Following my August 2025 coverage of Gartner Inc. ( IT ), which I downgraded to a hold rating due to my worries about the AI disruption narrative, slowing CV growth, and tariff headwinds, this post isI take a fundamentals-based approach to value investing.I disagree with the common misconception held by many investors that low multiple stocks must be cheap. I look for companies that offer the best long-term durability at the most affordable prices. Consequently, I have a propensity to be drawn to companies ...

Core Viewpoint - The article discusses the author's downgrade of Gartner Inc. to a hold rating due to concerns about AI disruption, slowing CV growth, and tariff headwinds, emphasizing a fundamentals-based approach to value investing [1]. Group 1: Investment Philosophy - The company adopts a fundamentals-based approach to value investing, focusing on long-term durability and affordability rather than merely low multiples [1]. - There is a common misconception among investors that low multiple stocks are inherently cheap, which the company disagrees with [1]. - The company seeks firms with steady long-term growth, no cyclicality, and a robust balance sheet, indicating a preference for stability in investments [1]. Group 2: Investment Risks - Investing in successful companies carries risks, particularly the risk of overpaying, highlighting the importance of valuation [1]. - Despite the risks, there are scenarios where the potential for growth is so significant that immediate price considerations become less critical [1].

Financial Data and Key Metrics Changes - The company reported record fourth quarter revenues of $488 million, an increase of 11% year-over-year [10] - For the full year, adjusted revenues grew 28% to $1.54 billion, driven by a 35% growth in M&A [4][10] - Adjusted compensation expense ratios improved to 61.1% for Q4 and 65.8% for the full year, down from 69% in the previous year [10][11] - Adjusted pre-tax margin was 28.6% for Q4 and 21.5% for the full year, representing a 510 basis point improvement from 16.4% in 2024 [11] Business Line Data and Key Metrics Changes - M&A accounted for approximately two-thirds of the business mix for both the fourth quarter and full year, with significant growth in capital markets [10] - Capital Structure Advisory (CSA) saw a decline, contrasting with the growth in M&A and Capital Markets [10][11] - The private capital advisory business is ramping up, with expectations for meaningful revenue growth in 2026 [71] Market Data and Key Metrics Changes - The company noted an increase in investor appetite across growth-oriented sectors, benefiting capital markets activities [7] - The financing markets are described as constructive, setting the stage for an active transaction environment in 2026 [5] - The company anticipates a broadening of M&A activity across transaction sizes as the year progresses [6] Company Strategy and Development Direction - The company aims to continue growing client capabilities and footprint, having added 21 managing directors in 2025 [8] - There is a focus on integrating the private capital advisory team with industry and financial sponsor bankers to enhance service offerings [8] - The company is committed to maintaining a strong balance sheet with no debt and substantial cash reserves [9][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive growth while generating operating leverage and delivering sustained value [9] - The outlook for 2026 is positive, with a near-record pipeline and expectations for increased sponsor activity [5][19] - Management acknowledged the potential impact of geopolitical factors on transaction activities but noted a general resilience among boards to proceed with necessary corporate transactions [32][33] Other Important Information - The board declared a regular quarterly dividend of $0.65 per share and authorized a new share repurchase program of up to $300 million [13][14] - The company returned $284 million of capital to shareholders through dividends and share repurchases in 2025 [14] Q&A Session Summary Question: Broader advisory outlook and sponsor engagement - Management noted an increasing velocity of sponsor deals and expects more activity in the middle market in 2026, driven by pressure from LPs to return capital [18][19] Question: Restructuring liability management activity - Management indicated a long runway of activity in liability management due to many companies still grappling with balance sheet issues [22][23] Question: M&A composition and outlook for 2026 - Management expects continued activity in larger cap transactions while anticipating a resurgence in middle market deals as financing conditions improve [28][31] Question: Impact of geopolitical factors on transactions - Management acknowledged that geopolitical uncertainty can affect transaction levels but noted that boards are becoming more accustomed to navigating these challenges [32][33] Question: Revenue recognition cadence for the coming year - Management indicated that while the first quarter may be lighter, the overall environment remains constructive, with high motivation for transactions [36][38] Question: Capital allocation and buyback timing - Management emphasized a commitment to maintaining dividends and mitigating share dilution through buybacks, while also keeping a strong balance sheet [74][75]

Market Overview - Stocks are facing pressure due to fears that AI disruption may negatively impact traditional enterprise software companies, with the S&P 500 and Nasdaq down 1% and 2% respectively [1] - Advanced Micro Devices (AMD) shares fell over 16% despite reporting a beat and raise, indicating that the market expected even stronger guidance [1] - Eli Lilly shares rose nearly 10% following a significant earnings beat and raise, with further analysis to be released [1] Sector Rotation - The rotation away from technology stocks is benefiting industrials, with Eaton experiencing volatility but closing nearly 1% higher after a mixed fourth quarter and light guidance [1] - Dover, another industrial stock, saw shares increase nearly 3% due to the same rotation [1] Company-Specific Updates - GE Vernova shares dropped 7.5% to around $722 despite an upgrade from Baird to outperform, with a new price target set at $923, up from $701 [1] - Analysts at Baird noted that concerns about overcapacity are not immediate, and the energy infrastructure cycle is still in early stages [1] - GE Vernova was upgraded to a buy-equivalent rating after solid earnings, with a reiterated price target of $800 based on confidence in its power and electrification businesses [1] Additional Stocks Covered - Other stocks mentioned include Advanced Micro Devices, Chipotle, Uber, Amgen, and Five Below, indicating a broad market interest [1]

Core Insights - The company is experiencing a significant shift in its web ecosystem, with a 13% year-over-year decline in core web sessions, primarily due to a 50% drop in Google Search referrals over the past two years [1][6] - Digital revenue growth of 14% in the quarter was driven by advertising, performance marketing, and licensing, despite a 23% decline in print revenue [2][6][3] - The company is focusing on off-platform distribution, with off-platform views nearly doubling over two years and non-session-based revenue growing 37% year-over-year, now representing about 38% of total digital revenue [6][7] Financial Performance - Print revenue fell by 23%, attributed to a lack of political advertising compared to the previous year and ongoing declines in the print sector [2] - Licensing revenue increased by 36%, supported by partnerships with Apple News and Meta, while performance marketing grew by 17% during the holiday period [2][3] - The company reported adjusted EBITDA guidance for People Inc. of $310 million to $340 million, with expectations of mid- to high-single-digit growth in digital revenue and digital adjusted EBITDA [5][15] Strategic Initiatives - The company is shifting towards a strategy that includes developing standalone products and services to mitigate risks from AI-driven disintermediation, leveraging iconic content brands [8] - New initiatives include a "recipe locker" with 3 million registered users and a relaunched People app with 300,000 downloads, focusing on user engagement [19] - The company has increased its stake in MGM to 25% and repurchased $337 million of its shares, reducing the share count by approximately 10% [5][18] Guidance and Future Outlook - IAC will cease providing quarterly guidance, opting for annual targets instead, citing volatility in the industry [5][14] - The company anticipates approximately $15 million in litigation costs related to Google AdTech in 2026, which will impact corporate expenses [15] - IAC expects over 50% EBITDA-to-free-cash-flow conversion in 2026, supported by low capital expenditures and minimal cash taxes [17]

Anthropic has set investors on edge for an AI fear they weren't expecting. - Hans Lucas/AFP via Getty Images Alphabet earnings are the headliner for later, but for now, investors continue to weigh the fallout from embattled software stocks after Anthropic’s “Cowork” bombshell. - Tuesday saw the iShares Expanded Tech-Software Sector ETF IGV slide 4.6%, the second-biggest one-day percentage drop since last April. Most Read from MarketWatch Our call of the day from Charlie McElligott, Nomura’s widely res ...

Core Viewpoint - The European software sector is experiencing a sell-off due to fears of disruption from AI technologies, particularly following an announcement from AI startup Anthropic about new tools that could automate tasks in legal and data analysis fields [1][4]. Group 1: Market Reaction - The software sector in Europe and the U.S. is facing declines, with companies like Salesforce, Adobe, and ServiceNow showing lower pre-market performance, although not as drastic as previous days [2]. - The market is assessing the implications of Anthropic's announcement on customer services and various research sectors, leading to a broad sell-off across companies perceived to be vulnerable to AI disruption [4]. Group 2: AI Disruption Concerns - Anthropic's new tools are designed to automate legal drafting and research tasks, raising concerns about the potential impact on jobs and industries reliant on these services [3][5]. - The International Monetary Fund (IMF) has previously warned about significant job market disruptions due to AI, contributing to market apprehension [5]. Group 3: Industry Implications - The potential for AI to replace existing tools raises questions about the future of industries and the business models of companies that rely on traditional software solutions [6][9]. - The discussion highlights a "vicious doom loop" where the destruction of certain industries could lead to reduced revenue for AI providers like OpenAI and Nvidia, as these companies depend on software firms as major customers [10][11]. Group 4: Future Considerations - The software industry has been proactive in addressing potential AI disruptions, with leaders emphasizing the necessity of integrating technology into workflows to maintain effectiveness [14]. - There is speculation about the future role of proprietary systems and whether the current lock-in models will remain viable in the face of emerging technologies like quantum computing [15].

US stocks were mixed on Wednesday as Wall Street assessed a fresh wave of earnings and waited for Alphabet (GOOG, GOOGL) results, eyeing the fallout from an AI-stoked slump in software stocks. The blue chip-heavy Dow Jones Industrial Average (^DJI) rose roughly 0.2%. The S&P 500 (^GSPC) slipped 0.2%, while the Nasdaq Composite (^IXIC) fell 0.8%, after tech stocks bore the brunt of the selling on Tuesday. Wall Street is trying to find its feet after AI disruption fears fueled a rush out of software stock ...

Key Takeaways Markets were on edge as this year's software stock slump picked up steam. The tech-heavy Nasdaq dropped 1.4% Tuesday, weighed down by sinking tech stocks. The benchmark S&P 500 pared losses to close down about 0.8%, and the blue-chip Dow Jones Industrial Average, which this morning hit a record high, slid 0.3%. (Read Investopedia's live markets coverage here.) Rather, the slump appeared to be an acceleration of the moves that have characterized markets so far this year. Software stocks have be ...

MARKET RECAP – 2/3/26U.S. stocks sold off sharply today as software names got obliterated by AI disruption fears, triggering the sector’s worst single-day selloff in years and dragging tech giants lower with them. The release of Anthropic’s Claude 5 AI model with advanced legal automation capabilities sparked panic across data services, enterprise software, and related sectors — reinforcing the view that AI may displace traditional software subscriptions faster than anyone expected.The S&P 500 fell 0.84% to ...