projects.

4.1. Finland

Finland has become a core geography for Nebius.

The country offers a cool climate, which is a major advantage for data centers because it reduces the amount of energy needed to keep the computers from overheating. Additionally, Finland has a stable power grid and access to renewable and relatively affordable energy for European standards.

The Mäntsälä facility is a facility fully owned by Nebius.

As I mentioned in the infrastructure layer section, this data center uses an innovative heat recovery system that captures the excess heat produced by the servers and pumps it into the local municipal heating network.

In early 2026, Nebius expanded this site to 75 MW.

In March 2026, Nebius announced plans for a much larger project, a 310 MW AI factory in the city of Lappeenranta.

This facility will be one of the largest dedicated AI compute deployments in Europe. Construction began in the Pajarila district, with the first capacity expected to be available to customers in 2027.

This new site will use the latest technology from Nvidia, specifically the Blackwell and Vera Rubin chip platforms.

The project is estimated to require a $10B investment and is being developed together with the Finnish company Polarnode, so this will be a colocation facility.

4.2. Kansas City

Nebius’s largest project to date is located in the Kansas City metropolitan area.

This project is a massive AI factory campus designed to reach a total capacity of up to 1.2GW.

Construction is expected to begin in early 2026 and will happen in stages over a period of 3 to 5 years.

One of the most important parts of the deal is that Nebius pays the full cost of its electricity and any infrastructure upgrades. This ensures that the electricity rates for local residents do not go up because of the data center.

Data centers usually use a lot of water for cooling, which can be a concern for local residents. Nebius is using a closed-loop cooling system in Independence. This system requires a one-time fill of about 1M gallons per 200 MW building, but after that, it only needs about 20% replenishment each year.

This is a very small amount of water compared to traditional data centers and is roughly equal to what a typical restaurant uses in a year.

This project is entirely owned and operated by Nebius, without colocation partners.

4.3. New Jersey

The data center in Vineland, New Jersey, is a critical part of Nebius’s growth as the site is closely tied to a massive $17.4 billion, 5-year contract with Microsoft.

The Vineland campus is planned to span 2.6M square feet across 6 buildings and will have a power capacity of up to 350 MW.

A unique feature of this site is that it generates 85% of its own electricity on-site using natural gas generators.

It allows Nebius to operate without putting too much stress on the local power grid, which is often a problem in New Jersey. The project has been moving very quickly.

The first phase, which included a 150,000-square-foot facility, was delivered in just 20 weeks and is already operational as of early 2026.

However, the speed of construction has caused some concerns among local residents. Some community members have raised questions about noise, air pollution from the gas generators, and the impact on the local underground water supply.

This site is being developed in partnership with a colocation provider, Data One.

4.4. Alabama

Nebius is also expanding into the Southern United States with a data center project in Birmingham, Alabama, with a 300 MW capacity.

The Birmingham site is a brownfield asset, which means it was previously used for industrial purposes. Developing a brownfield site is faster than starting from scratch (a greenfield site) because the infrastructure and utility connections are already there.

The site is fully owned by Nebius.

This could be an interesting template for the future. There are a lot of industrial sites not only in the US, but in Europe and South America that have closed down for various reasons. These areas already have the grid connections, and eager politicians want to put something in an empty factory.

There are drawbacks, as brownfield data centers are generally smaller and need to be designed to get the most out of the location’s limitations, instead of customizing everything to get the best performance, as in greenfield developments.

But what they lose in size and customization options, they win in speed and cost.

4.5. Colocation

Nebius uses a hybrid approach to build its network.

While they are building massive campuses that they own (like in Missouri and Finland), they also use colocation.

As I explained in the business model section, colocation is when a company rents space, power, and cooling in a data center owned by someone else. This is a very common practice in the data center industry.

Colocation sites reduce deployment timelines and mitigate permitting risk, particularly in regions where grid access or regulatory approval is a constraint.

This strategy is much different from Iren!

Iren builds and owns large-scale data centers, giving it tighter control over energy sourcing, design efficiency, and long-term operating costs. Instead of having many smaller locations such as Nebius, Iren has fewer but larger ones. For instance, their Sweetwater campus in Texas will have 2GW of capacity when completed.

The trade-off is that Nebius gains speed and lower upfront investment but has less control over infrastructure and direct costs.

While Iren gains efficiency and control but faces slower deployment and higher capital requirements.

Both models can work. Iren is a bare metal compute provider to the largest companies in the world. Meanwhile, Nebius is competing with Hyperscalers for AI start-ups, offering them a whole suite of AI services as explained in the platform and application layer sections.

Ideally, Nebius hopes that the higher margin in cloud services compared to bare metal rental compensates for the higher operating costs. Whether this strategy will work is yet to be seen.

5. Customer Deals

As of today, Nebius has signed two large bare metal deals with Hyperscalers:

• Microsoft

• Meta

Let me explain these deals.

5.1. Microsoft

Last year, Nebius signed a $17.4B-19.4B 5-year deal with Microsoft, which instantly sent its stock price up almost 50% in a single day!

As I mentioned in the data center section, in partnership with a colocation company, Data One Nebius is building a new data center in New Jersey, with an initial planned gross capacity of 300MW, with the potential to expand it to 400MW total energy capacity. Microsoft will rent access to 100K Nvidia GPUs, which could demand 180-220MW, but we need to add 20% extra for additional IT equipment, resulting in 216-264MW.

This means that Microsoft could take up around 72-88% of the initial capacity and 54-66% of potential capacity!

At $17.4B for 5 years, that amounts to $3.48B per year, for 100K GPUs.

Revenues of $34.8K per GPU and $3.97 per hour!

This is a very strong anchor tenant that will enable Nebius to basically cover all costs and have a decent margin. The remaining capacity will be used for Nebius’ cloud business, where Nebius will earn better margins.

The deal will enable Nebius to cheaply borrow money through a vehicle known as revenue-backed loans.

Essentially, because Microsoft is such a large, profitable, and stable enterprise with a credit rating literally better than the US government, banks and investors are willing to lend money to Nebius at highly attractive terms, because the probability that Microsoft will not honor its contractual obligations is extremely low.

Thus, Nebius will borrow money using the Microsoft deal as collateral!

There are many ways this could be structured. One way would be for Nebius to sell these receivables at a discount of, let’s say, 3-7% to a special vehicle that is funded by a consortium of lenders, and Microsoft would transfer payments directly to that special vehicle.

Additionally, while it was not confirmed in the press release, later financial statements show that Microsoft prepaid about $1.6B.

But let’s expand on that in a bit.

5.2. Meta

While the deal with Meta was likely in the works for months, as such agreements are difficult to negotiate, Nvidia’s $2B investment, strategic partnership, and Rubin allocations were likely crucial factors that convinced Zuckerberg that Nebius is the real deal.

This deal agreement is structured in 2 tranches:

• $12B of dedicated capacity

• $15B of optional capacity

The foundational element of the deal is a $12B commitment for dedicated AI compute capacity.

Under this supply agreement, Nebius will provide Meta with massive, localized GPU clusters for Meta’s exclusive use.

Typically, Cloud customers share GPUs with other Nebius customers. Meta won’t be sharing any GPUs with other customers and will be physically separated from GPUs used by other Nebius customers.

Dedicated GPUs provide Meta with consistency, full performance, low latency, and stronger security, since no other users are competing for GPU compute. Shared GPUs are cheaper but can suffer from variable performance, making them less reliable for demanding or workloads.

Delivery of this capacity is scheduled to begin in early 2027, marking one of the first and largest commercial deployments of Nvidia’s Vera Rubin architecture.

This dedicated tranche ensures that Meta’s internal research teams, particularly those working on the Llama 4 and Avocado foundational models, have guaranteed access to the best AI chips in the world.

The remaining $15B of the contract value is structured as a commitment for Meta to purchase additional available compute capacity across upcoming Nebius clusters.

This tranche contains a clever monetization mechanism as Nebius intends to market this capacity to third-party enterprise and startup customers first, where it can get higher retail margins.

Meta serves as the guaranteed backstop, committing to purchase any remaining capacity that is not absorbed by the broader market. For Nebius, this provides a revenue floor of up to $27B, significantly de-risking its aggressive $20B capex roadmap for 2026.

Essentially, Nebius has secured the right to shop around to see if they can get a higher price or better payment terms. If they can’t find someone willing to pay more than Meta, the capacity will go to Meta.

This is clearly a sign that Meta has such strong demand for compute that Nebius had the upper hand to get this carveout.

Nebius doesn’t want to give up all its capacity to one client, as they are also focused on building their AI Cloud that competes with AWS, Oracle, Azure, and Google Cloud.

5.3. Profitability?

Unfortunately for us analysts, Nebius is not very forthcoming with contractual details. We don’t know how many MW this contract is for, how many chips are to be used, the price per hour, the price per MW, or whether Meta will pre-pay or not.

Such secrecy is understandable, as the industry is very competitive and there are many parties involved!

Nebius doesn’t want to publicize the price per hour that it charges Meta, as its wholesale price is likely significantly lower than the retail price. Revealing it could put downward pressure on retail prices.

At the same time, Meta doesn’t want others to know how much they are pre-paying, so that other cloud deals that they sign don’t ask for the same.

Also, Nvidia doesn’t want other customers to know on what contractual terms they are selling Rubin chips, because they could demand similar terms. We don’t know about bulk discounts or whether Nvidia is providing any vendor financing or generous payment terms.

My guess is that all these terms are very generous to Nebius, as Nvidia wants them to succeed to become large purchaser of Nvidia chips.

Nebius is still early in its journey and is capital-constrained, by providing generous payment terms, it would greatly help them. But that’s all it is, a guess. But we can go to Nebius financial filings and management statements to find some clues.

“How are we going to finance the CapEx?

So obviously, we will first finance it from our cash flows…

But most importantly…..we will continue to receive cash in 2026 from the favorable terms of our long-term contracts.

This cash flow will actually finance the majority, actually around 60%, maybe even more, of all of our CapEx needs in 2026.

So how are we going to finance the remaining amount?

As of today, we don’t have any corporate level debt.

We don’t have any asset-backed financing,

We don’t have any bank revolver,” Ofir Naveh, Chief Operating Officer of Nebius, Q4 2025 Earnings Call.

So, as Ofir says, 60%+ of capex will come from the favorable terms of our long-term contracts and the rest from contracted cashflows and conventional financing.

In Q4 2025, Nebius collected $1.6B from deferred revenue.

This is revenue that customers have already paid for, but Nebius has yet to deliver the service to recognize revenue. Simply put, these are customer pre-payments. The balance sheet further categorizes it with $1.3B is listed as non-current and $0.3B as current. This means that from the $1.6B that Nebius collected, it plans to recognize $0.3B as revenues in the next 12 months.

So the vast majority of this pre-payment was for services that will be recognized in 2027!

This demonstrated that the demand is so strong that Nebius is able to receive significant payments from customers more than a year before delivering services to them.

We also see a large spike in accounts payable, going from $228M to $1.2B. Many analysts have interpreted that favorable terms of our long-term contracts quote as pre-payments, but it also clearly means vendor financing and attractive payment terms.

If Nebius can receive early payments from customers while simultaneously delaying payments to suppliers, it can drastically reduce immediate cash requirements!

Nebius is essentially getting interest-free loans from both its supplier and the customer. It helps smooth out cash outflows, reduces interest costs, helping Nebius to scale quickly.

As we don’t have any concrete figures, I will have to speculate using back-of-the-napkin math and my own estimates to calculate how profitable this agreement could be.

Modeling about $10.7B in capex requirements.

Assuming 70% EBITDA margin, the $12B part could generate about $1.68B in EBITDA per year.

1 year service $2.4B pre-payment from Meta, credited towards years 3-5.

24-month vendor financing of 10% of capex, around $1.6B.

Conventional bank loans of $5.3B, about 50% of capex, at 7% interest rate.

Loans refinanced at the end.

Terminal value of $6.5B.

I get levered IRR of about 32%.

That seems decent to me. But granted, this model is very sensitive to terminal value, pre-payment size, vendor financing, and loan amount.

Lastly, we don’t know if the Meta agreement is pure bare metal GPU rental or if Nebius is also providing some kind of cloud software. If they do, that could drastically improve margins.

Meta is not Microsoft, they don’t have as much experience in running cloud software and are more likely to use various software solutions that Nebius offers.

6. Subsidiaries

When Nebius separated from Yandex, they kept not only the core AI data center cloud business but also various interesting non-core assets.

• Avride

• TripleTen

• Toloka

• ClickHouse

6.1. Avride

Nebius’ autonomous driving subsidiary Avride alone could be worth $4-6B!

It is quickly scaling and cornering a niche in small robot delivery.

Through their partnership with Grubhub, these food delivery robots are delivering around 1,200-1,400 deliveries a day at the Ohio State University campus. While this was already known, recently the company revealed that they have completed over 100,000 deliveries on said campus. The deliveries are made in around 15 min, drastically improving convenience and user experience.

Last year, it was announced that after the smashing success of this pilot, Grubhub is bringing this partnership to the University of Arizona!

If they can deliver 100,000 meals on a single campus, there is a potential for millions of deliveries if this technology is brought to thousands of large universities in the US and Canada.

This might seem trivial, but I think the university food delivery robot business alone could be a multi-billion-dollar vertical, and this success demonstrates their ability to expand!

Furthermore, Uber Eats is deploying Avride’s small autonomous delivery robots for food delivery in Dallas and Jersey City, in addition to Austin. This is going well, and companies are planning to enable grocery delivery as well.

Grocery delivery in urban areas using small robots is another potential multi-billion-dollar vertical!

Avride and Nebius have a very close relationship. Training a self-driving car requires a massive amount of computer power, and Avride runs its AI models on the Nebius AI cloud.

This represents Nebius’s exposure to physical AI, where software intelligence is paired with real-world deployment.

Both delivery robots and robotaxis are built on a shared architecture that includes perception, sensor fusion, mapping, and motion planning. This improves capital efficiency by spreading R&D costs across multiple verticals.

The partnership and investment from Uber is a strategic inflection point for Avride. In late 2025, Avride secured up to $375M in investments and commitments from Uber and Nebius.

This builds on a commercial partnership where Avride’s delivery robots are already integrated into Uber Eats in Jersey City, Austin, and Dallas. Robotaxis were launched on the Uber platform in Dallas in December of 2025, and by some reports, there are about 200 vehicles on the roads.

This relationship provides Avride with access to consistent demand, real-world operating data, and a trusted consumer interface without requiring Avride to build its own network.

6.2. TripleTen

One of the biggest problems in the AI industry is that there are not enough people who know how to use it.

TripleTen is an edtech company that helps people learn new tech skills. Nebius reported this segment’s revenue was up 88% in 2025.

TripleTen offers programs in areas like AI software engineering, data analytics, and cybersecurity. The platform’s curriculum has been updated around AI-native workflows, including an AI Automation track launched in 2025.

The strategic fit inside Nebius is clear, companies can lease AI infrastructure faster than they can retrain their staff. TripleTen addresses this bottleneck.

6.3. Toloka

AI models are not perfect, and they need humans to check their work and give them feedback.

This is what Toloka does. It’s a data annotation and labeling platform that provides a judgment layer for the AI world.

Toloka has shifted from mass-market crowdsourcing toward an expert network of more than 10,000 verified specialists across 20 domains and 40 languages.

In February 2026, Nebius and Toloka announced plans to integrate Tendem into the Nebius ecosystem.

Tendem is a hybrid human-AI system that allows AI agents to escalate uncertain edge cases to human experts. This hybrid workflow is 53% faster than a human-only baseline, with task quality improving by 21.3%.

This is particularly important for regulated enterprises, such as those in finance or healthcare, where AI decisions must be verified and audited. Toloka helps determine whether the cargo of the AI models is safe enough to ship.

6.4. ClickHouse

ClickHouse builds a high-performance analytical database designed for extremely fast queries on massive datasets.

This service is becoming extremely important in the age of AI, as having well-organized and labeled databases that are easily accessible is a must for LLM models to give fast responses to prompts. Their databases have trillions of rows.

This has made ClickHouse an important vendor for the $800B AI start-up Anthropic!

ClickHouse provides:

• Promt Analytics

• AI Token Usage Monitoring

• Fine-tuning Dataset Exploration

• Real-time Model Analytics

Recently, it was reported by media outlets that ClickHouse has hired a series of employees, which would hint at them preparing for an IPO.

The company recently raised $400M funding at a $15B valuation, but considering the strong demand for their services from some of the hottest AI start-ups such as OpenAI, Anthropic, and Mistral AI, I find it likely that the IPO would set them up for a $20-30B market cap.

This could mean that Nebius stake of around 28% could be worth around $5-8B!

7. Competitors

The demand for AI services is booming, so hundreds of billions of dollars of capital have entered the industry. Today, the industry might be supply-constrained, but that doesn’t mean that there is no competition.

In fact, the AI computing industry is starting to get very crowded, with 2 key types of players:

• Hyperscalers

• Neo-Clouds

7.1. Hyperscalers

The Hyperscalers are the biggest names in tech, such as Amazon, Google, Microsoft, and Oracle.

They have more money, more customers, and more data centers than anyone else.

The size of these companies is hard to imagine. While Nebius is proud to have a few data centers, Google has more than 40 large data center regions all over the planet. This scale gives them a huge advantage because they can serve customers in almost every country with very low delays.

Another big advantage is customer entrenchment.

Most big companies already use Microsoft or Amazon cloud hosting and other software services. So it is very easy for them to just click a button and start using that same company’s AI tools.

Hyperscalers create a walled garden.

They make it very easy to stay inside their system but very hard to leave.

For example, if a company has all its data stored on AWS, it might be very expensive or slow to move that data over to Nebius to train an AI model. This keeps customers stuck with the giants, even if a smaller company like Nebius offers a better service.

The way these companies get money is also very different.

Hyperscalers are so profitable that they can pay for new AI chips using the cash they have in the bank! They don’t have to issue equity, convertible notes, or expensive debt.

They have the highest access to capital and some of the lowest cost of capital.

As you can see in the graph above, in 2025, Google spent $91.5B on capex, Microsoft $64.6B, and Amazon $131.8B compared to $4B of Nebius!

Because they buy so much equipment, they can get better terms from suppliers such as Nvidia, Micron, AMD, Intel, or others.

Nebius, on the other hand, is still growing, unprofitable, and while it has some cash, it has to be much more careful. To build the massive data centers it wants, Nebius will need to borrow a lot of money or sell more of its own stock.

If the stock market goes down or if interest rates go up, it becomes much harder for a company like Nebius to get the money it needs to keep building.

7.2. Neo-Clouds

Neo Clouds are the newer, smaller companies that are competing directly with Nebius. The most famous ones are CoreWeave and Iren.

These companies can be faster than the giants because they do not have to worry about legacy tech debt, as they only focus on the newest AI chips.

Sometimes it is easier to just build everything from scratch instead of upgrading existing infrastructure.

A meaningful competitor is Iren, which has a very different background from Nebius.

Iren started as a Bitcoin mining company. Because Bitcoin mining requires a lot of electricity and big data centers, the company already knew how to build the physical parts of a data center.

They are considered an asset-heavy company because they own their own buildings and land. Iren’s main goal is to get the cheapest electricity possible, sometimes as low as $0.03 per kilowatt-hour, by building in remote areas.

Nebius is different from Iren because Nebius focuses much more on software. While Iren just provides bare metal. Nebius provides a whole platform that helps developers manage their AI work.

CoreWeave is another major competitor.

CoreWeave has grown extremely fast by taking on huge amounts of debt to buy Nvidia chips. As of 2025, CoreWeave had over $46B in liabilities on its balance, which is an absolutely mind-boggling amount for such a young company.

Essentially, Nebius competes with Neo Clouds for bare metal contracts with Hyperscalers, and it competes with Hyperscalers for AI start-ups.

So, in the future, it could be that Hyperscalers prefer to give their bare metal business to a sole focus Neo Clouds like Iren and CoreWeave, who don’t compete with Hyperscalers for the AI cloud business.

8. Risks

8.1. Dependency on Nvidia

A huge risk for Nebius is that its entire business depends on one company, Nvidia.

Nvidia makes the H100, H200, Blackwell, and soon, Rubin chips that are the engines of the AI world.

Without these chips, Nebius would have nothing to sell.

At the same time, if Nvidia experiences any production, supply chain, quality, or technology issues, Nebius could be severely affected. If Nvidia can’t deliver on its performance promises, then Nebius customers won’t want to use them or will demand significant discounts.

To strengthen their relationship with Nebius, in March 2026, Nvidia made a very big move by investing $2B into Nebius.

This made Nvidia a part-owner of Nebius, with about an 8.3% stake in the company.

On one hand, this is good because it means Nvidia wants Nebius to succeed and will likely give them chips first and on good terms.

On the other hand, it means Nebius is now more tied to Nvidia’s technology.

If Nvidia has any problems, or if a different company like AMD starts making better chips, Nebius might be stuck with old technology for which there is less demand.

Moreover, if the big hyperscalers like Amazon start making their own chips instead of buying them from Nvidia, Nebius could lose its biggest potential customers.

8.2. Construction Delays

Building a data center is not like building an office, as they are infinitely more complicated.

As these buildings are so large and use so much energy, many people do not want them in their neighborhoods.

For instance, in Vineland, New Jersey, residents have started protesting against the data center.

First, they complain about a loud metallic humming noise that comes from the cooling fans, which makes it hard for people to sleep.

Second, they are worried about water. Data centers use millions of gallons of water every year to keep the computers from melting. In places like Vineland that have had droughts, people are afraid there won’t be enough water left for farming or daily needs.

Even if the residents are assured by Nebius that these issues are only temporary and that mitigating steps are being taken, getting enough electricity is another huge problem.

In some instances, it can take more than a year just to get the right permits to connect a data center to the power grid.

In countries with terrible business regulations, such as France and Germany, these issues could take even longer. There are reports that some prospective data center entrepreneurs are being told that they would have to wait even 10 years to connect their data center to the grid in Germany. No wonder the German economy has been performing so poorly for a decade.

In some areas, the electricity utilities are so overwhelmed that they are asking the government to let them skip some rules so they can build faster.

This could lead to potential safety problems in the future.

There are also supply chain issues. For example, some electrical parts like transformers and switchgear can take 40 to 60 weeks to be delivered.

If a data center is finished but doesn’t have these parts, it cannot turn on, and Nebius not only incurs costs every day it stays dark, but it also doesn’t make revenues.

Continuous expenses and no revenues could be a recipe for a financial disaster.

8.3. Industry Overcapacity

There is a danger that the world is building too many data centers too fast.

If there is more supply of GPUs than demand, the price that Nebius can charge will go down.

For example, the State of Kubernetes Optimization Report by Cast AI in April 2026 found that in many companies, up to 95% of the AI chips they own are actually sitting idle.

This report is just from a single company focusing on one area of the industry, and excludes the hyperscaler clouds. However, the potential downside trend is clear.

Companies have been buying chips because they are afraid of running out. If these companies realize they have too much computer power, they will stop renting from Nebius.

When that happens, all the cloud companies might start a price war, and keep lowering their prices to steal each other’s customers.

If the prices drop too low, Nebius might not be able to pay back the billions of dollars it spent to build the data centers in the first place.

8.4. AI Cloud Failure

Nebius is trying to build a complex software platform at the same time it is building giant data centers.

This is very difficult.

Most of the hyperscalers have been building cloud software for 20 years. Nebius is still very new and is building its offering as it goes.

If a big company like Higgsfield AI wants to train a new AI model, they need to know that the software will work perfectly and never crash.

If Nebius’s software has bugs or is hard to use, customers will go back to the established giants even if Nebius is cheaper.

Nebius has many great engineers, but they are competing against thousands of the highest-paid engineers in the world, making millions of dollars at Google and Amazon. They simply have much more experience in the global cloud market.

8.5. Bursting of the AI Bubble

Many experts are worried that the current hype around AI is a bubble, like the Dot-com bubble of the 2000s. In a bubble, people invest huge amounts of money based on hopium rather than real profit.

In 2026, many investors are starting to ask for proof that AI is actually making businesses real money.

If big companies spend billions on AI but don’t see their profits go up, they might stop spending. Some people worry that if the FED raises interest rates to fight inflation, the funding that is fueling the AI boom could become more scarce.

If the bubble bursts, the value of Nebius’s stock will crash, and it might not be able to finish the massive projects it has started.

In such a scenario, bankruptcy or a 90%+ crash in the share price is a realistic outcome.

9. Opportunities

Even with all these risks, there are huge opportunities for Nebius.

Because the AI world is changing so fast, being a small and focused company can actually be an advantage.

9.1. Hyperscaler Bare Metal

One of the most interesting opportunities for Nebius is that the big Hyperscalers are so capacity-constrained that they are actually becoming its customers.

Sometimes, a company like Microsoft or Meta has so much demand for AI that it cannot build its own data centers fast enough. Instead of telling their customers no, they rent extra capacity from companies like Nebius.

In this setup, the advantage is that Nebius doesn’t have to worry about finding small customers.

As I already explained in the customer deals section, Nebius has a $17.4B contract with Microsoft and a $12 and $15B with Meta.

This gives Nebius some guaranteed income, which makes it much easier for them to get loans from banks to build more data centers. Then the company can reinvest earnings from these deals into building its own AI cloud offering.

Per Bloomberg estimates, Microsoft, Meta, Amazon, and Google will spend over $600B in capex in 2026 alone.

There is a significant opportunity for Nebius to capture this growing demand.

9.2. Inference

For the last two years, the AI world has been focused on training.

But the next phase of the market is inference.

Per Markets and Markets forecast, the AI inference market will grow with a 19.2% CAGR to reach $255B by 2030!

Nebius is working to service this growing demand, but inference is a different kind of business.

While training happens in big bursts, inference happens every second of every day as millions of people use AI apps.

As explored in the Application and Platform layer sections. Nebius has built its Token Factory inference offering.

9.3. Agentic AI

Agentic AI is the next big step after chatbots.

For example, an AI agent could look at your work emails, find a meeting time, book a meeting room, and send you the meeting notes after it.

Per Markets and Markets forecast, the Agentic AI market will grow with a 44.6% CAGR to reach $93.2B by 2030!

This is precisely why Nebius acquired Tavily.

As the Agentic AI industry explodes, the need for these agents to have the best and most accurate information will only increase.

Now, not only is Nebius prepared to serve the inference needs of AI Agents, but it can capture the data pipeline needs as well, capturing a larger slice of this market.

10. Valuation

After rising 76% in 2026, Nebius now trades for a market cap of $37.2B!

Using the trailing valuation metric is a bit pointless because Nebius gets its value from future potential, not current performance.

At any other company, a P/S of 70 would be insane, but not for Nebius, as they are essentially a start-up.

The only reason Nebius is public in the first place is the unconventional situation with Yandex and its split from Russian assets due to forced selling.

Nebius is essentially a start-up that venture capital investors would normally invest in!

The company expects to close 2026 with an ARR of $7-9B, a 7x Y/Y increase!

This is why Nebius trades 70x 2025 sales.

Incredible growth deserves VC-like revenue multiples.

Taking this guidance into account, Nebius trades for 4-5x 2026 ARR!

Analysts expect the business to grow revenues by 30x in the next 3 years, reaching $16.1B!

This is absolutely mind-boggling growth, which will come from the company turning on the data centers under construction to begin serving the massive Microsoft and Meta contracts.

At the same time, EBITDA is forecast to reach $10.34B in 2028, compared to the $141.6M loss in 2025.

Taking these analyst consensus 2028 estimates into account, Nebius trades at 2.3x Sales and 3.6x EBITDA.

EBITDA is not the best and final measurement of Nebius profitability as it excludes depreciation and interest, two of the most important expense categories. However, I still view it as an important metric, as it essentially shows the earnings this business is creating from its operations, before looking at what it costs to create that business.

Taking into account depreciation, interest, and taxes, analysts expect 2028 net income to be just $188M. That’s a tiny profit, as the company is still expected to remain in the aggressive growth mode then.

So let’s build a valuation model to try to see what kind of results Nebius could deliver by 2030.

11. Valuation Model

First, Nebius 2026 contracted power target is 3GW, which means that Nebius expects to have agreements with utilities to supply them with 3GW of electricity on 31 December 2026.

Yet, to bring all this capacity online as active IT power, Nebius will need years, as they have to construct the building and install all the electrical, GPUs, cooling, networking, and other equipment.

Thus, I am modelling 3GW of active IT power in 2030.

Next, I estimate that 70% of that capacity will go towards bare metal contracts, largely with Hyperscalers and major start-ups, and 30% as AI cloud to others. The demand that Hyperscalers have for bare metal compute is absolutely insane. I believe Nebius will not miss out on the opportunity to serve them.

This model is also a bit simplified, as I am kind of blending owned and colocation sites together, some of the depreciation expense will probably shift to opex in reality.

For bare metal, I am modeling $9M revenue per MW, whilst for AI cloud, I model $17M.

This would give us bare metal revenues of $18.9B and AI cloud of $15.3B.

Bare metal segment EBITDA of 70% and AI cloud segment EBITDA of 85%.

At $40M per MW, it would cost Nebius to $120B to bring 3GW of capacity online!

While this is an incredibly large amount, I estimate Nebius raising this funding in the following ways:

$40.8B in GPU financing, about 34% of the total amount.

$4.8B in vendor financing, 4% of total

$13.2B in conventional debt, 11% of total.

$25.2B by selling equity.

$21.6B in pre-payments from customers.

$14.4B from internal project cash flow.

So, I model $58.8B of the $120B funding coming from debt at 7% average interest rate!

Banks are open to lending even 90% of the GPU value, so $40.8B sounds completely doable. Also, Nebius just reported $1.56B in cash flow from deferred revenues, and said that they plan to fund the $20B capex for 2026 largely internally.

It is clear that the company is well capitalized, and they have plenty of venues to raise funding from.

Next, to calculate the depreciation, I create a detailed depreciation table.

From total capex, I am modeling 60% going towards GPUs, 19% other equipment, 18% building, and 3% land.

GPUs depreciate in 5 years, other equipment in 7, building in 25, and land never.

The result is 2030 depreciation of $9.83B, and net PPE of $77.7B.

In terms of operating expenses, I model Nebius needing about 14% of revenues to cover R&D and other opex.

We get 2030 revenues of $34.2B, and group EBITDA of $21.45B.

A 63% EBITDA margin might seem high, but we need to remember that for a high-capex data center business such as Nebius, depreciation is the biggest expense.

After taking into account $9.8B depreciation and $4.1B in interest, we get to earnings before taxes of $7.5B.

Tax of 20%.

The result is net income of $6B, a margin of 17.5%.

Next, I model dilution of 45% over the next 5 years, with the total number of shares outstanding reaching 367.1M.

An exit multiple of 30, and we get a $490 stock, an upside of 236% from today’s price of $146.

Discounting back 5 years with a 18% discount rate, we get an estimated fair value per share of $214.34, implying that Nebius share price of $146 could be trading for a 32% discount to its fair value per share.

However, the market would very likely assign a higher multiple to an AI stock such as this if the company delivers the modelled results.

A P/E of 40-50 results in an upside of 348-460%!

I realize that these are very aggressive assumptions, so let’s look at what could go wrong.

1. Demand is not as high as Nebius, McKinsey, Brookfield, and all other experts think. If AI compute supply is higher than the demand, prices could plummet.

2. Competition increases, driving down prices and lowering ARR.

3. There is a lot of debate regarding the 4-6 year depreciation schedule, with many arguing that chip useful lives are much lower. In such a scenario, the deprecation cost of 5 years I modeled could be much higher.

4. Some analysts have voiced concerns regarding the electricity prices. We are entering a stage of AI development where energy access is a key bottleneck, and AI demand might lead to significantly higher prices, possibly leading to lower segment EBITDA margins.

5. Growth could stall if Nebius can’t raise the capital required. Currently, that seems unlikely, but things could change quickly.

6. Geopolitical and trade issues could cause disruptions in the semiconductor supply chain, delaying crucial chip deliveries. If Asian countries that manufacture the data center equipment suffer an energy crisis because of the Iran war, they might be forced to increase prices.

7. OpenAI is the driving force behind the AI revolution. It is very likely that Nebius’ New Jersey capacity sold to Microsoft will go to OpenAI. Recently, they have been signing deals left and right with Nvidia, Oracle, AMD, Broadcom, Corewave, and many more, totaling over $1T. Some have raised concerns of a bubble forming, if they are right, the bursting of this bubble could prove to be catastrophic to Nebius.

However, despite these risks, the revolutionary potential that AI has, and the strong drive and statements from everyone in the AI ecosystem, lead me to believe that Nebius is an incredible opportunity.

Even if costs are much higher than I model, the top-line growth is incredibly impressive!

At P/S of 8, Nebius could be a $200B company in 2030.

12. Conclusion

In conclusion, Nebius AI Cloud and AI refinery business is uniquely positioned for an absolutely mindboggling growth in the next decade!

The recent deals with Microsoft and Meta elevate their pedigree in the eyes of investors, bankers, employees, AI start-ups, other Hyperscalers, and other participants of the AI ecosystem.

As Brookfield pointed out, the AI demand is forecasted to grow 11X in the next decade, making AI Cloud services one of the fastest-growing industries on the planet. Nebius has all that it takes to become a meaningful player.

The company will have 3GW of contracted power by the end of 2026. It could be that my active IT power estimate for 2030 is conservative.

As the valuation model showed, Nebius could be situated to generate over $30B in revenues past 2030. If my estimates regarding segment margins, interest costs, operating expenses, and depreciation are close, we could be looking at a company printing close to $5B in profits.

In such a scenario, Nebius could become a near $200B company, more than 5x from today!

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I am Ray, a passionate investor and equity analyst.

Today, I am adding a new stock to the portfolio!

I firmly believe that this is an excellent time to invest in great businesses, as the Iran War and AI disruption narratives have caused a sell-off in many good companies.

While the S&P 500 has largely recovered, many promising businesses are still available at a discount.

And today I am buying such a business.

Read more

I am Ray, a passionate investor and equity analyst. And today I am covering an interesting small-cap opportunity.

While people have always loved gambling, the way the industry operates has changed immensely in the last hundred years.

The rise of the internet and smartphones is driving unparalleled innovation in the casino industry!

Casino services suppliers such as Evolution are developing innovative casino games and Las Vegas-like game shows. Whilst online casinos are quickly becoming much larger than the established brick-and-mortar casino giants.

At the same time, the trend of online casino and sportsbook legalization is continuing. More and more states in South America, Asia, Africa, and the US are implementing new regulatory frameworks.

This creates an opportunity not only for the large and established players but for smaller upstarts. Gaining ground in fast-growing and quickly legalizing emerging markets could deliver meaningful market share gains in a relatively short amount of time.

This is exactly the kind of opportunity that Meridian offers!

Over the last 20 years, they have made a series of mergers and acquisitions that have transformed the company into a full-service iGaming enterprise with a strong online casino presence in Europe, Mexico, Brazil, Nigeria, and more.

Their largest and most important acquisition was finalized in 2024, when Golden Matrix merged with a Serbian gaming company, MeridianBet, for $330M!

At the time of the deal, Golden Matrix was worth around $80M, so this was essentially a reverse merger with Meridian getting most of the shares in the combined Nasdaq-listed entity. As Meridian constitutes the majority of the combined company’s operations, it was just revealed that the Golden Matrix is changing its name to Meridian Holdings Inc.

Today, the combined company is worth only $87M, as the share price has fallen 70% in the 12 months. This is largely the result of investors still digesting the unification. The new company is a completely different beast from what Golden Matrix was.

New name, new leadership, and new growth strategy.

As a result, Meridian trades for a TTM P/S of 0.5 and EV/FCF of 4, despite 2026 analyst consensus revenue growth sitting at 17%.

This is a significantly lower valuation multiple than many of its peers, which are not growing as fast as Meridian. This suggests the company may be undervalued.

In this report, I will look at what is driving this stock’s underperformance, how Meridian is executing on the new growth strategy, and analyze the market concerns to see if they are valid.

Furthermore, I will explain their business model, analyze financials, look at the growth opportunities, and create a 2030 Valuation Model.

Disclosure: This is Issuer-Sponsored Research

Let’s begin.

1. Business Model

2. The Opportunity

3. MeridianBet Merger Rationale

4. Key Causes Behind the Sell-Off

5. Financial Analysis

6. Valuation

7. Valuation Model

8. Conclusion

1. Business Model

The company’s business model is actually what piqued my interest last summer when I first heard about the company, as they offer a unique blend of B2B and B2C gambling services.

Some of you might be familiar with Evolution, the Swedish provider of gambling software and services to online casinos. Online casinos outsource the boring and tedious tasks, such as live dealing and game development, to Evolution.

Online casinos such as PokerStars, DraftKings, FanDuel, Caesars, and Holland Casino operate the front end, acquiring customers, providing customer service, managing customer funds, and paying out the winnings.

Meridian combines the two ideas!

It provides software services and games to online casinos whilst at the same time running some online casinos itself. However, while there is some overlap, Meridian doesn’t compete much with Evolution, as their services are a bit different.

Let me explain.

1.1. B2B

On the B2B side, Meridian is an enterprise SaaS company offering various solutions to casino operators.

Under its GMAG division, they provide infrastructure software that enables online casinos to operate!

Essentially, whilst Evolution does the front-facing work of offering live dealer and casino game services, GMAG does the behind-the-scenes grunt work.

• Tech backend

• Compliance

• Payments

• Game aggregation and integration

• Customer relationship management

• Marketing tools

Running casinos might seem simple, but there is a lot of tech backend work that needs to be done to have a successful business and avoid customer experience issues. The company handles cloud hosting, cybersecurity, database management, transaction tracking, wallet infrastructure, and more for its clients.

Furthermore, the GMAG also provides help with compliance, helping casinos manage payments, know-your-customer and anti-money laundering regulations, and anti-cheating/fraud services.

But most importantly, GMAG provides gaming integration and aggregation services to online casinos. Evolution might be the most well-known, but there are hundreds of suppliers of online casino games. It would be incredibly difficult and time-consuming for both the supplier and the online casino to manually negotiate an agreement for each game. Also, as there are thousands of games, game discoverability would be quite complex. So instead, many of these suppliers work with GMAG, which aggregates games and then offers them to its online casino clients.

Online casinos benefit from having access to thousands of games, a faster and simpler negotiation and integration process. Whilst game developers benefit from having a broader distribution for their games.

Next, after an online casino has built most of its business through GMAG, the company also provides a full set of customer relationship and marketing management tools that help the casinos increase revenues. Custom bets, promotional offers, emails, and soon, AI-driven personalization. The company said that they are working on tools that will analyze a gamer’s behavior and offer customized and personalized gaming experiences.

The GMAG division primarily serves regulated and unregulated markets in Asia. The final responsibility to apply for gambling operating permits lies with the operator, not GMAG.

There is a risk to this segment if certain jurisdictions in Asia implement stricter gambling enforcement. However, the overall trend is for online gambling to be legalized in more territories, not less.

This segment reported revenues of $14.5M in 2025!

In Q2 and Q3 of 2025, revenues for this segment decreased by 21% and 18%, respectively. However, the decline moderated in the second half of the year, with overall 2025 revenues still up 16% thanks to a strong Q1.

This underperformance was explained by reduced usage of several key customers due to increased competition. To counter that, the company is investing in improving the range of products offered.

While this segment has had a slow second half of 2025, others have performed better, with Expanse Studios performing exceptionally well.

Expanse Studios is Meridian’s in-house iGaming development division that was one of MeridianBet’s subsidiaries.

Unlike Evolution, Expanse doesn’t offer live dealer games or live game shows.

Expanse exclusively focuses on digital game development!

• Slot machines

• Table games

• Crash games

• Localised games

New versions of classic slot machine games with an added twist. Digital table games such as poker, blackjack, roulette, dice, and more.

Crash games are a new genre of online casino games that are simple, fast-paced, and built for mobile gaming. These “less sophisticated” games are exceptionally popular with young people in emerging markets.

Most importantly, Expanse has the capabilities to localise games. The same game mechanics can be used in Brazil, Nigeria, and the Balkans, with minor adjustments that make the game more popular with local audiences. Character skin colour can be changed to better represent the population, basketball becomes football, tomato becomes a mango, etc.

Here, Expanse competes in a crowded field of competitors (Evolution), but being part of a larger group gives it competitive advantages!

First, GMAG can help Expanse distribute its games cheaper. Fees that normally go to a 3rd party aggregator stay in the group, giving Expanse a cost advantage.

Second, having a direct relationship with an aggregator gives them a data advantage. GMAG platform managed $4.7B in wagers in 2024. This gives them visibility into which games generate the most revenue and can use this information in game development to develop more engaging games.

Third, their own online casino platforms, such as MeridianBet, are great places to place Expanses’s games. This gives them an additional and guaranteed distribution layer.

So far, the results have been excellent.

In 2025, Expanse active players grew 282%. This is an incredible growth that demonstrates this division’s potential.

In Q4 2025, gross gaming revenues (GGR) grew 322% Y/Y, whilst overall revenue jumped 435%!

As of Q4 2025, their games are available in 1,344 gaming sites, an increase of 630% Y/Y.

Gates of Olympia is their new flagship game.

This is a 6×5 slot game where symbols fall into place, enabling players to win random multipliers and free-spin bonuses that can stack to win big payouts. It’s popular because it’s easy to play, fast-paced, flashy visuals, and a chance at massive multiplier hits create high excitement and strong player engagement.

Essentially, the company provides a white-label, turnkey platform that allows online gaming operators to run many aspects of their business and scale it with new games and customer engagement tools!

The value proposition of their combined B2B offering is clear:

• Speed to market

• Lower operating costs

• Lots of content

Using Meridian’s tools, the only thing that a prospective online casino operator needs is funding and operating licenses. Once that is secured, they can quickly build their online casino, significantly lowering the time to market.

By not having to build all the back-end from scratch, client start-up costs and operating costs are reduced. This enables them to reinvest more capital in compliance, customer acquisition, and marketing.

Meridian can instantly offer them thousands of online casino games, from Expanse or other studios.

There are many ways in which the company extracts value from its customers.

For the use of its software, online casinos pay a licensing fee, which can be a monthly or yearly subscription depending on what’s negotiated.

In the casino game business, developers often get a revenue share of the casino operators’ GGR, which is then shared with the game aggregator. Which, in the GMAG case, is the company itself.

For some games, GMAG negotiates a wholesale distribution price and then adds a markup when the games are sold to casino operators.

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1.2. B2C

In the B2C category, the company owns a few online gaming offerings.

• Classics for a Cause

• RKings

• Mexplay

• MeridianBet

Let’s expand on each.

Classics for a Cause is an Australian car giveaway platform that the company owns 80% of. This is a small segment, which generated $2.3M in revenues in Q4 2025 and $8.7M in 2025.

Essentially, people buy tickets and subscriptions for raffles in which old classic cars can be won.

RKings is a raffles website operating in the UK and Ireland. The concept is similar to Classics, as participants have to buy tickets to participate in specific competitions. While cars seem a big draw, people can compete for other prizes as well, such as a PS5, electronics, vacations, and more.

RKings is a much larger segment than Classics, generating $9M in Q3 2025, an increase of 2% Y/Y.

While there is a potential to expand the concept of Classics and R Kings by increasing the number of items and bringing the brands to new markets, these offerings don’t seem that particularly interesting to me due to their smaller size and slower growth.

With Mexplay, we finally get to the juicy part of the B2C business of Meridian.

As the name and the picture would imply, this is a Mexican online casino and sports betting website. The Mexican online casino market has a lot of potential, as there are comparatively few online casino operators. This is due to a very complex and confusing legal operating framework.

In 2025, player registrations increased by 84.5% to 162K.

First depositors reached 15.7K, up 74.2%.

Meanwhile, revenues grew by 51.9% to $2.27M!

While this is still a small segment today, using Expanse Studios games, GMAG operating technology, and the operating know-how of the MeridianBet team, Mexplay could become a meaningful business.

MeridianBet is the group’s largest and most important brand, which operates in Serbia, Montenegro, Bosnia & Herzegovina, Malta, Cyprus, Kenya, Tanzania, Nigeria, South Africa, from 2025, Brazil, and others.

The company offers quite a diverse set of services.

• Retail sports betting locations

• Small retail casinos

• Online sportsbook

• Online casino

Most developing countries are cash-first societies. This means that retail sports betting locations are a must to gain market share. Furthermore, these retail shops are often located directly in neighborhoods where people live, creating marketing opportunities and driving brand loyalty.

MeridianBet has over 740 retail betting shops!

Furthermore, in more developed markets such as Malta, and Serbia, online sportsbook operations are growing very quickly. This is driven by a rising mobile adoption and improved internet access.

But as internet access and mobile penetration in other emerging markets expand, online casinos are becoming increasingly popular.

In Q4 2025, Meridianbet performed well, growing revenues by 15% to $35.2M.

Overall in 2025, this segment reported revenues of $124.6M, generating 68% of the group’s total revenues, and being a strong profit driver with a gross margin of 70%.

Most importantly, new user growth is incredibly strong, as new registrations jumped 63% whilst first deposits grew 38.6%!

New user growth is a strong future revenue growth indicator. This clearly suggests that expansion in Brazil and Africa is going well.

As of Q4 2025, 341K active players use the platform, an increase of 28.8% Y/Y.

Furthermore, Meridian is the lead sponsor of the basketball club Red Star Belgrade!

Red Star is the most famous and storied basketball club in Serbia and the Balkans, with millions of fans. The club is a regular performer in the highly popular Euroleague (sort of European Champions League, but for basketball). These games provide Meridian with incredible visibility, attracting new players to the platform.

2. The Opportunity

The management has said in an interview last year that it believes that the company has the potential to become a $1B market cap enterprise. That is a very ambitious long-term aspiration that will require a lot of execution.

Let’s look at the opportunities that could help them achieve that.

2.1. The US Expansion

Expanding to the US is the ultimate prize, and this could be the biggest reason why MeridianBet merged with Golden Matrix.

The US is the world’s biggest economy, with the largest and richest middle and upper classes!

Furthermore, the country is currently undergoing a generational transformation, with online gambling getting legalized in more and more states.

As we can see in the picture above, online casinos are only legal in a handful of states in the northeastern US. Yet, this hasn’t stopped DraftKings from reaching a market cap of $11B!

As of today, only 40M people in the 7 states have access to online casinos. It is not legal in any of the major states, but that is likely to change in the years to come. Many state finances are not great, and additional tax revenue from online gambling could provide a welcome boost to state coffers.

Currently, there are active legislative procedures that could legalize online casinos in a few years in Maryland, Illinois, Indiana, and Wyoming. If that happens, around 26.5M people will gain access to online casinos.

Additionally, there have been some early discussions to maybe legalize online casinos in New York, Massachusetts, Ohio, Virginia, and other states. In these states, there is still a lot of uncertainty, so in the best-case scenario, it would be 5 or more years before operations can begin.

In any case, it seems the winds are shifting, so it is likely that in the next decade, there will be many US states that will legalise online casinos, possibly even tripling the TAM for online casino operators if any of the major states legalise.

As I understand, the company is deep in the process of acquiring a B2B license in New Jersey and Ontario, Canada.

The US and Canadian B2C markets are very competitive with high customer acquisition costs. This is because the industry is still relatively new, and there is a lot of funding from investors who hope to capture market share.

By serving the B2B market, Meridian is aiming to avoid this extreme B2C competition.

Despite that, because of the sheer size and growth of the market, there is a lot of potential on the B2B front.

2.2. Emerging Markets

Emerging market economies are a very attractive growth opportunity for Meridian. Many of these markets, such as Brazil, Mexico, and Africa, have recently simplified legal frameworks, making it easier for online casinos to operate.

At the same time, these are some of the fastest-growing economies in the world, with millions of people forecast to escape poverty and enter the lower and middle classes!

As people’s income grows, they seek new entertainment methods, and online gambling is increasingly becoming very popular.

Key reasons that make emerging markets attractive include:

• Large young populations

• Growing internet penetration

• Growing mobile access

• Sports obsessed

• Lower competition

Most of the large and established gambling companies focus on developed economies, because that is where the total revenue potential is the largest. However, this invites strong competition from well-capitalized players. That is not the case in emerging markets, where there is an opportunity for new regional leaders to emerge.

Analysts at Grand View Horizon forecast that the Brazilian online gambling market will grow with a 12.3% CAGR to reach $3.9B by 2030!

MeridianBet entered this market at a perfect moment, just in time for the 2026 FIFA World Cup. Brazilians love football almost as much as Jesus, and next year it will happen in the US, Mexico, and Canada, the same time zones as Brazil.

I have no doubts that sports betting volumes will break new records.

As we can see in the graph above, similar growth can be expected from the Mexican online gambling market.

Experts at Spherical Insights forecast the market to grow with a CAGR of 15.64%, reaching $3.89B in 2033!

Next, looking at Africa, while the whole industry is projected to grow more slowly, a large share of the growth will be driven only by a few countries.

Per the forecast of Astute Analytica, the African gambling market is expected to grow with a 7% CAGR till 2032, reaching $11.27B!

With its presence in Nigeria, Kenya, Tanzania, and South Africa, Meridian is exposed to the largest and fastest-growing markets.

2.3. Expanse and GMAG

At this scale, the combination of B2B and B2C services generates strong synergies with no conflicts of interest. GMAG is largely an Asian business, and Expanse has yet to expand there meaningfully.

But once Expanse scales into Asia, becoming a significantly larger enterprise, questions regarding conflicts of interest could arise.

GMAG is financially incentivized to promote Expanse’s games as it keeps all of the fees the games generate. Will other game developers GMAG aggregates be ok with it? At what point will they begin complaining or leaving GMAG?

Moreover, why would Expanse offer its best games to MeridianBet’s direct competitors? That would help them succeed. However, at the same time, if Expanse doesn’t give its games to the Meridian B2C competitors, it is leaving money on the table.

For these reasons, it could be possible for GMAG and/or Expanse to be sold.

The company will use the synergies of data sharing, distribution, and scale to grow these B2B segments as large as they can before issues arise. Then GMAG could be sold to another aggregator, whilst Expanse to Playtech, Evolution, or anyone else.

In a few years, under good conditions, these segments alone could be worth the entire current market cap of Meridian Holdings!

Earnings from this sale could be used to acquire other B2C operators.

3. MeridianBet Merger Rationale

I think it would be useful to discuss the rationale behind the merger between Golden Matrix and MeridianBet.

Some readers are probably thinking:

Why did MeridianBet owners merge with a much smaller US-based company, mostly for equity?

They were making millions of dollars in pure profit in the Balkans, why bother?

I think there are a few reasons.

Being a publicly listed US company comes with a certain level of legal, operational, and reputational advantages!

A US company applying for a gaming license or seeking banking, payment processing, or other services will have an easier time than a Serbian one.

I just said that the US is a huge opportunity.

Despite the improving economy, it would be incredibly difficult for a small, private Serbian online casino operator to get a US casino license.

However, a Nasdaq-listed US-headquartered gambling conglomerate largely owned by MeridianBet Serbian shareholders would have an easier time getting a license.

Moreover, being part of a US group enables Meridian to scale by reinvesting earnings at higher returns.

The company now has access to the US capital markets. As they have aggressive expansion plans in both B2B and B2C verticals, new funding will undoubtedly be needed. Now the company can issue new shares to pay for mergers, or raise debt from US funds and banks.

Making millions in profit in the Balkans is great, but it also comes with a ceiling. Equity in a public company gives founders exposure to potentially much larger upside.

Essentially, they are trading steady regional dominance for global opportunity.

The merger was closed in April of 2024, whilst the Brazilian operating license was approved in January of 2025. It could be that the merger with Golden Matrix was a crucial step that helped MeridianBet secure that operating license.

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4. Key Causes Behind the Sell-Off

While the rationale behind the merger sounds great and makes sense in theory, unfortunately, the US capital market has so far disagreed!

As you can see in the graph above, the stock is down 70% in the past 12 months and now sits at a market cap of around $87M.

Essentially, here is why the stock is currently depressed and could be undervalued:

• Insider selling

• CEO’s departure

• Integration

• Financing risk

• Dilution

• Prediction markets

First, investors really dislike insider selling.

Company executives have insight into day-to-day activities and non-public information. When they sell shares, that is interpreted by the market as a negative signal, as the presumption is that they are acting on deteriorating business fundamentals. Mr. Goodman, the previous CEO, has been selling shares since June 2025 and has continued to do so despite a significant fall in the share price.

The market doesn’t view a CEO selling as the stock continues to go down as an indicator of confidence!

This is even doubly so for a small-cap stock that just underwent a large, company-changing merger. Especially when the reason for sales is not explained, as I couldn’t find any commentary from Mr. Goodman.

This could have been a factor that led to Mr. Goodman stepping down from his position as the CEO of the group.

On December 12, 2025, he was replaced by the Chairman of the Board, William Scott, who became interim CEO. If I understand correctly, the company is currently in the process of finding a permanent CEO.

Moving on, the MeridianBet owners would have hoped that the combined company would have a market cap of around $410M ($330+$80M). But the market is assigning a significant discount not only due to the CEO turnover, but also due to integration risks. Combining a large multi-continent business is not easy, problems happen.

Moreover, as part of the acquisition agreement, MeridianBet owners were awarded $70M in post-closing considerations.

As of Q4 2025, $25.7M have already been paid in cash, while $28.1M was paid in shares.

Which means about the $16.2M of the acquisition debt remains.

So the company will probably soon announce how this will be settled, cash or shares.

The conversion of debt into equity has diluted public market shareholders, further worsening the sentiment.

As you can see in the table above, the total number of shares outstanding has increased by 25.6% to 12.64M shares since the acquisition was closed as a result of debt conversions.

Lastly, the rise of prediction markets has caused a sell-off in all online gambling stocks.

We are in a bit of a funny situation. Prediction markets companies vehemently deny that prediction markets are gambling, claiming that these are financial derivative futures contracts. However, this is clearly nonsensical, as the majority of the contracts are sports-related. At the same time, as prediction markets deny the gambling aspect, investors of regulated gambling companies sell their shares out of fear of market share loss.

If it quacks like a duck, it is a duck.

Now that we have discussed the narrative behind the sell-off, let’s look at each point and assess its severity.

First, the insider selling. While the CEO was selling, other insiders were buying. For instance, group CFO Richard B. Christensen has been buying at regular about 1,000 share increments since May 2024, and as of November 2025, per FiscalAI data, owns 12.5K shares.

As the CFO, he clearly knows the finances inside out, and likely believes the company is undervalued.

Another point is that Meridianbet owners, merger debt holders, chose to convert their debt into equity, a sign of confidence in the business, as they could have demanded cash.

Second, a search for a new CEO. Mr. Goodman was instrumental in building the legacy Golden Matrix Group into an $80M company, however, now the vision is completely different.

The new name symbolizes this shift in strategy.

The scale and the core of the business of Meridian Holdings have shifted from a regional, majority B2B player to a global, majority B2C player. It makes perfect sense to have a new face with a different set of skills to execute on this new strategic vision.

Third, the interim CEO, William Scott, confirmed in an interview that returning to profitability is a priority in 2026, and the majority of the expensive integration costs will be behind the company.

Moving on to financing, there is a clear focus on paying down debt.

As you can see in the chart above, key liabilities peaked at $110M in Q3 2024, right after the merger. Since then, they have been reduced by $47M, $25.7M with equity, and around $21.3M with cash. With a 2025 OCF of around $25M, Meridian could pay down all its key liabilities in 2 years. Thus, the financing concern does not seem valid.

Next, dilution. While it is likely that there is some dilution left, as the $16M acquisition debt still needs to be paid, this will be it. Once this debt is clear, dilution won’t be an issue. Meridian is not an SBC-heavy company that only lives to reward shareholders (Snap). In 2025, they paid $4M as SBC, just 2.2% of revenues. The low valuation, TTM P/S of 0.5, and EV/OCF of 4 already more than compensates for the dilution risk.

Lastly, prediction markets.

They are 100% gambling and will eventually be regulated as such.

Prediction markets are only gaining ground because of the regulatory loophole. Just a few months ago, the government of the Netherlands issued swift warnings of high fines if Polymarket didn’t immediately stop accepting bets from the Netherlands. Other countries are following suit as they don’t want to miss out on the tax revenue that regulated gambling generates. Prediction markets are largely a US phenomenon, and I find it unlikely that they would meaningfully impact MeridianBet’s core casino offerings in Europe, Africa, and Brazil.

Furthermore, Meridian already has the customer relationship and betting technology. They have already rolled out some prediction market-style bets on real-world non-sporting events.

The company has a product called Free Bet, where bettors can create custom bets on various real-life non-sports events, and Merdian proposes custom odds for this event. Bets on the US and Hungarian elections were highly popular.

If the demand for these types of bets increases, they can easily expand in this arena.

But most importantly, prediction market bets have little impact on high-engagement sports betting and online casino games, as prediction markets are simple one-sided bets.

A regular sports bettor likes to make parlays and various other combo bets, which is not possible on prediction markets. I also don’t see how prediction markets could replace engaging online casino games such as Expanse’s Gates of Olympia.

Overall, while there are some real issues affecting Meridian’s stock market downturn, they don’t have the severity to warrant a 70% sell-off!

5. Financial Analysis

With the stock down 70%, one would think that this is a struggling company, but looking at the finances, we clearly see that isn’t the case.

Q4 2025 and FY 2025 Results:

• Revenues of $49.6M +8.1% Y/Y, $182.9M +21% Y/Y

• Gross profit of $28.5M +6.4% Y/Y, $103.5M +16.8% Y/Y

• EBITDA of -$89.6M, -$81M*

• Adjusted EBITDA of $4.6M -29% Y/Y, $19.4M -11.7%

• Net income of -$86.7M, -$89.9M*

Cash situation:

• Operating cash flow of $8.2M -50.6%, $25.4M +6% Y/Y.

• Free cash flow of $6.5M -52% Y/Y, $19.2M +14.5%.

• Cash and equivalents of $18M -40% Y/Y (paying down debt)

While the company is GAAP unprofitable, the 2025 trajectory results clearly indicate that they are on the right path to achieving profitability in 2026.

There are 4 main reasons why Meridian is unprofitable:

• Impairments *

• Merger integration costs

• Interest costs

• Investments to expand in the US and Brazil

The biggest reason for the high GAAP net income loss is the merger-related impairment of goodwill and intangible assets!

When a business gets acquired, it is usually for a premium to the accounting value of its net assets. Let’s say that a business with $60M in assets and $15M in liabilities gets acquired for $100M. In this example, the acquirer paid $100M for a business with $45M in net assets.

In such situations, the acquirer records the difference between the purchase price and the net asset value of the acquired business as goodwill on the consolidated balance sheet. So in the example above, it was $55M. Companies pay a premium to the accounting value of net assets because they expect earnings growth to justify it.

However, US GAAP requires yearly tests to assess whether that goodwill position is appropriate. Rules require that the goodwill position be reduced in certain situations when the share price goes down, interest rates increase, or some business units underperform. This reduction appears on the income statement as a loss.

As of Q3 2025, Meridian had $129M of goodwill and other intangible assets on the balance sheet.

The company recognized a substantial $91.8M impairment charge in Q4 2025, primarily due to higher interest rates and a decline in the company’s stock price, which lowered the fair value accounting.

$63.4M of the impairment relates to the acquisition’s goodwill and $28.4M to other intangible assets.

This is a non-cash accounting entry, meaning it does not impact the company’s actual bank balance or daily operations.

Though it significantly reduced reported net income for the year. Long-term, this write-down aligns the book value of the company’s assets more closely with current market realities, potentially reducing future depreciation expenses.

While the remaining $35M in intangibles is currently looking stable, further impairments remain a risk if the company fails to meet the results warranting such a position. Per accounting standards, another impairment test will be done in Q4 2026.

These impairments, while disappointing, don’t change the core investment thesis of the company as they mostly affect the less interesting parts of the business.

The bull thesis lies in the core Meridian segments, Meridian online casinos, Mexplay, and Expanse. These segments are growing well, delivering improved financial results.

During the first 9 months of 2025, before the impairments, Meridian spent about 58.3% of its revenues on SG&A, compared to 56% in the prior year. This is directly because of the high integration costs. If the SG&A ratio had remained the same, the company would have spent $3M less here.

Next, in the same period, interest costs more than tripled from $0.8M to $3.5M, a swing of $2.7M.

Without these 2 merger related swings in costs, the EBIT would have been $5.7M larger, compared to the 9M 2025 EBIT loss of $2.8M.

Lastly, the company is now investing aggressively to expand the B2C business in Brazil and the B2B in the US. While they haven’t disclosed specifics, both ventures have likely cost millions of dollars, and it will take time before these investments lead to higher earnings.

Net leverage ratio now sits at 0.86 compared to 1.5 in Q2 2025.

Meridian is undergoing a steady and necessary transformation, whilst delivering strong operating growth in its key growth segments.

It is clear that there is a meaningful disconnect between the share performance and financial results!

The share price action would imply a collapsing business, but that is not the case.

5.1. Segment Performance

Let’s look at which segments drove this performance.

While 2025 total group revenues grew by 21% Y/Y:

• Online casino grew by 26.6% to $53.8M.

• Online sports betting grew by 12.3% to $42.2M.

• Retail casino grew by 8% to $25.1M.

• GMAG, R Kings, and Classics grew by 29.9% to $58.3M.

The GMAG, R Kings and Classics segment performance looks better than it actually was because Classics was acquired in August 2024, so its performance was not consolidated in the first half of the year, making 2025 results look stronger.

For instance, in Q3 2025, R Kings revenue increased by 1.7%, GMAG declined by 17.7%, whilst Classics grew by 11.3%. Individual segment performance for Q4 2025 was not disclosed.

It is clear that the core online and offline casino and sports betting segments are doing the heavy lifting, while the legacy Golden Matrix segments are underperforming.

5.2. Regional Performance

Now that we know which segments are driving this growth, let’s look at the regional performance.

While 2025 total group revenues grew by 21% Y/Y:

• Europe ex UK, the largest region, grew by 14.5% to $102.5M.

• The UK grew by 26.2% to $35.1M.

• Africa grew by 22.9% to $15.5M.

• Central and South America grew by 66.6% to $8.9M.

• Australia grew by 89% to $8.7M

• APAC grew by 8.8% to $12.2M

In short, the core market of Europe and the growth market of Africa demonstrated strong and resilient growth as the 2025/2026 sports season began.

The new emerging region of the Americas demonstrated incredible growth.

Meanwhile, Australia’s growth was strong, in large part due to the integration of Classis in mid 2024.

Lastly, APAC underperformed largely because of the GMAG segment.

6. Valuation

A market cap of $87M, 2025 revenues of $183M, and adjusted EBITDA of $19.4M implies that the company is trading for 0.5x P/S and 4.5x EV/ADJ EBITDA.

That compares favorably to competitors.

In the above picture, you see the P/S, EV/EBITDA, and revenue growth of some key gambling companies.

Flutter trades for 2.5x the Meridian’s P/S multiple and 3x the EV/EBITDA multiple, despite comparable revenue growth.

Meanwhile, Draftkings are signficiantly more expensive than Meridian, despite growing top-line only slightly faster.

Looking at a few years in the future, the analyst consensus 2028 estimate revenue sits at $279.6M and EBITDA at $50.4M.

Implying a 2028 P/S of 0.3 and EV/EBITDA of around 2!

A key catalyst that could bridge the valuation gap between peers is GAAP net profitability. Once that is reached, Meridian will begin to appear in stock screeners that demand it.

As a small-cap with a market cap below $100M, the company is hard to discover in a sea of thousands of publicly traded companies. Screeners are a crucial tool that investors use to discover such companies.

If the current financial trajectory continues, that could happen after Q4 2026 results.

And institutions are front-running this possible catalyst.

As you can see in the chart above, per Fintel.io, while there was a small decrease post Q4 2025 results, overall institutional ownership has been growing steadily as the share price has gone down, up from 1.5M shares in August of 2024, to over 6M by April 2026.

Smart money is seeing value here!

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7. Valuation Model

Let’s build a quick valuation model.

It is hard to adequately estimate the growth of the RKings, Classics, and GMAG segments. So, I am going to model a modest 5% CAGR.

For Meridian, they reported $5.33M in revenues from Latin America in 2024, so I am assuming that all of it relates to MexPlay and the recent entry into Brazil.

Meridian, excluding Brazil and Mexico, I model them growing with a 9% CAGR till 2030. This mostly consists of the core business in Europe and the expansion in Africa.

Regarding Mexico and Brazil, I model a rapid expansion, reaching revenues of $68M in 2030.

As per the 2030 forecasts, the Mexican industry would generate $2.52B in revenues, the Brazilian $3.9B. So to get revenues of $68M, Meridian would only need a market share of 1.1%. This is a very reasonable and achievable market share target.

In such a scenario, total revenue could reach $312.6M, a CAGR of 11%!

Modeling the operating margin reaching 14%, and tax, interest, and other expenses of 30% of operating income.

Net income could reach $31M in 2030, a margin of 9.8%!

Next dilution. I am going to model 15.168M shares outstanding in 2030, an increase of 20% in 5 years. This assumes that a significant portion of the remaining $16M acquisition debt gets converted into equity.

If the Meridian trades for a P/E of 15-20, we could be looking at $460-613M market cap company and a $30-40 stock in 2030.

That would be an upside of 342-490% from today’s share price of $6.85!

Discounting it back at 15% per year to calculate a fair value per share, we get $15-20, implying that currently the company might be trading for a 55-66% discount to its fair value.

8. Conclusion

So, in conclusion, Meridian appears to be undervalued compared to what its peers are trading at. As the valuation model showed, there is further potential for strong upside.

But execution is the key!

• Integration needs to go smoothly, and operational synergies must be achieved.

• Legacy markets in Europe must continue to grow.

• The company shouldn’t experience any issues in Africa, Brazil, or Mexico.

If that happens, Meridian Holdings could make its shareholders very happy.

The company has gone through a transformation, from a largely B2B driven to B2C. The synergies that this vertical integration can deliver have yet to be realized by the market.

Additionally, I was not very optimistic regarding the GMAG, Classics, and RKings segments. If these segments perform much better than I expect, there could be an additional upside.

However, as always, investing in small caps comes with additional risks, and this is not a guaranteed slam dunk.

Nevertheless, the business does look promising.

Disclosure:

This report is Issuer-Sponsored Research. Global Equity Briefing has entered into a research and distribution agreement with Meridian Holdings Inc ($MRDN). The compensation may create a conflict of interest; however, the Analyst maintains editorial independence and all opinions expressed in this report are strictly his own. The Analyst agrees not to trade Meridian securities during the period of the agreement. The compensation received is a fixed fee and is not contingent upon the content of the report or the performance of the issuer’s securities. This is not a recommendation to buy or sell any security. Global Equity Briefing is not a registered broker-dealer or investment adviser.

Disclaimer: Global Equity Briefing by Ray Myers

The information provided in the “Global Equity Briefing” newsletter is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer or solicitation to buy or sell any securities. Ray Myers, as the author, is not a registered financial advisor, and readers should consult with their own financial advisors before making any investment decisions.

The content presented in this newsletter is based on publicly available information and sources believed to be reliable. However, Ray Myers does not guarantee the accuracy, completeness, or timeliness of the information provided. The author assumes no responsibility or liability for any errors or omissions in the content or for any actions taken in reliance on the information presented.

Readers should be aware that investing involves risks, and past performance is not indicative of future results. The author may or may not hold positions in the companies mentioned in the “Global Equity Briefing” report. Any investment decisions made based on the information in this newsletter are at the sole discretion of the reader, and they assume full responsibility for their own investment activities.

They have been providing weight loss programs for over 60 years, peaking at a $6.7B market cap in 2018.

However, since then, the company has not only lost weight for its customers, but it has lost 99% of its market cap, today trading for just barely above $100M!

The first trouble started when, in the 2010s, easy-to-use weight loss and calorie-counting apps began stealing market share from WW’s flagship point-based and in-person weight loss coaching programs.

Then, the GLP1 boom of the 2020s killed the company completely.

There was little interest in WW’s weight loss programs if customers could just take highly effective and safe medical treatments to lose weight. As revenues declined, profits evaporated, and the business couldn’t deal with the massive weight of interest payments from their debt saddled balance sheet.

So last May, the company filed for bankruptcy to reorganize the business and reduce debt.

Now, WW is out of bankruptcy with around $460M of debt, declining revenues, and no profits.

So why would an investor be interested in this business?

Because WW is pivoting away from its legacy weight loss businesses towards becoming a digital health care platform.

The strategy is simple, milk the core legacy business for all it can give, and reinvest that into the new GLP1 success subscription and new healthcare emerging verticals. There is little trust in the market that this pivot will succeed, so WW trades for just 1x its 2026 ADJ EBITDA guidance of $105-115M.

If they are successful, investing now at a $100M market cap could provide investors with a 10x opportunity.

In this report, I will explain how WW plans to transform its business and why I see the stock as a compelling high-risk-high-reward opportunity.

1. Business Model

2. Finances

3. The Opportunity

4. Valuation

5. Valuation Model

6. Conclusion

1. Business Model

WW business can be viewed from 3 angles:

• Legacy Weight Loss

• Pivot to GLP1

• Emerging Digital Health Offerings

1.1. Legacy Behavioural Business

The story of Weight Watchers began in 1963 when one Jean Nidetch began holding weekly meetings with her friends in her New York apartment to discuss weight loss strategies.

For many decades, the company built its entire business around human connection, group support, and behavioral change. The traditional business model centered heavily on in-person group meetings, personal coaching, and a points tracking system.

Under this system, members attended weekly workshops to receive encouragement and guidance from trained coaches who had successfully lost weight themselves using the program.

The point system served as the foundation of the operation. Rather than counting calories, which many individuals found difficult and tedious to maintain over time, the company assigned a point value to foods based on their protein, fiber, fat, and calorie content.

Members received a daily points budget tailored to their personal goals. This educational approach successfully guided participants toward more filling, nutritious options without completely banning their favorite treats.

For many years, this method was working great as it combined science-backed behavioral tactics with the psychological power of community support.

However, as the internet and smartphones advanced, consumer habits began to shift away from physical interactions toward mobile devices and digital tools.

These easy-to-use tracking apps began to steadily erode the paid membership model’s market share.

While the company developed a highly rated digital app of its own, the physical workshop infrastructure became an expensive headache. Additionally, the biggest challenge to this traditional system arrived with the rapid consumer adoption of medical weight loss treatments. Standalone coaching and restrictive diet programs suddenly felt too difficult and slow for the average consumer when drug treatments offered fast results.

So this segment is in terminal structural decline, with essentially 0% chance of a recovery!

In 2025, the number of behavioural subscribers fell by 19% from 3.2M to 2.6M!

Facing a decline in subscription revenues and a heavy debt load that required large interest payments, the company filed for bankruptcy on May 6, 2025.

The filing aimed to implement a financial restructuring plan and allow the company to safely pivot toward a new, modern medical business model.

Simply put, the plan is to extract as much cash as possible from existing subscribers and reinvest that in new growth segments.

1.2. Pivot to GLP1

A major disruption in the weight management landscape was created by GLP1s!

These drugs were originally formulated to help patients with type 2 diabetes control their blood sugar levels. Researchers soon realized that these medications also caused significant weight loss because they mimic a natural hormone in the gut that slows digestion and tells the human brain that the stomach is full.

The most famous medications are sold by Novo Nordisk with the brand names Ozempic and Wegovy, and Eli Lilly Zepbound and Mounjaro.

The massive popularity of these medications forced the company to execute a massive strategic pivot. Recognizing that fighting the pharmaceutical trend was an impossible task, management decided to embrace medical weight loss and combine it with their historical behavioral support systems.

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On Wednesday, I published an article on why investors should not stop investing during this war.

To navigate these turbulent times successfully, investors must establish a strict set of criteria to separate permanently damaged companies from those that will emerge stronger.

Periods of high market panic often create the best opportunities to buy incredible businesses at a steep discount!

Today, I will explain my 4 easy criteria for buying stocks now and give 6 of my picks.

1. Criteria for Buying Stocks during the Iran War

Investing during a War downturn requires being smart and selective.

The goal is to not only identify companies best positioned to benefit from the eventual recovery, but also to find long-term winners that will reach new highs.

I believe the following 4 criteria are crucial for this:

• Not directly affected

• Strong long-term prospects

• Improving financials

• Attractive valuation

1.1. Not Directly Affected

A significant problem during the current Iran War is a sharp increase in oil, gas, and other commodity prices!

When energy prices surge, the ripple effects move rapidly through the global economy. This creates long-term structural issues that can easily last for years, severely penalizing businesses that depend heavily on physical commodities or require vast amounts of power to operate.

Airlines are a classic example of an industry that is directly harmed by rising energy costs. Fuel typically accounts for a significant portion of an airline’s opex, sometimes exceeding 25%.

When crude oil price surges over $100 a barrel, the price of jet fuel rises even faster due to widening refinery profit margins. Because airlines operate on razor-thin margins, they are forced to raise ticket prices to cover these costs. This immediately reduces travel demand, leaving discount carriers that cannot pass on costs to customers at high risk of pausing operations or facing insolvency.

Cruise ships face similar structural headwinds. These massive vessels consume incredible amounts of heavy fuel oil and marine gas to transport passengers across the ocean.

General tourism and heavy manufacturing industries also suffer prolonged damage during energy crises.

High travel costs and fears regarding regional stability keep families at home, devastating local economies that depend on international visitors.

Meanwhile, manufacturing businesses that use a lot of raw commodities or high-temperature processing see their cost of goods sold rising rapidly. If consumer demand weakens at the exact same time that input costs are rising, these energy-intensive businesses can face structural profitability issues that last for years.

Thus, it is smart to avoid firms that see rapid cost spikes during an energy crisis.

1.2. Strong Long-Term Prospects

While avoiding damaged industries is a defensive move, growing wealth requires an offensive focus on companies with favorable long-term growth trends.

Businesses driven by secular shifts rather than cyclical economic patterns tend to outperform in the long run, regardless of short-term geopolitical issues.

When a broad market sell-off occurs due to a war, it often drags down the share prices of high-quality companies whose underlying business drivers remain completely unaffected.

Sectors like AI, digitization, e-commerce, semiconductors, renewables, and fintech are excellent examples of structural growth trends that will continue moving forward independently of Middle Eastern geopolitics.

The shift toward a digital economy is a global trend driven by the pursuit of convenience, speed, and cost reduction. Businesses adopt software and automation to lower overhead and improve productivity when labor and energy become more expensive.

At the same time, Fintech and e-commerce platforms continue to gain market share simply because they provide superior user experiences compared to legacy brick-and-mortar stores and traditional banks. In developing regions, where large portions of the population remain unbanked or underbanked, digital finance platforms provide the core infrastructure needed for modern commerce.

Because these digital platforms do not require massive physical branch networks or fleets of heavy delivery trucks to operate their core software, they are naturally shielded from the worst effects of an energy crisis.

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1.3. Improving Financials

When investing during a macro crisis, it is crucial to ensure that the target company possesses a strong and improving internal engine of cash generation.

During a war, capital markets often freeze, interest rates may rise to combat energy-driven inflation, and securing external funding becomes incredibly difficult and expensive.

Therefore, businesses must demonstrate improving financials, particularly in terms of operating leverage and free cash flow generation.

When a company can grow its revenue while keeping its operating expenses flat or declining, its profitability expands exponentially. Investors should look for businesses that have already completed their heavy capital investment cycles and are now beginning to harvest the rewards.

High gross margins are particularly important because they give a company the flexibility to absorb minor cost increases without falling into losses. While a strong balance sheet with ample cash reserves ensures that the business can survive prolonged periods of economic uncertainty without needing to dilute shareholders or take on high-interest debt.

Most importantly, when investing in a company with improving margins, investors could see a significant share price appreciation as the multiple rises!

1.4. Attractive Valuation

The final and most important criterion for making an intelligent investment is ensuring an attractive entry valuation!

No matter how incredible a company’s growth prospects are, paying an excessive price for the stock can still result in poor investment returns. During periods of peace and economic expansion, investors are often willing to pay massive premiums for growth stocks.

However, when war breaks out, the market’s risk appetite shrinks, causing valuation multiples to compress drastically.

Buying shares at these lower multiples could end up being extremely profitable as the end of a military conflict brings higher multiples.

Simply put, buying stocks at a reasonable valuation protects the downside while maximizing the potential for upside returns when market conditions eventually normalize.

Metrics such as the price-to-sales ratio, enterprise value relative to net cash, and price-to-earnings must be evaluated carefully. Finding companies that are growing their top-line revenues at 20% or more per year while trading at multiples historically reserved for slow-growing legacy businesses represents the ideal scenario for a long-term investor.

2. 6 Companies that fit these criteria

Applying the 4 investment parameters detailed above yields a list of high-quality businesses not only capable of withstanding the current geopolitical storm but also coming out of it stronger.

These 6 companies operate in sectors not heavily affected by the energy price shocks, possess powerful long-term growth catalysts, are showing clear signs of financial improvement, and are trading at attractive prices.

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I am Ray, a passionate investor and equity analyst. Today, I am reviewing the March performance of the Global Equity Portfolio.

A reminder that I track all aspects of the Global Equity Portfolio for my Premium subscribers.

• All sales/buys are revealed as they occur in the Substack Chat

• Portfolio composition

• Performance

• Strategy

• Stock watchlist

• Potential catalysts

Since its founding, the portfolio has returned 143.56%, a CAGR of 16.18%, beating the S&P500 return of 107.87%, CAGR of 13.12%!

In the above image, we see a graph from Portseido that compares the performance of the Global Equity Portfolio to the S&P500 if invested in the index at the same time as I bought the stocks.

I have been using Portseido to track the performance of the Global Equity Portfolio for some time now. They are an investment performance tracking and visualizations platform that is extremely easy to use. I especially like their smart benchmarking graphs and tables you can see in the picture above.

This is exactly what I was looking for, and I would recommend them to everyone looking to approach investing seriously and beat the market in the long term.

Use my link below to begin your 2-week trial.

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If you are new to the Global Equity Portfolio, I recommend reading my full Portfolio reveal and analysis from November 2025.

Let’s take a look at the March performance.

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• Oil price flirting with the $120s

• Asian stock markets are falling, activating circuit breakers

• EU natural gas prices are jumping to multi-year highs

• Gasoline prices are rising worldwide

• Fears of supply chain disruptions

War creates uncertainty, volatility, and fear in markets, but it doesn’t automatically mean you should stop investing.

In fact, history shows that staying invested or even better continuing to invest often performs better than trying to time exits and re-entries.

The natural human instinct during times of instability is to seek safety, which usually means selling stocks and moving capital into cash.

However, an analysis of historical market behavior suggests that withdrawing from the market during wartime is often a strategic error.

History demonstrates that financial markets possess a remarkable capacity to absorb shocks, and economies are far more flexible than popular doom narratives suggest.

1. What Happens During a War

The behavior of financial markets during military conflicts typically follows a cyclical pattern of anticipation, shock, and adaptation.

While every war has unique characteristics, the general principles of market reaction remain consistent across different eras and geographies. Investors who understand these phases are better equipped to resist panic and identify opportunities where others see only risk.

• Short-term volatility

• Medium-term stabilization

• Long-term recovery

1.1. Short-term volatility

In the immediate aftermath of a military strike or an invasion, stock markets almost always experience sharp drops. This initial reaction is driven by a combination of high volatility and panic selling as the sudden removal of certainty forces a repricing of global risk.

This is what we are seeing now!

As the United States and Israel launched air strikes against Iran on February 28, 2026, global markets reacted with immediate distress, and oil prices jumped. This mirrors historical events where surprise or sudden escalation led to significant drawdowns.

Data from twenty major military interventions since World War II shows that the S&P 500 falls by an average of 6% from the initial market impact to the trough level. This decline is often exacerbated in surprise wars where investors have not had time to price in the possibility of conflict.

Events such as the bombing of Pearl Harbor in 1941 and the invasion of South Korea in 1950 hit harder because they lacked a long lead-up period. In these cases, the market experiences a gap down as traders scramble to adjust their portfolios to a new reality of wartime spending and potential supply chain disruptions.

However, the duration of this initial dip is often shorter than expected.

Despite the length of some conflicts, the market historically takes an average of only 28 days to return to the levels seen prior to the event. This suggests that the initial shock is more about the psychological adjustment to a new risk environment than a permanent destruction of value.

However, certain oil shocks have proven more painful. The 1973 Yom Kippur War and the subsequent Arab oil embargo caused the S&P 500 to trade down by 16.1%, while Iraq’s 1990 invasion of Kuwait led to a 15.9% decline.

Table data indicates that while drawdowns can be significant, the time to recovery is often measured in weeks or months rather than years.

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1.2. Medium-term stabilization

Once the fog of war begins to lift and the scope of the conflict becomes modeled, the market enters a period of stabilization.

Investors shift from emotional selling to a more calculated assessment of how the war will affect specific industries and the broader economy. During this phase, partial recoveries are common as the initial worst-case scenarios fail to materialize.

The uncertainty before a war often creates more perceived risk than the war itself!

Once a conflict is certain, it can be modeled as a risk factor, allowing markets to price it accurately. For example, leading up to the 2003 Iraq War, markets were depressed by pre-war jitters.

However, after the invasion began, the S&P 500 and the Australian ASX 200 both recovered significantly, gaining more than 35% and 26% respectively by the end of 2003.

In the medium term, specific sectors often begin to outperform.

Defense and defense-related companies, such as those in steel, coal, and aerospace, frequently see their stock volatility decrease as wartime contracts provide stable and predictable revenue streams.

This period also sees a re-evaluation of energy prices. During the 2022 Ukraine War, while oil initially peaked at nearly $124 per barrel, the market selloff was less acute than previous shocks because it became evident that Russian crude supplies would not be completely removed from the global market.

1.3. Long-term recovery

The long-term trajectory of the stock market is overwhelmingly positive, even when interrupted by major wars.

Unless a war directly destroys the domestic economy and its productive capacity, the market tends to recover and eventually reach new highs. This resilience is visible in the annualized returns of the S&P 500 across six major historical conflicts.

Data varies based on the source and methodology, but the general directional principle is accurate.

It shows that US large-cap stocks delivered positive returns across all major 20th and 21st-century conflicts.

This long-term growth is fueled by the fact that the broader economic factors, such as innovation, interest rates, and corporate earnings, eventually matter much more than the temporary impact of war.

For instance, during the Afghanistan and Iraq wars, the 2008 recession caused a major downward trend, but this was a separate macroeconomic event not directly tied to the military conflicts themselves.

The key for long-term investors is to avoid exiting the market during the mid-war turbulence. Those who gave up and stayed in cash after the 1973 oil shock missed the substantial market gains that began in the 1980s.

2. Economies are Flexible

A recurring mistake I see investors make is that they underestimate the flexibility of the economy.

Experts and media often issue doom predictions at the start of a crisis, assuming that supply chains are rigid and markets will break under pressure. However, modern economies are highly adaptive systems capable of rerouting resources and finding workarounds in record time.

Let’s look at a few examples:

• Covid

• Ukraine War

• Current energy rerouting

2.1. Covid

The COVID-19 pandemic provides a powerful example of economies outperforming the worst-case forecasts.

In early 2020, the International Monetary Fund described the “Great Lockdown” as the worst recession since the Great Depression, predicting a cumulative loss to global GDP of $9T over two years.

While the 2020 contraction of 3.5% was severe, the recovery was the fastest in several decades. By 2021, the US economy grew by 5.5%, its fastest pace since 1984, as businesses and households learned to adjust through digital technologies and shifted consumption patterns.

The vaccine was created and distributed in record time, and instead of the worst global depression, we got a few slow and very weird years.

2.2. Ukraine War

Similarly, the 2022 invasion of Ukraine triggered warnings of a permanent “global food crisis.” I saw some analysts predicting the worst famine since Mao, and estimates of tens of millions of deaths.

While food prices reached an all-time high in March 2022, they fell below pre-invasion levels by December of that same year.

Global cereal stocks were at historically high levels, and alternative shipping routes were established to move grain. Even in Ukraine, a country under direct assault, the economy showed remarkable resilience. By late 2022, nearly 65% of surveyed employees were still working in private enterprises, and essential services like electricity and internet remained functional in major cities despite Russia’s persistent bombing of civilian infrastructure.

2.3. Current energy rerouting

The conflict with Iran in 2026 has provided the most recent proof of economic agility.

Following US and Israeli strikes in late February, Iran effectively shut down the Strait of Hormuz, a waterway that normally handles 20% of the world’s oil.

The shutdown caused tanker traffic to drop by 90% in the first week of March 2026. While doom narratives predicted a total energy collapse, regional players activated decades-old contingency plans with surprising speed.

The Saudi East-West Pipeline, also known as Petroline, became a central lifeline. Built during the 1980s as an insurance policy, it reached its full capacity of 7 million barrels per day on March 28, 2026.

By moving oil across the kingdom to the Red Sea port of Yanbu, Saudi Arabia was able to maintain 50% to 70% of its pre-war export volumes.

Other critical rerouting efforts include:

• UAE Gulf of Oman Pipeline: The Habshan-Fujairah pipeline moved approximately 1.62 mbpd to the coast, bypassing the Strait of Hormuz entirely.

• Iraq-Turkey Pipeline: On March 18, 2026, the Iraqi government and the Kurdistan Regional Government reached a deal to restart the Kirkuk-Ceyhan pipeline. This route, which had been shut for over a decade, resumed pumping at 250,000 to 300,000 bpd to the Turkish Mediterranean port of Ceyhan.

• Global Reserves: The IEA launched the largest emergency oil reserve release in its history, totaling 400M barrels, to stabilize prices as the rerouting took place.

The ability of these nations to rapidly deploy spare infrastructure reinforces the view that economies are not static and can find ways to survive even the closure of major chokepoints.

The longer this closure goes, the more countermeasures will be implemented.

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3. Continuing to invest makes sense

While the headlines focus on destruction, the investor’s focus must remain on value and time.

There are 3 clear arguments for continuing to invest during a war:

• The opportunity presented by lower prices

• Dollar-cost averaging

• Long-term compounding

3.1. Lower prices equal opportunity

Market panics driven by war often push the prices of fundamentally sound companies below their fair value.

Paradoxically, the stock market becomes one of the few stores where consumers tend to run away when things go on sale.

When the news is at its worst, the war premium factored into prices is at its highest. For example, before the 2003 Iraq invasion, oil prices included a premium of $5 to $15 per barrel due to the threat of war. Once the war began and the initial outcome became clear, oil prices in New York plunged by a record $10 in a single day.

Investors who bought during the period of maximum uncertainty were able to purchase assets at a discount before the fear premium evaporated.

History suggests that the best time to put money to work is when everyone else is freaking out, as generational lows are often formed during these periods of peak emotional distress.

3.2. Dollar-cost averaging

Dollar-cost averaging (DCA) involves putting a fixed amount of money into the market at set intervals.

When that salary check hits the account, you should allocate a certain percentage of it towards investing.

During periods of war-driven volatility, DCA ensures that an investor buys more shares when prices are low and fewer shares when prices are high.

This smooths out the average entry price and removes the need to perfectly time the market’s bottom, a feat that is nearly impossible during a geopolitical crisis.

The 2003 Iraq War serves as a case study for this approach. Leading up to the conflict, volatility was extreme, and markets declined. However, those who continued their regular investment schedules through the trough in March 2003 benefited from a massive recovery by year-end.

In today’s context, investors in early 2026 who continue to DCA into the market are essentially taking advantage of the Hormuz discount on stocks, betting that the eventual reopening of the strait will lead to a significant repricing of assets.

We saw this during Covid, when panic caused a huge sell-off, which quickly recovered.

We saw this during the Ukraine War, when panic caused a huge sell-off, which quickly recovered.

We will probably see this after the current Iran War, when panic caused sell-off could quickly turn into a recovery.

3.3. Long-term horizon matters

For an investor with a 5-20-year horizon, the short-term shocks of war are less significant than the long-term upward trend of the economy.

Market drawdowns of 10% or more occur in more than half of all years since 1980, regardless of whether there is a war. Furthermore, midterm election years, like 2026, historically experience peak-to-trough declines of about 20%, yet they are almost always followed by robust rebounds to new highs.

If an investor’s goal is retirement or long-term wealth, the daily fluctuations caused by Iranian missile threats or US naval movements are noise.

The focus should remain on the underlying drivers of their stock growth:

• Technological advancement

• Demand trends

• Market share growth

• Growing TAM

• Improving margins

• Product pipeline

• Etc

Even messy or prolonged wars eventually bring enough clarity to ease investor anxiety and stabilize markets, as seen in the multi-decade conflict in Afghanistan.

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4. Likely Conclusions of the Iran War

It is true that the 2026 war with Iran is an important conflict with direct major implications for the global economy and markets.

The way I see it, there are 4 possible scenarios for the war to end:

1. Total Iranian victory and establishment of the Hormuz “toll road.”

2. Total US and Israeli victory and a friendly regime in Iran.

3. Long painfull ground war that will last many years.

4. Trump pulls back and encourages internal uprising.

4.1. Total Iranian victory and Hormuz as a “toll road.”

This is the least likely scenario.

In this outcome, Iran would achieve effective military control, essentially closing the Strait of Hormuz to its enemies while allowing friendly nations (China and Russia) to pass for free and charging a toll fee for the others.

This would be a disaster for Trump and the Gulf countries, so this scenario will not be permitted.

Furthermore, Iran does not have the naval or air power to maintain a total blockade against the combined strength of the US and Israel. The US Navy dominates the Strait of Hormuz, and any attempt by Iran to fully control it would trigger an overwhelming military retaliation that Tehran likely cannot survive.

Experts note that Iran’s current strategy is one of small control and deterrence rather than seeking to dominate global shipping sustainably.

Such a scenario would be catastrophic for global stocks in the short-to-medium term. Oil prices could reach $150 to $200 per barrel, leading to high inflation and a possible global recession.

4.2. Total US/Israel victory and a friendly Iranian regime

This scenario involves a complete collapse of the current Iranian government and the installation of a pro-Western regime.

While being the stated goal of Trump, this is considered very unlikely.

This is not in the interest of Russia and China, so these countries will provide ample military and financial support to any remaining old regime factions.

Moreover, history in Iraq and Afghanistan shows that regime change is extremely difficult, costly, and often results in long-term instability rather than a clean democratic transition.

A full ground invasion of Iran would require hundreds of thousands of troops, which the US does not currently have in the Gulf.

While the US might succeed in destroying nuclear programs or coastal defenses, a clean regime replacement is unlikely.

4.3. Long, painful war lasting years

This scenario envisions a grinding conflict that drags on for years, depleting the resources of all involved parties.

This is also unlikely!

President Trump has shown a historical reluctance to long-term forever wars and lacks broad public support for a multi-year ground conflict in Iran. The 2026 midterm elections in November serve as a critical deadline. Historically, the president’s party loses seats in the midterms, and a stagnant economy caused by a long war would almost certainly lead to Republicans losing power.

There is even talk that a prolonged, unconstitutional war could lead to efforts to impeach the president or key cabinet members if the conflict proves unpopular and expensive.

A long war would lead to a period of sideways market performance characterized by high volatility and low investor confidence, as the affordability crisis for consumers worsens due to sustained energy costs.

4.4. Trump pulls back and encourages internal uprising

This is the most likely scenario.

It fits the pressure without occupation strategy, where the US uses limited strikes and economic sanctions to force a change from within.

Trump has publicly pushed for an internal Iranian uprising and has used troop surges as a coercive diplomatic signal to bring Tehran to the negotiating table. This strategy allows him to “declare victory” early and reduce his military footprint before the November midterms, avoiding the political disaster of a long ground war.

While this off-ramp is strategically attractive, limited strikes do not guarantee a final resolution, and the situation remains unpredictable.

This scenario is the most favorable for the stock market.

Once the threat of a full-scale regional war recedes, the markets would likely experience a relief rally similar to the one seen after the start of the 2003 Iraq War. Investors who stayed the course through the initial strikes would be positioned to capture the gains as the world returns to a state of aggressive continues measures and protests.

Overall, the historical data and current 2026 developments suggest that war is a temporary disruption to a much larger story of economic growth.

Whether through the rerouting of oil via the Saudi East-West pipeline or the inevitable stabilization of market prices as uncertainty clears, the global financial system is built to survive.

For those who can maintain a long-term perspective and avoid the emotional trap of panic selling, continuing to invest during a war is a clear pathway to long-term financial success.

5. Which stocks to invest in?

While the economy and the stocks are likely to recover, one still needs to be smart with their investments.

I am not suggesting simply checking which stock is down the most and buying that one.

Some businesses will naturally be more affected by others. Especially those for which commodity prices drive margins, such as airlines and trucking.

Saturday, I will release an article on how to pick stocks during the current sell-off and which 6 stocks I believe are the best buys right now.

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When the AI boom really began after the release of ChatGPT, Nvidia saw the demand for its AI GPUs explode.

From 2022 to 2026, Nvidia’s data center business grew 18x in just 4 years, to nearly $200B!

As we are reaching the limits of what current technologies can achieve, Nvidia has invested billions in its suppliers to help them develop technologies critical for making AI better, faster, and cheaper.

$2B went to the company we are covering today, Lumentum!

Lumentum is a technology company that specializes in photonics, a field that is enabling the shift from electrical signals to light-based signals.

For a long time, Lumentum was known for helping companies with lasers that enable 4G and 5G technology, but today it has a much more exciting job.

It provides the digital plumbing that allows AI to function. As AI models become more powerful, they need to move massive amounts of information between chips at literal light speeds.

Lumentum builds products that make this fast data movement possible, and its products are experiencing an increase in demand comparable to Nvidia in 2023.

Revenues are projected to more than 3x by 2028!

As a result, Lulemtum’s stock has risen by over 1,000 in the past year!

This report examines the company’s strategic role in the burgeoning AI data center markets, its business units, financials, and its long-term valuation potential.

As always, the report will conclude with a 2030 Valuation Model.

Let’s begin.

1. Photonics and Nvidia

2. Business Model

3. Finances

4. The Opportunity

5. Valuation

6. Valuation Model

7. Conclusion

1. The Photonics Industry and Nvidia

Before getting to Lumentum and what products the company provides, let’s talk a bit about the Photonics Industry.

Because training and running AI models require an extreme quantity of data, the demand for data processing has reached a level where traditional copper-based electrical systems are no longer sufficient.

In modern data centers, especially those built to support large-scale AI models developed by Anthropic and OpenAI, the sheer volume of data moving between processors creates massive amounts of heat and consumes excessive power.

This physical limitation, often referred to as the interconnect bottleneck, has forced the industry to look toward light as the primary carrier of data.

Photonics, which involves the generation, manipulation, and detection of light particles, or photons, offers a solution that is faster, cooler, and more energy-efficient than copper.

The strategic importance of this technology is best illustrated by the actions of Nvidia!

Recognizing that its future growth depends on the ability to move data between its high-performance chips at incredible speeds, Nvidia has made significant financial commitments to secure its supply chain.

In early 2026, Nvidia announced a $4B investment initiative within the photonics sector. This initiative included $2B each invested into Coherent and Lumentum, two of the largest established players in the optical technology market.

These investments are part of a multi-year strategic partnership intended to enhance the energy efficiency and resilience of AI factories. Nvidia’s commitment includes multi-billion-dollar purchase agreements to ensure it has priority access to advanced laser components and optical interconnect technologies.

This massive capital inflow into the sector validates the entire market.

It signals that the biggest names in technology view optical components as the critical infrastructure of the next decade.

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2. Business Model

Lumentum is a key player in this emerging photonics niche.

The company operates a B2B model, where it sells its advanced parts to other giant technology companies that build the world’s internet and computer systems.

Lumentum acts as a picks and shovels provider during the AI gold rush, and often those selling the tools make a steadier income than the gold miners themselves.

In this case, the “gold” is AI, and Lumentum is selling the essential tools needed to make AI more powerful.

The core of this B2B model relies on deep partnerships. Because Lumentum’s parts are so specialized, they cannot just be bought off a shelf. Tech giants like Google, Microsoft, and Nvidia have worked with Lumentum for years to design parts that fit perfectly into their systems.

These relationships are often backed by long-term agreements where customers promise to buy a certain amount of parts years in advance to make sure they do not run out.

This creates a very stable business where Lumentum knows exactly who its customers are and what they need for the next several years.

The company serves three main types of customers in this B2B setup.

First are the hyperscalers that own massive data centers where AI lives.

Second are the telecommunications companies that build the global phone and internet networks.

Third are industrial and consumer electronics companies that use lasers for things like manufacturing or face-ID on phones.

By selling to these different groups, Lumentum makes itself a necessary partner for almost every part of the modern digital world.

2.1. Cloud & Networking Segment

The Cloud & Networking segment is the primary engine of Lumentum’s business, making up about $1.4B or 86% of 2025 revenues.

This segment focuses on moving data through fiber optic cables using light. In the past, this business mostly sold to companies building 5G networks, but today, the biggest growth comes from AI data centers.

Inside an AI data center, thousands of GPUs must talk to each other to solve complex problems. Moving this much information using copper wires is no longer the best solution because copper gets too hot and cannot move data fast enough.

Lumentum sells the solution, optical transceivers, and the high-speed laser chips that power them. These devices turn electrical signals from the computer into light pulses that travel through glass fibers.

Large tech companies like Nvidia buy the laser chips to put into their own high-end networking gear.

The second group is the hyperscale cloud providers like Google, Amazon, and Meta, who buy complete optical systems to connect their servers.

Because these companies are building the largest computer systems in history, they need millions of Lumentum’s lasers, making this segment a high-volume, high-profit part of the business.

2.2. Industrial & Tech Segment

The Industrial & Tech segment accounts for the remaining 14% of Lumentum’s revenue.

As you can see in the graph above, this segment has been underperforming for a few years!

This part of the business uses the company’s expertise in lasers for applications outside of the internet and data centers. The customers range here is diverse, ranging from car companies to smartphone makers and various other factories.

One of the most famous uses of Lumentum’s technology in this segment is for 3D sensing. The company produces tiny lasers called VCSELs that allow smartphones to scan a user’s face for security, such as Apple’s FaceID.

Meanwhile, in the automotive industry, these lasers are used for lidar, which helps self-driving cars and trucks see their surroundings by bouncing laser light off objects to create a 3D map of the road.

Lumentum also sells high-power lasers used in heavy manufacturing.

These lasers are so precise and powerful that they are used to cut through metal for cars, drill tiny holes in circuit boards, and even help manufacture electric vehicle batteries.

While this segment is smaller than the networking side, it provides Lumentum with a presence in the future of transportation and advanced manufacturing. However, as AI demand has surged, Lumentum has started to focus more on its higher-profit networking parts, sometimes moving workers and factory space away from these industrial products to meet the massive demand for AI infrastructure.

As the Lumentum technology and its use cases have been converging, the company has decided to stop separating its business into these 2 Cloud and Industrials categories.

Instead, the company will separate revenues based on Systems and Components.

2.3. Components & Systems

Lumentum has been actively focusing on vertical integration.

This means that instead of just designing a part and asking another company to make it, Lumentum controls almost every step of the process.

• Components – $444M last quarter, high-margin specialized chips and lasers.

• Systems – $222M last quarter, complete modules and switches sold to end-users.

The value chain strategy follows three clear steps:

Designs Chips: Lumentum’s engineers design specialized semiconductor chips made of a material called Indium Phosphide. These chips are the most difficult part to make and act as the brain of the laser.

Manufactures Lasers: Lumentum owns its fabs, where it makes the materials and builds its own lasers. The Electro-absorption Modulated Laser (EML) is the most advanced in the world for moving data and is seeing strong demand.

Integrates into Systems: With the acquisition of Cloud Light in 2023, Lumentum can now take its own lasers and build them into complete systems like transceivers or optical switches. This allows the company to sell a finished product directly to cloud providers, which lets them have better margins.

By owning the whole process, Lumentum ensures that its products are more reliable than those made by companies that outsource their manufacturing. In the world of AI, where a single broken laser can stop a million-dollar calculation, this reliability is a major reason why companies like Nvidia and Google choose Lumentum.

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3. Finances

Lumentum’s financial health has changed dramatically over the last few years. For a long time, the company was a steady but slow-growing provider of parts for wireless communications networks.

However, the sudden need for AI infrastructure has turned it into a fast-growing company with incredible sales growth.

3.1. Historic Revenue Growth

Historically, Lumentum’s revenue growth was modest.

In the years leading up to 2024, it grew at a slow CAGR of about 5.2%, reaching $1.4B!

As we can see in the graph above, in 2024, the company actually saw its revenue decline meaningfully as carriers slowed down their capex spending on new 5G networks.

However, fortunately for Lumentum, the AI supercycle began to show up in the numbers in late 2025.

The company’s total revenue grew from $1.36B in mid-2024 to $2.1 billion in LTM as of February 2026, representing 55% growth.

This growth was driven almost entirely by the demand for high-speed lasers used in AI data centers.

3.2. Historic Profitability

Profitability has been difficult and patchy for Lumentum.

2020-2022 were quite strong, with operating income and net income peaking at $527M and $397M.

However, from 2023-2024, the company reported net losses, peaking at $546.5M in 2024.

This was because it was spending a lot of money to build new factories to prepare for future growth.

3.3. Current Profitability

By 2026, Lumentum’s profitability has seen a massive turnaround.

As it started selling more expensive, high-speed parts, its profit margins began to expand.

In 2025, the company reduced operating losses to $180M and showed a positive net income of $26M thanks to a $200M tax benefit.

In the LTM, we can see that operating income is now at a positive $25M, ending losses. Meanwhile, net income is now at $251.6M, excluding the tax benefit, the company would have made $51M in net profit.

Looking at 2026 estimates, we see that Lumentum is expected to return to strong profitability, with operating income jumping to $782M and net income to $680M!

3.4. Financial Year Q2 2026 Results

The FY Q2 2026 was the best quarter in the company’s history.

Lumentum reported revenue of $665.5M, +65.5% Y/Y, beating analyst expectations of $650M.

The most impressive part of the report was the profitability expansion. The company’s GAAP EPS hit $0.89, compared to the $0.88 loss last year.

Management attributed this to the fact that they are now selling many more 200G laser chips, which are high-speed parts that sell for a lot of money and have high profit margins.

Additionally, we see that operating expenses as a % of revenue have fallen from 37.6% in Q2 2025 to 26.4% today. This is a clear sign that operating leverage is being achieved, as expenses don’t grow in tandem with revenues.

Most importantly, the company gave very optimistic guidance for the third quarter of 2026.

Lumentum expects revenue to grow even faster, reaching about $780-830M, implying 83-95% Y/Y growth!

Furthermore, they also expect their operating margins to continue climbing toward 30% or higher as they scale up their production of AI-related products.

This quarter proved that Lumentum is no longer just a steady company but is now a high-growth leader in the AI hardware market, experiencing an Nvidia-like growth.

4. The Growth Opportunity

Hyperscales are set to spend $650B in 2026 on capex in 2026, an increase of 70% Y/Y!

Increasingly, this money is being spent across the AI ecosystem to deliver improved cost efficiency, elevating new winners.

Lumentum is standing at the center of a massive change in how AI servers are built.

This change is driven by the need to move huge amounts of data quickly to train AI models. Because traditional electrical wires cannot keep up, the world is moving toward Lumentum’s optical solutions.

This shift is creating three major growth opportunities for Lumentum in:

• Cloud Transceivers

• Optical Circuit Switches (OCS)

• Co-Packaged Optics (CPO)

4.1. Cloud Transceivers

Cloud transceivers are the devices that connect servers and switches in a data center.

They are like the ports that allow information to flow. Right now, the industry is moving from 800GB speed to 1.6TB (1.6 Terabits per second), which is twice as fast.

To make a 1.6T transceiver, a company needs very advanced laser chips.

Lumentum has a huge advantage here because it is the world leader in 200G-per-lane EML laser chips. You need eight of these chips to make one 1.6T transceiver.

Lumentum currently controls about 50% to 60% of the entire world market for these advanced lasers.

Analysts at Mordor Intelligence forecast that the Optical Transceiver market will grow with a 13.67% CAGR to reach $29.3B in 2031!

Because demand for these chips is much higher than the supply, Lumentum can charge higher prices and choose which customers to sell to. This makes the 1.6T transition a strong growth driver for the company for at least the next 5 years.

4.2. Optical Circuit Switches (OCS)

Optical Circuit Switches (OCS) are a revolutionary new way to route data.

In a normal network, data has to be turned from light into electricity, sorted by a computer, and then turned back into light to be sent to the next server. This process is slow and uses a lot of power.

An OCS uses tiny, high-tech mirrors to bounce light directly from one fiber to another without ever turning it into electricity.

This technology is incredibly important for AI because AI data centers use massive amounts of power. Using OCS can reduce a data center’s power use by up to 40%. Lumentum’s OCS business has grown from almost nothing to a major revenue source in just 18 months.

Analysts at Mordor Intelligence forecast that the Optical Switches market will grow with a 9.54% CAGR to reach $12.7B in 2031!

As of early 2026, the company has a backlog of OCS orders worth more than $400M.

Management believes this will eventually become a $1B annual business as more companies like Google and Nvidia adopt the technology

4.3. Co-Packaged Optics (CPO)

Co-Packaged Optics (CPO) is the long-term future of AI computing.

Currently, transceivers are separate parts that plug into the outside of a switch or server. In the future, the optical lasers will be moved inside the machine and placed directly on the same chip as the main processor.

This allows data to travel even shorter distances, which saves even more power and makes everything faster.

Lumentum is a pioneer in this field. They have already received a multi-hundred-million-dollar order for CPO light engines, which are the specialized lasers used in this setup.

These products will start shipping in large numbers in 2027.

CPO evolves in stages:

• First, Scale-Out Phase 0, optics are still separate from switches, with mostly copper connections.

• Scale-Up Phase 1, optics move closer with more optical links, but copper backplanes remain.

• Scale-Up Phase 2, systems use hybrid or mostly optical backplanes with optics tightly integrated alongside compute chips.

Each stage increases bandwidth and efficiency by replacing electrical connections with optical ones closer to the silicon.

We are currently in Phase 0, but quickly moving to Phase 1!

By being one of the first companies to perfect CPO technology, Lumentum is making sure that it will remain the primary provider of light for AI systems even after the current generation of transceivers is replaced, and the industry moves to the next stage.

5. Valuation

Lumentum’s valuation has climbed rapidly as the stock market realized the company’s importance to the AI world.

As of March 2026, Lumentum’s stock price was trading around $703 per share. This is a massive increase compared to early 2025, when the stock was trading under $100. Over the past 12 months, the stock has risen by approximately 1,027%, reaching a market cap of $50B.

Several key factors have caused this huge price increase:

• The Nvidia Effect: In March 2026, Nvidia announced a strategic partnership and a $2B investment in Lumentum. This gave investors massive confidence that Lumentum is a winner in the AI race.

• S&P 500 Inclusion: The company was added to the S&P 500. Not only a sign of trust, but also this meant that many large mutual funds were forced to buy the stock.

• Record Earnings: Every quarter, the company has reported sales and profits that are much higher than anyone expected, leading to beat and raise cycles.

Looking at analyst price targets, the stock is currently seen as a Moderate Buy. Out of 16 ratings, 11 analysts say you should “Buy” the stock, and 5 say you should “Hold” it.

None of the analysts is currently saying you should “Sell” it.

The average price target from these analysts is $679.40, though some very optimistic analysts think it could go as high as $900.

5.1. Valuation Multiples and Comparison to Peers

Because Lumentum is growing so fast, it is often compared to other companies in the optical networking space, such as Coherent ($COHR) and Fabrinet ($FN).

Lumentum’s valuation looks high if you only look at the past, but it looks more reasonable if you take into account future growth expectations.

For example, its forward P/E ratio of about 60x is higher than Coherent’s 38 and Fabrinet’s 36. However, Lumentum is growing its revenue much faster (66% vs 17% and 36%).

This suggests that investors are willing to pay a premium for Lumentum because of higher future growth expectations.

5.2. Analyst Growth Expectations

Analysts have become incredibly bullish on Lumentum’s future. They have been raising their earnings estimates for the company faster than for almost any other stock in the tech sector.

As you can see in the picture above, analysts expect the company’s annual revenue to grow at a CAGR of 47.4% between 2024 and 2028, with revenues reaching $6.4B.

Meanwhile, EBITDA and operating profit are also expected to reach $2.7B and $2.2B.

Taking these estimates into account, Lumentum trades for a 2028 P/E of 35.

While this is significantly lower than the current FWD P/E of 60, this is still a premium valuation. This means that Lumentum investors are betting that either the company will improve on these already healthy estimates or the growth could continue significantly past 2028.

6. 2030 Valuation Model

To estimate what Lumentum might be worth by 2030, we can build a model based on the optimistic targets and market trends.

Key Model Assumptions:

I am modelling a 45% revenue CAGR. We assume the company can maintain a high growth rate, supported by the move towards its photononics products across the AI ecosystem.

Next, as the company scales up, its operating margins grow to a heathly 40%.

We get 2030 revenues of $10.5B and operating income of $4.2B!

This is a 541% and 2,443% increase from 2025 levels!

Next, I am modelling tax and other expenses at 25% of operating income.

The result is a net income of $3.16B!

In terms of dilution, I model the share count increasing by about 5% per year, reaching 91M in 2030.

Assuming an exit multiple of 40, we could be looking at a $1,338 stock in 2030, implying an upside of 93%!

Discounting that back at 16% per year to today, we get an estimated fair value per share of $661.

That is 8% above today’s share price of $718.

So this valuation model shows that Lumentum appears overvalued.

Thus, for the company to deliver meaningful upside to its shareholders, it needs to either grow faster than the 45% CAGR I modeled, has better operating margin than 40%, or a much higher multiple than 40.

If I increase the CAGR to 55%, the operating margin to 50%, and exit multiple to 45, the upside increases to 280%.

While that is certainly possible, considering the speed at which the AI industry is moving, I won’t be betting my money on it.

7. Conclusion

Lumentum has successfully transformed itself from selling photonics products to the networking and communications industries into a foundational engine of the AI boom.

By focusing on the most difficult and high-value parts of the optical network, the lasers and the mirrors that guide light, the company has built a competitive moat that is very hard for other companies to cross.

Its financial situation has improved dramatically, with revenue and profits now growing at their fastest rates in history. While the stock price has risen over 1,000% and currently trades at a demanding valuation, the underlying business is supported by real orders and massive customer demand. The partnership with Nvidia and the $400M OCS backlog are strong signals that Lumentum is a mission-critical partner for the world’s most powerful technology companies.

Furthermore, Lumentum represents a classic picks and shovels investment.

As long as the world continues to build more AI models and larger data centers, the need for high-speed optical connections will only grow. With its vertical integration strategy and lead in 1.6T lasers, Lumentum is better positioned than almost any other company to capture this growth.

While there are risks, such as high spending on new factories and potential increased competition, the overall trend toward light-based computing makes Lumentum a key beneficiary of one of the most significant technology shifts of the 21st century.

However, despite the fundamental qualities this company has, the valuation model clearly demonstrates that the company is very richly valued.

Even with generous growth assumptions of 45% revenue CAGR, 40% operating margin, and 40x exit multiple, the model found only 93% upside in the stock by 2030.

Essnetially todays investors are betting on the company delivering astronomical levels of growth.

So while the company could deliver a decent upside for today’s shareholders if everything goes better than I modeled, to me it seems that the bulk of the gains have already been made.

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Retail investors are not very patient, so for many months, Grab has been criticized for not putting its large cash balance to good use, and some even questioned why a profitable company would raise this much in the first place.

However, the funds were clearly intended to purchase its biggest competitor in Indonesia, Gojek.

While that deal has been rumored to be in the works for years, it seems Gojek will have to remain an independent company for longer, as any potential deal is stalled while Gojek goes through various scandals and government investigations.

Grab was forced to pivot and find another M&A target, and they finally did.

Grab is buying the Taiwanese food delivery business, Foodpanda, for $600M in cash!

With this deal, Grab takes a first step beyond its core region of Southeast Asia, expanding to a large, developed, and advanced economy of 23M people.

By stepping into Taiwan, Grab is testing its ability to compete in high-income, high-density markets outside its home turf.

In today’s report, I will analyze:

• The strategic reasons for the deal

• The current state of the industry in Taiwan

• How this could serve as a blueprint for Grab to enter other countries

1. The Deal

The acquisition is a cash deal worth $600M, where Grab will take over Foodpanda’s entire delivery business in Taiwan from its parent company, Delivery Hero.

This transaction is expected to close in the second half of 2026, and Grab expects to migrate all customers, merchants, and driver partners to its app by the end of 2027.

The strategy behind this deal is built on three main pillars:

• Geographic expansion

• Financially accretive

• Tech synergies

First, Taiwan represents Grab’s ninth market and its first venture outside of Southeast Asia!

Taiwan is an attractive market because of its incredibly strong economy and very dense cities. In 2025, Taiwan’s economy grew by 9%, and it had a GDP per capita of over $30K, much higher than all of Grab’s current markets, except Singapore.

Second, Grab is looking for assets that are already accretive to the bottom line!

Foodpanda Taiwan generated about $1.8B in GMV in 2025 and was profitable on an ADJ EBITDA basis, excluding Delivery Hero HQ costs. This acquisition will increase Grab’s 2025 $22.1B GMV by about 7%. Grab expects that after synergies and consolidation costs, this unit will generate $60M in ADJ EBITDA in 2028.

While adding this to its book will help Grab reach its goal of tripling ADJ EBITDA to $1.5B by 2028 more easily, it won’t be a huge contributor.

The price is a bargain compared to Uber’s previous attempt to buy the business.

Uber offered $1.25B for in 2024 but failed because Taiwan’s antitrust regulator blocked it over competition concerns. They argued the combined company would control 90% of the market, potentially leading to higher prices and reduced competition.

Third, Grab believes its technology can make Foodpanda even better.

Grab has spent years perfecting AI for routing and mapping in complex and highly dense cities like Jakarta, Manila, and Bangkok. By bringing these tools to Taiwan, Grab can reduce the time it takes for a rider to deliver food, which makes both customers and restaurant partners happier.

Of course, if they are successful, then Grab will significantly increase GMV and earnings.

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2. Foodpanda Presence in Taiwan

Foodpanda is currently a dominant force in the Taiwanese delivery market. It operates in 21 cities across the island, providing a network that reaches almost the entire population.

This wide reach is why Grab was willing to pay $600M for it.

Essentially, Grab believes that it can significantly increase the GMV by more effectively competing in this market.

In the battle for Taiwan’s delivery market, Foodpanda holds a slight lead over its biggest rival, Uber Eats.

Analysts at Momentum Works estimate that Foodpanda has a 52-55% market share in Taiwan.

This position is supported by a very loyal group of users who use the pandapro subscription service.

About one-third of Foodpanda’s customers in Taiwan are subscribers, and these people are responsible for more than half of the total money spent on the platform. This creates a steady stream of income that Grab can rely on and mirrors Grab Unlimited strategy.

Taiwan’s food delivery market is essentially a two-horse race, with Uber Eats holding an estimated 48-45% market share.

3. Taiwan’s Ride-Hailing Industry

Meanwhile, the ride-hailing market in Taiwan is very crowded.

There are three main players that control most of the business: Taiwan Taxi, LINE GO, and Uber.

Taiwan Taxi: This is the traditional leader. They have a massive fleet of yellow taxis and have built a very successful mobile app to keep up with modern technology.

LINE GO: This is a very strong competitor because it is built into the LINE messaging app, which almost everyone in Taiwan uses. It is a joint venture between the tech company and local taxi groups.

Uber: After struggling with financial lossesf or many years, Uber now operates a stable business and is a cash flow-generating machine.

In 2025, a new player named Bolt entered the market, which has made competition even more intense.

The ride-hailing market continues to grow as more people in cities choose not to own cars because of high costs and a lack of parking.

4. Taiwan Opportunity

Grab’s real goal in Taiwan is not just delivering lunch. It wants to build a full superapp that captures more of customers wallet share.

Once Grab has millions of people using its app for food, it can easily offer them rides and more.

Grab is already known as the king of ride-hailing in Southeast Asia and has a lot of experience and tech know-how to build a great network.

However, Grab is unlikely to build a new ride-hailing network from scratch!

That would be difficult and very expensive.

Instead, it would probably partner with existing local taxi companies, just like Uber and LINE GO have done. This allows Grab to follow local rules while still providing a fast and reliable service using its own dispatching technology.

This partnership-led approach would allow Grab to offer a full suite of mobility services to its users without the significant capital expenditure and regulatory risk associated with managing a massive independent driver network in a mature market.

While the market is incredibly competitive, I believe it must and ultimately will expand beyond just food delivery, because of the risk of losing customer mind share!

If Grab doesn’t have ride-hailing in its app, customers will be forced to use Uber or others. So Grab would essentially force its people to use a competing product. Now, once they have the Uber app, what stops them from using Uber Eats?

People are creatures of habit, and while many of us always price compare, the reality is that a lot of people don’t, and these are the most profitable users.

In a sense, ride-hailing is a low-margin customer acquisition service to get food delivery, mart, quick commerce, and fintech customers.

These activities have higher margins and stronger customer loyalthy that taxi rides. But taxi rides are crucial to attract customers to the app, to use these more profitable services.

Taiwan has a very high number of convenience stores like 7-Eleven and FamilyMart. Grab can expand into grocery delivery by partnering with these stores to deliver items like milk, snacks, and toiletries in 30 minutes or less. This is a high-growth area that Foodpanda has already started, but Grab has the tech to take it to the next level.

Another opportunity is to expand its fintech division!

Taiwanese consumers are very comfortable using mobile phones for payments. Grab has a financial services division that’s growing rapidly. However, unlike most of Southeast Asia, Taiwan is an advanced economy where financial services are easily available.

This makes the financial services industry more competitive, so simply offering a digital wallet won’t be sufficient. Grab needs to offer innovative and high-quality services to attract customers.

Also, let’s not forget about the tourists!

The integration of tourism-related synergies also presents a significant upside. Approximately 30% of visitors to Taiwan in 2025 originated from ASEAN countries, a demographic that already uses the Grab app in their home markets. By owning the dominant delivery infrastructure in Taiwan, Grab can offer these travelers a familiar interface for discovering local cuisine, thereby increasing its transaction frequency among existing users as they move across borders.

However, during the deal presentation press conference, the company said that for now, they are focused on closing the deal and integrating Foodpanda, and they won’t comment on ride-hailing or financial services expansion.

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5. Blueprint for the Future

Could the Foodpanda Taiwan deal serve as a blueprint for future M&A?

This strategy is much faster and less risky than trying to build a new business from the ground up.

The blueprint could follow a simple set of steps:

1. Find a strong local player: Look for the company in first, second, or third place in a country’s delivery or ride-hailing market.

2. Buy the business at a fair price: Use cash to take over an asset that is already running and has many customers.

3. Upgrade the technology: Introduce Grab’s AI, mapping, and logistics tools to make the local business more efficient.

4. Add new services: Once the customers are on the new Grab app, start offering rides, groceries, and financial products.

This model could work best in countries that have a large population and a growing middle class who want to save time.

When looking at where Grab might go next, we must evaluate different regions based on their current competition and how well Grab’s technology would fit.

Let’s look at two potential countries:

5.1. Bangladesh

Bangladesh is an emerging market country with a huge population of 176M people, and could be quite an exciting opportunity for Grab.

Per Mordor Intelligence, the food delivery market is expected to grow with a 13% CAGR, reaching $8.3B in 2031.

The market is currently a battle between Foodpanda and a local company called Pathao. Foodpanda has about 65% of the market and operates in 64 districts. Pathao is a local success story that offers rides, food, and logistics.

Grab could acquire Pathao, which recently raised $12M to build its own financial services. Pathao is already profitable, which makes it a perfect stepping stone for Grab to enter South Asia.

Or it could continue its history with Delivery Hero and buy Foodpanda Bangladesh.

In Bangladesh, the digital economy is booming. More than 70M people now use mobile money services.

This means people are ready for a superapp that combines payments with delivery.

Pathao is the perfect partner for Grab because it has already done the hard work of building a brand that people trust. Unlike Foodpanda, which spent millions on discounts to get users, Pathao focused on providing good service and building a local network of restaurants.

If Grab bought Pathao, they would not only get a ride-hailing and food business but also a gateway into the lives of millions of young Bangladeshis who are looking for their first bank account or credit card.

5.2. Sri Lanka

Sri Lanka is another logical choice because its market is dominated by a company that already operates just like Grab.

The leader is PickMe, which holds 70% of the ride-hailing market and about 45% of the food delivery market. Its main rival is Uber.

PickMe is a very healthy business. In 2025, its revenue grew by 51%, and it paid out dividends to its shareholders. Grab could buy PickMe to immediately become the number one player on the island.

Sri Lanka is a smaller market than Bangladesh, but it is more advanced in how it uses technology for transport. PickMe has succeeded because it understands the “tuk-tuk” economy better than anyone else. They have over 100,000 drivers on their platform.

For Grab, Sri Lanka would be a safe bet. PickMe’s net profit grew by 84% in a single quarter in 2025, reaching 514M rupees. By bringing Grab’s AI dispatching and mapping to PickMe, Grab could help the company grow even faster in rural areas where demand is still untapped. This would be a high-margin business that provides steady cash for Grab’s other projects.

6. Conclusion

The acquisition of Foodpanda Taiwan for $600M is much more than a simple business purchase.

It is a bold statement that Grab is ready to compete on the global stage in more economically developed markets.

By acquiring a profitable market leader and upgrading it with world-class technology, Grab has created a clear blueprint for expansion.

As this report has shown, the opportunity in Taiwan is vast, it is a large, economically developed, and fast-growing country.

But the real excitement lies in what comes next. By following this same blueprint in countries like Bangladesh and Sri Lanka, Grab could transform itself from a Southeast Asian success story into a global superapp powerhouse.

The journey from Singapore to Taipei could be just the beginning.

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1. Sivers Semiconductors

2. Klarna

3. Ondas

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Nvidia was the big first winner, making hundreds of billions from selling AI GPUs. Lately, the company has been throwing its weight around, investing in its suppliers and technology partners to ensure that the AI industry continues improving.

And as we are starting to reach the limits of physics of what electrical signals can achieve, Nvidia has invested billions in the next generation of tech, photonics.

Thanks to the company, the global AI industry is currently undergoing a structural transformation that favors speed, energy efficiency, and high-capacity data transmission.

At the core of this transformation is the shift from electrical signals to light-based signals, a field known as photonics. And today, we are going to be talking about an interesting Swedish semiconductor firm:

Sivers Semiconductors!

While the company has a history spanning more than seven decades, in the last few years it has positioned itself as a primary provider of the essential building blocks for this new AI era.

This report examines the company’s strategic role in the burgeoning AI and Lidar markets, its business units, financials, and its long-term valuation potential.

As always, the report will conclude with a 2030 Valuation Model.

1. Photonics Industry and Nvidia

2. Business Model

3. Finances

4. Key Growth Opportunities

6. Valuation

7. Valuation Model

8. Conclusion

1. The Photonics Industry and Nvidia

Before getting to Sivers and what products the company provides, let’s talk a bit about the Photonics Industry.

Because training and running AI models require an extreme quantity of data, the demand for data processing has reached a level where traditional copper-based electrical systems are no longer sufficient.

In modern data centers, especially those built to support large-scale AI models developed by Anthropic and OpenAI, the sheer volume of data moving between processors creates massive amounts of heat and consumes excessive power.

This physical limitation, often referred to as the interconnect bottleneck, has forced the industry to look toward light as the primary carrier of data.

Photonics, which involves the generation, manipulation, and detection of light particles, or photons, offers a solution that is faster, cooler, and more energy-efficient than copper.

The strategic importance of this technology is best illustrated by the actions of Nvidia!

Recognizing that its future growth depends on the ability to move data between its high-performance chips at incredible speeds, Nvidia has made significant financial commitments to secure its supply chain.

In early 2026, Nvidia announced a $4B investment initiative within the photonics sector. This initiative included $2B each invested into Coherent Corp and Lumentum, two of the largest established players in the optical technology market.

These investments are part of a multi-year strategic partnership intended to enhance the energy efficiency and resilience of AI factories. Nvidia’s commitment includes multi-billion-dollar purchase agreements to ensure it has priority access to advanced laser components and optical interconnect technologies.

For a smaller, specialized player like Sivers, this massive capital inflow into the sector validates the entire market.

It signals that the biggest names in technology view optical components as the critical infrastructure of the next decade.

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2. Business Model

Sivers does not produce end-user consumer electronics. Instead, its business model focuses on being a critical enabler of the technology used by other companies.

It develops highly specialized chips and lasers that solve performance challenges in high-growth markets such as satellite communications, defense, autonomous driving, and AI data centers.

The company operates through two main subsidiaries: Sivers Wireless and Sivers Photonics.

Let’s expand on them.

2.1. Sivers Wireless

Sivers Wireless develops advanced semiconductor technology for microwave and millimeter-wave applications for communication systems.

These are high-frequency radio waves that can carry large amounts of data over short to medium distances.

The primary applications for this technology include:

• Satellite Communications (SATCOM)

• Fixed Wireless Access and 5G

• Defense

For SATCOM, Sivers provides chips that allow ground terminals to communicate with satellites in space, particularly for next-generation constellations that provide global internet. Key clients include the satellite communications company Intelsat and the European Space Agency.

Meanwhile, Fixed Wireless Access refers to providing high-speed internet to a stationary location (like a home or office) using wireless signals rather than physical cables. Instead of a technician digging up your yard to lay a cable, they install a small receiver on your roof or window that sends signals to a nearby cell tower. This is significantly cheaper than laying cables, and with the rise of 5G is becoming fast enough.

Sivers communication chips are enabling telecommunications companies to provide such high-speed internet!

Furthermore, the company also supplies secure, high-bandwidth communication tools for military contractors.

A major technical achievement for this division is its beamforming integrated circuits.

Unlike traditional antennas that broadcast a signal in all directions, beamforming chips can focus a signal into a narrow beam, which makes the communication much more efficient and harder to jam. Essentially, the signal is sent directly to the receiver instead of in all directions. Sivers is currently the only commercial provider based in the EU for certain types of these chips.

2.2. Sivers Photonics

The Photonics segment manufactures specialised photonic devices.

Unlike traditional computer chips made of silicon, these devices use materials that are better at generating and manipulating light.

This division is the primary driver of the company’s growth in the AI market, and its products include:

• Lasers

• Optical Amplifiers

• Lidar Components

The company makes high-precision lasers that are used to send data through fiber optic cables. These are special lasers that produce a very pure and stable light at one exact wavelength. In addition to fiber optic cables, they are used in things like 5G networks, various sensors, and increasingly AI data centers to send data quickly and accurately.

Additionally, this division makes Optical Amplifiers, devices that boost the strength of a light signal as it moves through a system. They are used in fiber-optic networks to boost signals so data can travel longer distances without losing quality.

Lastly, another potential high-growth application from this segment is Lidar Components.

Lidaruses laser light to measure distances and create detailed 3D maps of objects and surroundings.

Sivers sells lasers and sensing chips used in self-driving cars and industrial robots.

The company provides custom foundry services, meaning it can design and manufacture specific parts for other companies, as well as sell its own standardized laser products.

2.3. Revenue Lifecycle

The company’s revenue is driven by a cycle that begins with technical engagement and ends with high-volume production.

This design-to-revenue cycle is critical for understanding the company’s future value because it acts as a leading indicator of sales.

Pipeline: This phase represents all potential opportunities Sivers is currently discussing with customers. In 2025, Sivers reported that its opportunity pipeline grew by 64% to reach $453M. This growth suggests a strong long-term demand for the company’s technology.

Design Win: A design win occurs when a customer officially chooses Sivers’ technology to be a part of their future product. For example, the company reported that a “strategic Lidar customer” has already incorporated Sivers’ lasers into its sensing platforms. This is an important step, as a single design win could bring in stable revenues for years, as companies rarely change input suppliers once the design is final.

Ramp-up: This is the phase where the customer moves from testing prototypes to mass-producing their product. Sivers expects its lidar customer to begin this ramp-up in Q4 2026.

3. Financials

Sivers is currently in a transitional financial phase.

It is moving from being an engineering-focused research company to a product-focused manufacturing company that earns recurring revenue from high-volume sales.

3.1. Revenue Growth and Profitability

For several years, Sivers has maintained a pattern of significant investment in research and development, which has led to strong revenue growth, but consistent negative FCF.

This is common for semiconductor firms that are building IP for markets that are only just beginning to mature.

From 2016 to 2025, revenues grew with a CAGR of 36.7%, an increase of 16X to 304M SEK ($32M)!

As you can see in the above chart, the revenue fluctuated a lot, with some slow years and a few strong years. During that period, the company was heavily focused on qualifying its products for major customers. This is the result of the discussed revenue cycle affecting their business, as growth is driven by design wins.

2025 revenues were 304M SEK ($32M), which was a strong 25% Y/Y increase.

While operating losses remain high at 141M SEK ($15M), a margin of -39%, it is a significant improvement from the -83% operating margin of 2022.

Meawhile FCF losses fell from 151M SEK in 2022 to 66M SEK ($13M) in 2025, a decrease of 56%.

The revenue acceleration indicates that the company’s design wins are starting to move into the production phase for several customers.

3.2. Q4 2025 Results

Let’s look at the last reported quarter to see the most up-to-date performance.

In Q4 2025, it reported net sales of 80.7M SEK, which represents a 5% Y/Y growth.

Key Metrics:

• Revenue of SEK 80.7M +5% (+17% FXN)

• ADJ EBITDA SEK 10.8M -30%.

• Product Revenue SEK 21.3M +13% Q/Q

• OCF SEK -17.5M

• Total CASH SEK 43.5M

For Q4 2025, the company reported an adjusted EBITDA of 10.8M SEK, which was a 30% decrease Y/Y. This was driven by high R&D and expansion costs.

A critical detail in this report is the growth of product revenue. In the past, Sivers relied heavily on non-recurring fees, where customers paid them for development work. The company is beginning to earn more revenue from selling actual products to clients.

In 2025, annual product revenues reached 85.7M SEK, an increase of 13% at FXN. This trend is important because product sales generally have higher profit margins and are more predictable than one-time development contracts.

3.3. Balance Sheet

At the end of 2025, Sivers held a total available cash position of 43.5M SEK.

This is a significant increase from 18M SEK last year, as the company successfully completed a directed share issue to raise 95M SEK in 2025, diluting shareholders by about 8%.

The cash burn remains a concern as the company is unprofitable. Last month, in February of 2026, the company raised an additional $17M via $5M term loan and a $12M convertible debt.

However, with the decrease in debt, capital leases, and an increase in cash position, the company is not in danger of insolvency.

4. Growth Opportunities

Sivers is currently leveraging several high-profile partnerships to gain access to the most lucrative segments of the AI and wireless markets.

These partnerships allow Sivers to integrate its specialized lasers into larger systems designed for mass production.

Let’s look at the AI and Lidar opportunities.

4.1. The AI Data Center Opportunity.

The industry is currently moving toward a design concept called Co-Packaged Optics (CPO).

In older systems, optical transceivers were separate parts that plugged into a machine. CPO seeks to integrate the optical components directly into the same package as the processor.

This proximity reduces the distance signals must travel, which can lower energy consumption by as much as 80% compared to traditional copper setups. However, because processors generate intense heat, the lasers used for communication must be moved slightly away to remain stable. This has created a demand for Sivers lasers.

For instance, analysts at Precedence Research forecast the CPO market to grow with a 30.66% CAGR to reach $1.055B in 2034!

The transition to Co-Packaged Optics in data centers requires highly reliable external light sources. Sivers has formed two major collaborative efforts to meet this need.

First, Sivers is working with Poet Technologies.

This collaboration combines Sivers’ high-power lasers with Poet’s Optical Interposer platform. In fiber optics, components like lasers, detectors, and modulators are discrete parts connected by wires and fibers. This is bulky and expensive. Poet’s optical knterposer acts like a motherboard, allowing all these components to be integrated onto a single, tiny chip.

The goal is to create plug-and-play light engines that are energy-efficient, scalable, and can be easily slotted into AI infrastructure.

Simply put, traditional optical modules are reaching their performance limits as connectivity speeds move toward incredible speeds into terabits (125 GB) per second. By using Poet’s platform, Sivers can help customers reach higher speeds.

Prototypes are expected to be shown to customers in the first half of 2026, with the goal of being ready for production by the end of 2026.

Second, Sivers has announced a strategic partnership with O-Net Technologies and Enablence Technologies to develop new light source modules for CPO technology.

In this arrangement:

• Sivers provides the laser arrays.

• Enablence Technologies provides tech that helps distribute the light wavelengths efficiently.

• O-Net Technologies serves as the manufacturing partner, which will manufacture the final module.

This collaboration is specifically meant to targeted at the AI data center markets. Because CPO brings optics so close to the processors, the heat becomes a major problem for the lasers.

The ELS module developed by this group solves that problem by keeping the lasers cool and stable in a separate compartment.

Furthermore, beyond just Co-Packaged Optics, Sivers is targeting the broader AI factory infrastructure through two key technology paths:

• Optical Input/Output

• Memory Pooling

Large AI clusters require incredible connectivity, linking GPUs and accelerators as if they were a single system. Sivers is a key partner for Ayar Labs, providing compliant laser arrays for their “SuperNova” light source. This optical input/output system bypasses copper limits, delivering potentially 5-10x faster communication speeds within a GPU cluster.

Next is memory pooling.

AI workloads are limited by stranded memory, which is RAM memory that’s physically available in a server but cannot be used by the processors that need it. It is essentially wasted capacity. Every server is built with a set amount of memory, for example 512GB. If a specific AI task only needs 100GB of that RAM but requires 100% of the CPU’s power, the remaining 412GB sits idle.

Usually, Server A cannot lend its extra RAM to Server B. Even if Server B is running a massive LLM and is crashing because it ran out of memory, it cannot reach across the rack to use Server A’s idle capacity.

Thus, the industry is moving toward tech called Compute Express Link over optical interconnects to share memory across racks. Sivers’ high-power lasers provide the necessary light sources for these next-generation memory fabrics, enabling AI models to access 100+ terabytes of shared memory with low latency.

Simply put, Sivers helps to “un-strand” memory!

4.2. Lidar and Automotive Opportunity

Outside of the data center, Sivers is seeing a significant ramp-up in the Lidar market.

Let’s remember that Lidar is a sensor technology that uses lasers to create a 3D map of a car’s surroundings. This is essential for advanced safety features and self-driving capabilities.

Sivers recently announced that a strategic Lidar customer has incorporated its technology across all their platforms. This customer plans to start high-volume production in the fourth quarter of 2026. According to the company, the revenue potential for this single partnership is estimated to be between $53-138M over the customer’s product lifecycle, which could be about 8-10 years, around $5-14M per year.

For context, that would be 16-44% of 2025 revenues, from a single deal.

This deal is particularly significant because it moves Sivers into the consumer automotive market, with its technology being adopted by Tier 1 Automotive OEMs.

Per Precedence Research, the global market for automotive Lidar is expected to grow from $1.3B in 2024 to $10.5B by 2034, a CAGR of 23%!

By being designed into a major customer’s platform now, Sivers is well-positioned to benefit from this industry-wide growth.

5. Key Risks

Despite the strong technological position of Sivers, there are three major risks that investors must consider.

• Liquidity and Dilution

• Execution

• Competition

5.1. Liquidity and Dilution

Sivers is currently a loss-making business, and at the end of 2025, the company had 43.5M SEK in cash.

Given its current rate of spending on research, development, and global office expansion, this cash may not last very long. To continue operating and growing, the company will likely need to raise more capital.

In the past, Sivers has raised money by issuing new shares.

Total number og shares outstanding has increased by 101.58% since 2020 to 311.33M shares!

While this provides the cash needed to survive, it also reduces existing shareholder ownership. If the company cannot reach profitability before it runs out of its current cash, shareholders may face further dilution.

5.2. Execution

The most valuable parts of Sivers’ future are currently tied to production ramps that have not yet happened. For example, the Lidar revenue of up to $138M depends on the customer successfully starting mass production in late 2026.

Similarly, the AI partnerships with POET and O-Net are targeting late 2026 or 2027 for full production.

In the semiconductor manufacturing industry, delays are common. There could be technical problems with the designs, issues in the factories, or a slowdown in the overall economy that causes customers to delay their orders.

Because much of Sivers’ current stock price is based on the expectation of this future revenue, any delay in these timelines could cause the stock price to drop significantly.

5.3. Competition

Sivers is a relatively small player in a market that includes some of the largest companies in the world.

On the wireless side, it competes against established semiconductor giants. On the photonics side, Nvidia’s massive investments in Coherent and Lumentum show that the biggest customers in the world are already forming deep partnerships with Sivers’ larger competitors.

Furthermore, Sivers’ revenue is currently concentrated among a few very large customers. For instance, a single development contract from a major customer or a single Lidar platform can represent a huge portion of the company’s potential sales. If one of these major customers decides to switch to a competitor or cancel a project, Sivers would lose a large part of its projected income.

6. Valuation

In 2026, Sivers Semiconductors’ stock experienced a dramatic surge, rising 166%, reaching a market cap of 3.4B SEK, about $360M.

This rally was triggered by several factors, including the announcement of the Lidar production ramp and the AI partnerships with O-Net and Enablence.

Speculative interest also grew after a prominent analyst, Serenity, highlighted the company’s potential value compared to American competitors.

The valuation of Sivers is complicated by the fact that the company is not yet profitable. So metrics like the P/E ratio are not useful when a company has no earnings. Instead, we must look at how the company is valued compared to its sales and its future growth potential.

6.1. Analyst Expectations

Analysts generally remain optimistic about Sivers’ growth prospects.

For 2028, revenue is estimated to reach 646M SEK, more than doubling from 2025!

Operating losses are projected to turn into earnings by 2028, with 58.9M SEK in EBIT.

Similarly, the 2025 net loss of 186.5M SEK is projected to turn into a 47.85M SEK profit.

At the same time, the company is expected to begin generating a positive OCF of 97M SEK in 2027 and 12M SEK FCF in 2028.

These estimates demonstrate that the company is expected to successfully convert its $453M pipeline and new partnerships into real sales.

Today, the Sivers trades for a P/S of 7.2, but taking these estimates into account, it trades for a 2028 P/S of 4 and P/OCF of 23.

This is a premium multiple that requires strong sales growth to justify it.

7. 2030 Valuation Model

To understand what Sivers Semiconductors could be worth by the year 2030, we can create a model based on a few sets of assumptions.

This model assumes that the company successfully navigates its production ramps and becomes a major supplier in the AI and Lidar markets.

Assumptions for the 2030 Model:

Revenue CAGR of 45%. This is aggressive but consistent with the expected explosive growth of Sivers’ core markets.

Operating margin of 25%.

Tax and other costs of 30% of operating income.

We get 2030 revenues of 2.3B SEK, an increase of 659% from 2025!

Net income of 404M SEK vs 187M SEK net loss in 2025.

Dilution of 5% per year, about 28% by 2030. This is less than Siver have diluted historically, but they just did a large raise and are projected to be profitable and cash flow positive in 2028. I model them needing to do fewer equity sales in the future.

With an exit multiple of 30, we could be looking at a 30.5 SEK stock in 2030, 168% above today’s share price of 11.39 SEK.

Discounting that back at 16% per year, we get an estimated fair value per share of 14.52 SEK, implying Sivers could be trading today for a 22% discount to its fair value.

There is an additional upside if the market assigns a higher multiple. Considering that the AI data center industry is entering a stage where it needs to become more efficient, that seems plausible.

Hyperscalers are spending hundreds of billions of dollars on AI data centers, and Nvidia’s investments in this sector clearly show that the photonics demand could be much higher than the current model.

8. Conclusion

Sivers Semiconductors is currently standing at the intersection of two important technology trends of the decade:

• AI

• Lidar

By providing the specialized lasers and wireless chips that these systems require, Sivers is rapidly transforming itself from a local Swedish engineering firm into a critical global supplier.

The company’s results for 2025 confirm that its strategy is working. Achieving strong 25% revenue growth and significantly increasing its pipeline to $453M demonstrates that the market is ready for its products.

Furthermore, strategic partnerships with companies like POET, O-Net, and major automotive customers provide a clear path toward high-volume production in late 2026 and 2027.

However, the investment is not without risk. The company must manage its limited cash carefully to avoid excessive dilution of its shareholders. It must also ensure that its technology remains ahead of much larger competitors who are also investing billions of dollars into the photonics space.

For patient long term investors, Sivers represents a high-risk, high-reward opportunity.

It is a way to bet on the new “plumbing” of the AI revolution, light.

If the company can successfully transition from design wins to mass production over the next few years, it has the potential to become a cornerstone player in the more efficient, light-speed data economy of the future. The transition from copper to light is a physical necessity for the next stage of AI development, and Sivers is well-positioned to be a major player.

Thank you for reading Global Equity Briefing!

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Disclaimer: Global Equity Briefing by Ray Myers

The information provided in the “Global Equity Briefing” newsletter is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer or solicitation to buy or sell any securities. Ray Myers, as the author, is not a registered financial advisor, and readers should consult with their own financial advisors before making any investment decisions.

The content presented in this newsletter is based on publicly available information and sources believed to be reliable. However, Ray Myers does not guarantee the accuracy, completeness, or timeliness of the information provided. The author assumes no responsibility or liability for any errors or omissions in the content or for any actions taken in reliance on the information presented.

Readers should be aware that investing involves risks, and past performance is not indicative of future results. The author may or may not hold positions in the companies mentioned in the “Global Equity Briefing” report. Any investment decisions made based on the information in this newsletter are at the sole discretion of the reader, and they assume full responsibility for their own investment activities.

At the center of this change is Klarna!

Everyone loves shopping, but nobody loves paying, especially Gen Z.

What if you could buy now, but pay later?

If that sounds appealing to you, you are not alone, as Klarna has attracted over 188M customers to its BNPL business.

The company’s primary mission is to provide a fairer and more transparent alternative to traditional credit cards, which often trap consumers in cycles of high-interest debt.

By using advanced technology to lower costs and improve service, Klarna is attempting to rebuild the retail banking experience from the ground up for a new generation of shoppers.

However, the market has grown increasingly pessimistic in its BNPL business, with shares collapsing 69% since the IPO!

The narrative has shifted, with a lot of bears making fun of people paying for their Uber Eats with Klarna and calling the company a subprime lender.

What they miss is that Klarna is transforming into a fully fledged banking fintech!

In this Klarna Investment Thesis report, I will explain its business model, shift to digital banking, finances, growth opportunities, and conclude with an analysis of the valuation and a 2030 valuation model.

Let’s begin.

1. Business Model

2. Finances

3. Growth Opportunity

4. Valuation

5. Valuation Model

6. Conclusion

1. Business Model

The business model of Klarna is built upon a two-sided network that brings together over 118M active consumers and nearly 1M merchants across 26 countries.

As you can see in the chart above, Klarna is rapidly growing its customer base despite its already massive scale.

This network creates a flywheel effect:

As more shoppers use the app, more stores want to offer Klarna at checkout, which then attracts even more shoppers!

Unlike a traditional bank that might only see a customer when they apply for a loan or visit a branch, Klarna is deeply embedded in the daily shopping habits of its users, processing millions of transactions.

This high frequency of interaction gives the company a massive amount of data, which it uses to make better decisions about who to lend money to and how to help people manage their finances more effectively.

1.1. Buy Now, Pay Later (BNPL)

The foundation of the Klarna experience is the Buy Now, Pay Later, (BNPL) service, which allows people to buy things immediately and pay for them over a short period without paying interest.

The most popular version of this is the Pay in 4 product, where the total cost is split into four equal payments made every two weeks.

This is a major shift away from how old-fashioned credit cards work.

A credit card company usually makes money when a person cannot pay their full bill and has to pay high interest rates, sometimes as high as 25% or 30%. In contrast, Klarna’s basic service is free for the person buying the item as long as they pay on time.

The money that Klarna earns from these transactions primarily comes from the stores themselves. Merchants are willing to pay Klarna a fee, often between 2% and 6% of the sale, because Klarna helps them sell more products, increasing average basket sizes.

When a store offers Klarna, more people finish their checkout, and the amount they spend is higher. Furthermore, Klarna takes on all the risk, the store gets paid the full amount immediately, and Klarna takes over the responsibility of collecting the payments from the customer.

The average company-level revenue-take-rate is now 2.7%, an increase from 2.5% in 2023!

As Klarna grows, it is likely to increase its take-rate as its platform becomes more attractive for partners, increasing Klarna’s ability to monetise transactions.

This relationship has allowed Klarna to partner with some of the biggest names in retail, including Walmart, H&M, Sephora, and Nike.

The company has also introduced a physical Klarna Card and a digital version that can be added to Apple Pay and Google Pay. This allows people to use Klarna’s flexible payment options even when they are shopping in a physical store, not just online.

By early 2026, the company had over 4.2M active card users, and in the United States, about 25% of all Klarna Card spending was happening in-person at brick-and-mortar stores. This shows that the business is moving beyond being just a button on a website to becoming a tool people use for their everyday spending.

Overall, Klarna’s BNPL volumes reached $128B in 2025, an increase of 54% since 2022, a CAGR of 15.6%!

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1.2. Funding Strategy

To provide billions of dollars in loans to millions of people, Klarna needs a massive and reliable source of money.

In the early days of financial technology, many companies had to borrow money from big investment banks at high interest rates, which made it hard for them to be profitable. Klarna has taken a different path by becoming a regulated bank in Europe, which allows it to take deposits from regular people.

These deposits are a very important part of the company’s strategy because they are usually the cheapest way for a bank to get money.

By the end of 2025, Klarna had reached $13B in consumer deposits, a 37% increase from the year before.

About 90% of the money Klarna uses to fund its loans now comes from these deposits. However, as Klarna grows, especially in the United States, it needs even more capital. To keep its balance sheet light and avoid taking on too much risk, the company uses something called forward-flow agreements.

In these deals, Klarna agrees to sell a portion of the loans it makes to big investment firms. For example, the company signed a major deal to sell $6.5B worth of US loans to Elliott Investment Management. It also has a massive $26B agreement with a firm called Nelnet to fund its Pay in 4 products in America.

This strategy is very clever because it allows Klarna to earn money in two ways.

• First, it earns a fee for every loan it starts and manages.

• Second, it gets to move the risk of those loans off its own books and onto the books of the investors.

This means Klarna can keep growing its business very fast without needing to raise billions of dollars from selling more of its own stock. In the fourth quarter of 2025 alone, Klarna recognized a $73M gain just from selling these loans. This combination of cheap deposits from Europe and big investment deals in the US gives Klarna a powerful engine to fund its global expansion.

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1.3. Transition to Banking

I already mentioned it, but Klarna is moving into banking.

The company refers to this as Phase Two of its evolution.

The idea is simple, once a person trusts Klarna to handle a small $50 purchase, they are much more likely to trust the company with their savings, their daily spending card, or a larger loan for a piece of furniture.

This transition is designed to make the company more profitable and to make its relationship with its customers much deeper.

The data shows that this banking strategy is working very well.

Klarna categorizes its most active users as banking consumers, these are people who use products like the Klarna Card, savings accounts, or Fair Financing.

These banking consumers are worth more than three times as much to the company as a regular user.

While a regular Klarna user might generate about $30 in revenue each year, a banking consumer generates $107. These users also use the app much more often, transacting about 28.5 times per year compared to only 10 times for the average user.

To speed up this change, Klarna is launching new features like instant peer-to-peer (P2P) payments, which allow people to send money to friends and family directly from the Klarna app.

This makes the app a central hub for all things related to money, not just shopping. The company is also using AI to make these banking services more efficient. By using AI assistants to handle customer service questions and manage simple tasks, Klarna can serve millions of banking customers with a much smaller staff than a traditional bank would need. This lower cost of doing business is a key advantage as Klarna competes with older, slower banks.

Essentially, with this feature, Klarna aims to rival Cash App and Venmo!

2. Finances

The financial health of Klarna has been a hot topic among bears of the BNPL industry, especially since it went through a difficult period in 2022 when its private valuation dropped significantly.

However, since that time, the company has undergone a massive transformation, focusing on cutting costs and using technology to become more efficient.

While the company is still dealing with some loan-related losses as it grows its lending business, its underlying numbers show a business that is becoming much more powerful.

2.1. Revenue Growth

Klarna has a long history of very fast revenue growth. Since 2016, the company has consistently increased the amount of money it makes every year.

In 2016, Klarna’s revenue was only $384M, but by 2024, it had grown to over $2.8B. This growth has continued into 2025, with total revenue reaching $3.5B, which is a 25% Y/Y increase.

As you can see in the graph above, the bulk of this growth came from operating revenues, coming from Klarna’s BNPL take-rate. $937M 27% of total revenues came from interest income, and $72M came from selling loans to credit investors.

This growth is driven by several factors.

First, more and more people are choosing to shop online and use flexible payment methods instead of old-fashioned credit cards.

Second, Klarna has successfully expanded into huge markets like the United States and the United Kingdom.

In the US specifically, Klarna’s revenue grew by a massive 58% in the final quarter of 2025 alone.

Finally, as Klarna adds more banking products, it is earning more money from each individual customer, which helps push total revenue even higher.

2.2. Historic Profitability

The story of Klarna’s profitability is one of a company that chose to invest a lot to grow very fast, then had to quickly learn how to be efficient when the economy changed.

For many years, Klarna was profitable, but it started losing money in 2019 as it began a massive push to win customers in the United States.

These losses grew very large in 2021 and 2022, reaching over $1B in 2022 as the company hired thousands of people and spent heavily on marketing.

After the tech winter of 2022, Klarna’s leaders realized they needed to change their approach. They began a major effort to cut costs, which included laying off many employees and replacing manual work with automation and AI.

This plan worked incredibly well.

• Revenue per employee 3.6x from $344K to $1.24M.

• The number of employees fell by 49%, from 5,527 to 2,831.

• Total staff costs fell by 16.4%, from $635M to $531M.

The average compensation per employee increased as Klarna automated many of the lower-paid tasks, such as customer service, and hired many higher-paid professionals.

In 2024, the company achieved a major goal by reporting its first annual net profit in five years, earning $21M. This showed investors that the business model could actually work and make money if it was managed carefully.

2.3. Current Profitability

In 2025, the company’s financials became more complex due to its rapid growth in lending.

For the full year of 2025, Klarna reported an adjusted operating profit of $65M, which is a measure of the income it makes from its core operations, excluding share-based compensation.

Despite that, the company also reported a total net loss of $273M for the year!

This might seem confusing, how can a company be profitable in one way but lose money in another? The answer lies in the rules of accounting for banks, specifically something called upfront loan loss provisioning.

When Klarna gives someone a long-term loan (like its Fair Financing product), the rules say it must immediately set aside money to cover the possibility that the person might not pay it back.

This counts as an expense right away.

However, the interest money that Klarna earns from that loan only comes in slowly over many months. Because Klarna’s lending business grew so fast in 2025, especially Fair Financing, which grew 165% in Q4, the company had to set aside a huge amount of money for future losses all at once.

This created a temporary drag on profits that management believes will turn into big gains in 2026 as the interest money starts to get collected.

You can see how this loan losses provision dynamic plays out in an illustrative example below from Klarna’s Q4 2025 earnings presentation.

Klarna shows that while a $1B loan portfolio generates strong lifetime profit (+$35M), a large portion of expected credit losses is recognized upfront, heavily impacting early-period earnings. As a result, the first quarter looks less profitable or even negative, while later periods benefit from revenue without additional provisions, making profitability appear stronger over time.

Simply put, Klarna is saying that its financial results will improve as they collect payments for loans for which it had already recognized losses!

2.4. Q4 2025 Results

Let’s look at Q4 2025 results to see the most up-to-date performance.

The Q4 2025 was a record-breaking period for Klarna, as it delivered its first-ever billion-dollar revenue quarter.

For the three months ending in December, the company brought in $1.082B in revenue, which was a 38% increase from the same period in 2024.

The total value of all goods sold through Klarna (GMV) reached $38.7B +32% Y/Y, which was also ahead of what the company had predicted.

Despite these record numbers, the stock market was disappointed by the results, and Klarna’s share price fell by about 26% after the news was released.

Investors were focused on a few specific problems:

• Net Loss: The company lost $26M in the quarter, compared to a $40M profit in Q4 2024.

• Margin Miss: A key metric, Transaction Margin Dollars came in at $372M, which was below the $390-$400M that the company had told investors to expect.

• Guidance: The company’s predictions for the beginning of 2026 were more cautious than analysts had hoped, suggesting that growth might slow down a little bit.