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Luke Kawa

Microsoft drops as data-center constraints crimp cloud revenue growth

For Microsoft, the problem isn’t the lack of return on AI investments. It’s that even this so-called hyperscaler can’t scale up these capabilities quick enough.

Management said that AI services contributed 12 points to annual growth of 34% for its Azure cloud computing business. That pace of growth was down slightly from last quarter, and management warned that this decelerating trend would continue in the near term (to 31% to 32%).

Shares were down more than 5% in early trading on Thursday.

“We expect the contribution from AI services to be similar to last quarter, given the continued capacity constraints, as well as some capacity that shifted out of Q2,” CFO Amy Hood said, discussing the outlook for the current quarter.

CEO Satya Nadella added that he’s confident the supply-demand dynamics will be better aligned in the second half of Microsoft’s fiscal year (1H 2025), but that in the near term the company will struggle to fulfill demand.

“We have run into obviously lots of external constraints, because this demand all showed up pretty fast, right?” he said. “Pick the top four or five products of this generation: they’re all sort of in and around our ecosystem. And so therefore, we ran into a set of constraints, which are everything, because data centers don’t get built overnight.”

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Luke Kawa

Cava may be an unlikely victim of a potential US government shutdown

Government shutdowns typically aren’t a big deal for the stock market as a whole.

But for Cava, which was founded in Maryland and is headquartered in Washington, DC, there’s the prospect of forgone sales in the event that government employees suddenly have no cause to frequent the fast-casual Mediterranean chain, which means emptier tills as bellies get filled elsewhere.

At the end of Q2, Cava had 398 locations. It currently boasts seven in the district proper, at least 14 a close drive away in Virginia, and 25 in Maryland.

Cava’s annual report singled out the Washington, DC/Maryland/Virginia metropolitan area as having “a high concentration of restaurants,” in discussing risk factors for the company. And it may be a particularly bad time to be a slop bowl seller around the nation’s capital.

The potential shutdown would be the latest challenge for Cava amid struggles to stand out amid a myriad of lunch options for working professionals and the recently announced departure of COO Jennifer Somers.

For what it’s worth, this is not the first time this year Cava has faced concerns about potential weakness in DC. During its Q1 earnings call, Bank of America analyst Sara Senatore questioned Cava’s leadership about a potential impact from DOGE given its “fairly big footprint” in the metro area, and CFO Tricia Tolivar said the company hadn’t really seen evidence of metro-specific softness.

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Matt Phillips

Robinhood surges as prediction markets gain traction

Robinhood jumped to an all-time intraday record of more than $132 late Monday morning on growing optimism about the brokerage’s prediction markets business both on Wall Street and within the company’s own executive suite.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own stock as part of my compensation.)

Earlier in the day, Robinhood Chief Executive Vlad Tenev posted this tweet spotlighting that more than 4 billion event contracts have been traded on the platform since they began to be offered in February.

Analysts have also been focusing on the uptick in activity in the events contract business as a potential boon for the shares.

Piper Sandler analyst Patrick Moley published a note on Monday highlighting how trading volumes at prediction market company Kalshi soared to new records over the weekend as traders took positions on the outcomes of college and pro football games using event contracts.

Moley estimates that users at Robinhood — which partnered with Kalshi to offer contracts on games — account for between 25% and 35% of Kalshi’s daily event contract activity.

“We continue to expect HOOD will report ~2.5B of event contracts traded in 3Q25 which, at $0.01/contract, translates to ~$25M in revenue,” Moley wrote.

Luke Kawa
3h
“Follow the feds” replaces “follow the Fed” as financial market maxim

Taking a position in companies the US government has exposure to has worked out handsomely so far.

Donald Trump Campaigns For President In Arizona's Prescott Valley
Claire Yubin Oh
ANOTHER ONE BITES THE DUST
4h
Electronic Arts set to go private in $55 billion deal — the latest in a long line of disappearing stocks

The “Madden” maker is set to join a growing group of listed companies that are deciding to drop out of exchanges.

Electronic Arts Photo Illustrations
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Luke Kawa

Nvidia jumps as Jefferies hikes price target to $220 from $205

Nvidia is off to a great start this week, buoyed by Jefferies analyst Blayne Curtis hiking his price target on the $4 trillion chip designer to $220 from $205 thanks to the recent announcement of its $100 million investment in OpenAI to enhance and accelerate the build-out of data centers.

Curtis wrote:

“Management made clear the strategic partnership represents incremental demand for NVDA and does not overlap with existing OAI plans with ORCL or MSFT. Raising estimates based on the new partnership. Raising revenue for C26/C27 to $282B/$334B (vs St. $279B/$328B) from $269B/$300B, respectively. Raising EPS for C26/C27 to $6.55/$7.72 (vs St. $6.49/$7.57) from $6.09/$6.71.”

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