Earnings season is in full stride and it was a busy week. This week I focused on reports with noteworthy reports and visible market reactions. Under the headlines, the same pillars are doing the work for quality compounders: durable moats, disciplined costs, and reinvestment that shows up in margins and cash flow. Short-term swings aside, execution still separates the businesses that compound from those that do not.
General News
- Hurricane Melissa hits Jamaica resorts (Reuters). A powerful Category 5 hurricane made landfall in Jamaica, posing temporary disruption to resort operators such as Hilton Worldwide Holdings (HLT) and Marriott International (MAR) that we follow. The stocks did not react strongly but pullbacks may offer opportunity.
- Treasury yields remain elevated despite inflation cooling (TradingEconomics) → The U.S. 10-year Treasury yield climbed back above ~4.07% after the Federal Reserve signalled that a rate cut is not assured, maintaining pressure on discount rates for growth‐oriented compounders.
- The great AI build-out isn’t slowing. (Reuters) → Reuters reports AI infrastructure spending is rippling far beyond Big Tech including chips, power, cooling, and heavy equipment. Goldman estimates $3–4T in global AI capex by 2030. Nvidia crossed $5T in market cap, while Microsoft, Amazon, Meta, and Alphabet are set to spend ~$350B this year alone.
My take: Short-term weather shocks and rate jitters may keep volatility elevated, but they also set up potential opportunities especially in quality compounders like Hilton and Marriott. And the AI spending surge underscores that execution matters. Execution, unit economics, and balance-sheet discipline will separate real compounders from pretenders.
Notable Earnings
Waste Management (WM)
What happened: WM posted revenue of $6.44B, up 14.9% year over year and 3% organically. Adjusted EPS of $1.98 that missed consensus. Shares have fallen nearly 8% since reporting as investors focused on the modest miss and a slightly softer revenue outlook tied to recycling prices and WM Healthcare Solutions. Adjusted operating EBITDA reached $1.97B with a record 30.6% margin. Management reiterated full-year EBITDA and free cash flow guidance and said 2026 free cash flow is set to approach $3.8B. 📖 Waste Management Q3 2025 Earnings Release
Key takeaways:
- Guidance reaffirmed: Management reiterated full-year guidance and said 2026 free cash flow is set to approach $3.8B.
- Core collection and disposal strength: Operating EBITDA margins in this segment expanded to a record 38.4%, supported by disciplined pricing and higher landfill volumes of about 5%. Core price growth of 6% exceeded plan.
- Healthcare Solutions integration on track: Management said synergy capture exceeded expectations, though deferred pricing and customer credits temporarily slowed revenue. Stabilization is expected by early 2026, with cross-selling already adding multimillion-dollar contracts.
- Sustainability investments bearing fruit: Despite a 35% drop in recycled commodity prices, recycling EBITDA rose 18%, and renewable natural gas output doubled year to date. WM expects meaningful cash returns as green CapEx moderates.
My take: The pullback in WM stock makes sense. A small EPS and revenue miss, softer recycled commodity prices, and near-term healthcare clean-up gave traders a reason to take profits. Valuation also likely played a role after a strong multi-year run. None of that changes the core story (see Waste Management Stock: A Stable Compounder at a Premium Valuation). WM continues to execute. Pricing discipline, mix, and network advantages are expanding margins. Also encouraging was management’s comment that green capex is shifting from build to harvest. I will be watching how much incremental value is delivered from acquisition synergies going forward. Overall, this quarter reinforced why WM remains one of the market’s most durable compounders and it now trades at a more reasonable price.
MSCI Inc. (MSCI)
What happened: MSCI posted another solid quarter with revenue up 9.5% to $793 million and adjusted EPS up 15.8% to $4.47, beating estimates by ten cents. Shares rose about 9% after results, as investors reacted to steady recurring growth and a new $3 billion buyback plan. 📖 MSCI Q3 2025 Earnings Release
Key takeaways:
- Index momentum held firm. Revenue in Indexes was up 11% with record recurring sales. Asset-based fees jumped 17% on higher AUM of $6.4 trillion, while retention stayed near 96 percent.
- Analytics showed stability. Revenue grew 6% as demand from hedge funds and banks improved. Management’s comments suggested the franchise is regaining momentum as AI-driven tools deepen client engagement.
- Sustainability performance improved. With revenue up 8% and margin expansion of nearly 300 basis points, new climate and biodiversity indexes reinforced leadership in ESG data.
- Private assets gained traction. Revenue in the segment rose 10%. Meaningfully, this was supported by new analytics and benchmarking tools, including a private credit risk product launched with Moody’s. These offerings extend MSCI’s reach in alternative markets.
- Capital returns accelerated with $1.25 billion in repurchases and a new $3 billion authorization. Free cash flow rose 7 percent to $423 million.
My take: This quarter looked a lot like what I expected when I first wrote about MSCI after Q2 earnings (see MSCI Stock Analysis: Why I Bought the Dip After Q2 Earnings). Recurring revenue growth, high margins, and disciplined reinvestment remain the foundation of this business. The Index franchise continues to compound predictably, while Analytics and Private Assets are showing encouraging progress. While AI-driven products and private credit benchmarks may not move the needle immediately, they do deepen the moat. Risks remain, but the post-earnings move felt justified. At the end of the day, nothing in this report changed the long-term story.
Alphabet (GOOGL)
What happened: Alphabet delivered a strong quarter, plain and simple. Revenue grew 16% to $102.3 billion and EPS rose 35% to $2.87. Search, YouTube, Subscriptions, and Cloud each grew at double-digit rates. Excluding the $3.5 billion European Commission fine, operating margin reached 33.9% and operating income increased 22%. Google Cloud revenue climbed 34% with margin improving to 23.7%, supported by an expanding backlog that reached $155 billion. Management said AI is now driving tangible business results across the company. Shares rose about 5% following the report. 📖 Alphabet Q3 2025 Earnings Release
Key takeaways:
- Search momentum. Management described this as an “expansionary moment” for Search. AI Overviews and AI Mode lifted both total and commercial queries, and monetization has held in line with traditional formats.
- YouTube growth is broad-based. Advertising grew 15 percent, while subscriptions for YouTube Premium and YouTube TV delivered strong gains. Management called this a twin engine model, where ads and subscriptions reinforce one another.
- Cloud accelerating. Revenue rose 34% and operating income nearly doubled. The backlog reached $155 billion as enterprise demand for AI infrastructure remained high.
- AI translating into growth. CEO Sundar Pichai highlighted that Google now processes more than 1.3 quadrillion tokens a month. Products built on Gemini and AI Max are increasing engagement and expanding monetization opportunities.
- Capex scaling for AI. Capital spending guidance was raised to as much as $93 billion for 2025. CFO Anat Ashkenazi said the pace of investment reflects high demand across Cloud and AI, and that the returns justify the additional spend.
My take: Nearly three years ago, OpenAI released ChatGPT to the public, triggering a red alert across Alphabet and sending the stock lower. Since then, the company has risen to the challenge. Not only have we not seen a noticeable impact on the business, but there is strength across every major segment. AI is adding value rather than compressing margins. Search engagement is accelerating. YouTube continues to scale both ads and subscriptions. Cloud is converting demand into profit. The company is investing heavily, but management’s confidence suggests it is building from a position of strength, not chasing the cycle. For long-term investors, this report underscored the durability of Alphabet’s moat and the breadth of its compounding engine.
Microsoft (MSFT)
What happened: Microsoft delivered another strong quarter. Revenue grew 18% to $77.7 billion and non-GAAP EPS rose 23% to $4.13, well above expectations. Microsoft Cloud revenue reached $49.1 billion, up 26%, and operating income climbed 24% to $38.0 billion. Azure grew 40% as demand for AI infrastructure and services remained exceptionally high. Commercial bookings surged 112%, helped by major Azure commitments from OpenAI. Despite the strength, shares slipped nearly 3% as investors focused on heavy AI capex and near-term supply constraints. 📖 Microsoft Q1 2026 Earnings Release
Key takeaways:
- Cloud demand remains exceptional. Azure revenue grew 40% and Microsoft Cloud rose 26%, driven by surging AI adoption. Commercial RPO jumped 51% to $392 billion. Management said demand is outpacing available capacity and expects to remain supply-constrained through fiscal year-end.
- AI fueling growth across products. Satya Nadella said Microsoft’s “planet-scale cloud and AI factory” is creating real-world impact across productivity, coding, and security. There are now 150 million monthly active users of Microsoft’s Copilot products, up sharply quarter-over-quarter.
- OpenAI partnership deepens. Microsoft signed a new definitive agreement extending exclusive Azure rights and model IP through 2032. Nadella called it “one of the most successful partnerships in the industry.” Amy Hood added that OpenAI’s commitments to Azure total roughly $250 billion over time.
- Capex rose sharply but matched demand. Capital expenditures reached $34.9 billion, half of which was for GPUs and CPUs to meet near-term AI workloads. Hood expressed “high confidence in usage patterns.”
My take: Microsoft is executing at scale and it shows. Cloud growth, Copilot adoption, and AI integration across the product lineup are translating into real business results. This is another company investing heavily, but the ROI looks far more tangible here than at most peers. The pullback likely reflects valuation and sentiment after a strong run rather than any change to the thesis. Azure demand, recurring revenue strength, and disciplined operations keep the compounding engine running. Honestly, this is one I had hoped would pull back a bit more because the quarter only reinforced why Microsoft remains a cornerstone quality compounder.
S&P Global (SPGI)
What happened: S&P Global delivered a record quarter. Revenue rose 9% to $3.89 billion and adjusted EPS rose 22% to $4.73. Adjusted operating margin expanded 330 bps to 52.1%. Management raised full-year revenue and EPS guidance and announced a new $2.5 billion buyback to be executed in Q4. The stock moved up about 4% after the print. 📖 SPGI Q3 2025 Earnings Release
Key takeaways:
- Ratings strengthen. Revenue was up 12% in the Ratings segment with broad issuance across high yield, bank loans, and structured finance. Management expects billed issuance growth in the mid to high teens next quarter. Segment margin held strong at 67%, reflecting the continued rebound in issuance volume.
- Indices remains the profit engine. Margin expanded to 71%, supported by asset-linked fees and resilient passive flows. This segment continues to anchor the company’s profitability and cash generation.
- Market Intelligence momentum. The segment experienced organic growth of 8% which was the best in six quarters. This was attributed to product wins, cleaner go-to-market, and steady subscription growth.
- AI is paying off. CEO Martina Cheung emphasized that a decade of AI investment is now driving measurable productivity gains. Document Intelligence 2.0 and embedded AI across platforms are already improving speed and accuracy for clients.
- Leverage and discipline. Every division posted trailing margin improvement. Management is returning over $4 billion to shareholders between buybacks and dividends this year while still funding innovation and expansion.
My take: S&P Global’s stock has drifted lower in recent months, but the story is intact. S&P Global still anchors around two wide-moat businesses in Ratings and Indices, which continue to drive profit and cash flow. The optionality in Market Intelligence, Commodity Insights, and Mobility is beginning to show through. Execution remains steady, margins are expanding, and capital allocation is disciplined. This quarter reinforced why SPGI deserves its premium. It is a capital light compounder that keeps proving itself, even when sentiment softens.
Amazon (AMZN)
What happened: Amazon posted another strong quarter, with revenue up 13% to $180.2 billion and EPS of $1.59, beating expectations. Shares surged more than 13% pre-market on Friday, driven by a 20% rebound in AWS growth—its fastest pace in nearly three years. Management guided Q4 revenue of $206–213 billion and operating income of $21–26 billion.
Separately, Reuters reported that Amazon plans to cut as many as 30,000 corporate jobs, roughly 10% of its white-collar workforce. The cuts will affect HR, operations, devices, and AWS as part of CEO Andy Jassy’s ongoing effort to simplify operations and boost efficiency through AI-driven automation. 📖 Amazon Q3 2025 Earnings Release📖 Reuters – Amazon targets as many as 30,000 corporate job cuts
Key takeaways:
- AWS momentum returns. Growth reaccelerated to 20.2%, supported by expanding AI workloads and stronger enterprise demand. The backlog reached $200 billion, providing durable growth visibility.
- AI and custom silicon scaling fast. Project Rainier, Amazon’s 500,000-chip AI cluster, is already being used by Anthropic and will reach 1 million Trainium2 chips by year-end. Jassy said the Trainium line is now a multibillion-dollar business growing 150% quarter over quarter.
- Operating margins held up. Reported margin was 9.7%; excluding FTC and severance charges, it would have been roughly 12%. AWS margin reached 34.6%, reflecting improving operating leverage.
- Automation is driving real efficiency. Amazon now operates over one million robots in its fulfillment network, improving speed, safety, and cost efficiency. These gains are beginning to show in working capital and throughput metrics.
- Advertising remains strong. Ad revenue climbed 22%, helped by partnerships with Netflix, Roku, and Spotify, reinforcing advertising as a growing, high-margin profit stream.
- Capex rising, but disciplined. Year-to-date capital spending hit $89.9 billion, mostly for AI infrastructure. Management said the returns justify the pace, with measurable gains in productivity and speed across logistics and fulfillment.
My take: This quarter hit the heart of Amazon’s long-term thesis (see 5 High-Quality Stocks to Watch During This Pullback). The margin story is alive, and Jassy’s focus is on simplifying, automating, and expanding margins. The job cuts reflect that discipline more than distress. The results show how his efficiency plan is taking hold across the business. AI is now driving real operational leverage, and Amazon is proving it can grow and streamline at the same time. Spending is heavy, but management tone provides confidence as it appears intentional. Shares may fluctuate around the optics of layoffs, but strategically, this is the kind of operational tightening that will drive returns.
Company Spotlight
Thermo Fisher Scientific (TMO)
What happened: Thermo Fisher agreed to buy Clario for $8.875 billion in cash with up to $400 million in earnouts. Clario runs a leading digital endpoint platform for clinical trials, with work tied to roughly 70% of FDA approvals over the past decade. Management guides to immediate adjusted EPS accretion of about $0.45 in year one, high single-digit growth under TMO, and about $175 million of adjusted operating income from synergies by year five. The deal is expected to close by mid 2026 and sit inside Laboratory Products and Biopharma Services. 📖 Thermo Fisher Scientific to Acquire Clario Holdings, Inc. Press Release
Why it matters: This extends Thermo Fisher’s strategy to be the one-stop partner for pharma and biotech. Owning a scaled clinical-endpoints platform deepens the company’s data and software moat inside drug development. It tightens the link between PPD, lab products and data workflows, which can support higher switching costs and more cross-sell.
My take: This is classic Thermo Fisher. The company continues to execute its playbook of buying mission-critical assets, integrating them across its network, and widening the moat in the process. Clario deepens Thermo Fisher’s reach into clinical data and strengthens its position as the partner of choice for pharma and biotech. The story remains about scale, integration, and repeatability. Shares will live with some deal noise, but the strategy is intact. The focus now shifts to whether the accretion and synergies materialize as planned.
Watchlist Movers (±3%)
Earnings set the tone for this week’s winners and losers. Clear execution and confident guidance drove gains for some, while lofty valuations and cautious commentary took others lower.
Closing Thoughts
Earnings season is one of the best times to check in on the thesis behind the companies we own. It gives us a clear view of what is working, what is not, and whether the long-term compounding story is still intact. Hearing directly from management helps us understand how they are thinking about growth, margins, and reinvestment.
This season has also made one thing clear. Valuation still matters. Even small missteps were punished when expectations were high, while strong execution in well-positioned companies are being rewarded. We also learned that the spending story is still powerful, especially across AI and data infrastructure, where demand continues to push capital investment higher.
The swings we saw create opportunity, but only for investors who know what they own and why. Staying focused on the thesis and letting price come to us is how we stay aligned with compounding.
👉 Back next week with more in the Weekly Compounder Update series.
P.S.
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