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1B quaterly cloud revenue and their ARR is big. If they start to cut SBC, they would be positive in earnings.
The only thing is that the premium for Google is quite ridiculous. The price to operating cash flow when not calculating SBC as operating cash flow is: 16,77 for META, 18,69 for MSFT, 21,25 for AMZN and 28,66 for GOOGL. All the while in the prior quarter the YoY comparison for the same companies were as followed. Revenue growth YoY: META 23,8%, MSFT 16,7%, AMZN 13,6%, GOOGL 17,9% Operating income growth YoY: META 5,6%, MSFT 20,5%, AMZN 17,9%, GOOGL 15,8% Operating cash flow growth YoY (excluding SBC): META 27,8%, MSFT 69,8%, AMZN 23,4%, GOOGL 36,3% When looking at the data and the number is really don't see any reason why Google deserves a over 50% premium over Microsoft and Meta and a 35% premium over AMZN. I was saying the exact same thing one year ago about Microsoft when everyone was saying Microsoft was winning at AI and was going to be the best cloud provider. Microsoft was trading at a +40% premium compared to other big tech and got destroyed because of it.
Yea. Im waiting for the day there is a thread about which SaaS stocks arent as effected by the fears. But it seems the sentiment is toward calling them overvalued and having too much SBC. Hopefully one day such a thread gets made though.
The SBC is the worst part. I think if you got in at SNOW ipo, you were diluted almost half of your position. And no price appreciation. Tough situation
Was definitely overvalued, huge head and shoulders pattern on the daily/weekly, gap addressable around 300, software apocalypse catalyst, and much of the market has been correcting. SBC isn't great either but I've been adding a little bit at a time recently since 380s as I think it's around a tolarable fair value personally and yeah it moves like a demon. I do think it's a revolutionary company and during the most recent earnings call managment expects this 30% growth trend to countinue for the next 3 years or so. I can see axon as a 200B+ company one day.
Constellation Software. Stable cash flows. No dilution. No SBC. No buybacks (only because they reinvest at higher rates of return internally). Sleeping very well. Zzz. Might buy another 10 shares tomorrow.
?? What movement?. The stock is just an SBC programme for their execs to get rich 😂 just like snap were.
Please, prove me wrong. Explain their stock dilution from BlueHalo and SBC and why losing the SCAR program isn’t a massive impairment to the stock
IMO SNAP needs a block style layoff. Their SBC is too high
So... You gambled a quarter million on what is essentially worse Vine, and Vine's been dead for a decade, and now you're trying to juice retail into holding your bag because you've come to understand that SBC has screwed you and that stock will dilute forever.
It was more of a “recommendation “ from the new investor since he can’t force anything due to his shares having zero voting rights. Lyft gave up founder share rights (although the stock has done awful) so I’m hoping the same for snap. Not holding my breath though. Evan spiegel has made a ton of SBC over the years despite his stock crashing
I would only consider investing in this list cause IF they removed founder shares.. I want common shares that have actual voting rights, so an active investor can build a significant stake and push out management I have zero faith in Evan spiegel and his team.. this company issues $1B+ in SBC and guess what, the stock is only worth $7B ish???
I think your core point is valid: the market may be underestimating UiPath’s strategic position by focusing almost entirely on SBC, insider selling, and the “legacy automation” label. The real debate is whether PATH should still be valued as a slow RPA name, or as an enterprise execution layer for agentic AI. The bull case is not hard to see. UiPath already has enterprise relationships, security credibility, and integration depth that newer AI-native players simply do not have yet. If Microsoft and Deloitte partnerships translate into real adoption, that matters much more than the current surface-level narrative. Add a strong balance sheet, ongoing buybacks, and elevated short interest, and you can definitely make the case that sentiment has become too pessimistic. That said, the market is probably waiting for proof, not just positioning. Partnerships sound good, but investors want to see sustained revenue acceleration, cleaner GAAP margins, and evidence that agentic AI is becoming a material monetization driver rather than just a story. As long as SBC remains heavy and insiders keep selling, the stock will struggle to get the benefit of the doubt. So no, I don’t think you’re “missing something.” I think the market sees the same ingredients, but it does not yet believe management has fully converted them into a durable growth re-rating. If that proof starts to show up, the short setup could get very interesting.
# STRUCTURAL SCORE: 7.2/10 * *Justification:* Fortress balance sheet and negative dilution (buybacks) offset the structural SBC drag. Score capped by macro headwinds and high short interest.
Buying whatever I find have a solid balance sheet, good guidance and low price relative to estimated EPS growth + shareholder yield adjusted for SBC (PEGY adjusted for SBC more or less). Yes, if we have a deep recession the estimates probably will change I know but I make my decisions based on the information available today.
You are not gonna get good answers from employees. Do you buy a company that treats employees well with huge SBC or a company that treats employees like shit, for example, Microsoft, TSMC or Tesla?
35% growth yoy is not realistic though. I actually just learned that forward earnings are often non-GAAP and don't include SBC...so forward PE is an unreliable metric to begin with.
How TF has Snap existed for 15 years and has had 0 full years of profitability🤡🤡 They keep getting insiders rich and keep diluting shareholders, they could literally reach profitability if they wanted by cutting SBC, laying off half employees.. Meta, YouTube, twitter all reached profitability in about 5 years
Seems like sells were regular and happening at all prices. I'm not concerned about the SBC. This drop is certainly tied with the META ruling
You are being diluted via SBC. It is normal for that to be paid out that way though.
Agreed. Sudden CFO exits are one of the clearest “pause and reassess” signals. I also watch how they communicate after: do they file an 8 K with clear reasons, do they appoint an interim with credibility, and do they tighten disclosure or get even more vague. On earnings calls, I flag repeated deflections on the same topic (cash conversion, margins, customer concentration, SBC, or auditor questions). Curious if you have a personal threshold. One executive departure and you are out, or do you wait for a second signal like an auditor change or a guidance walk back?
I read your other post and I think you're seeing what you want to see. AI is a fundamentally disruptive technology. I sure wouldn't invest in names like TEAM, MNDY, or even a giant like CRM. The bigger they are, the harder they fall. But even if I'm wrong, I think a lot of these companies have a long way to fall yet. TEAM doesn't even make money, despite being basically the standard, and if you look at their financials they aren't even showing improvements in operating leverage. They're basically just floating along on massive SBC, and if you think about that, it seems likely they've got a whole lot of stressed out and pissed off employees right now.
A good but modestly mixed Q4 from GTI. On the positive side, revenue and aEBITDA were well ahead of expectations with Minnesota adult-use sales leading the way in Q4 as GTI remains one of the few companies continuing to show top-line growth. Negatively, margins came in further and expenses were elevated, consistent with most of 2025 as price compression continued in key states. GTI continues to generate significant cash flow and boasts an extremely strong balance sheet (with further debt taken out recently in Q1), suggesting they may become more acquisitive in 2026. Full review: **Revenue:** QoQ: $291.4M to $311.1M / YoY: $294.3M to $311.1M FY 2025: $1.14B to $1.18B *Big jump sequentially (up 6.7%) and YoY (up 5.7%) to close out the year, well ahead of expectations ($296M) led by the onset of AU sales in Minnesota where GTI has 8 stores. FY revenue was up 3.4%, led by 12 store openings and strong performance in MN/OH/FL/NY, offsetting price compression in other states.* **Adjusted EBIDTA:** QoQ: $80.2 to $100.2M / YoY: $97.8M to $100.2M FY 2025: $371.3M to $348.4M *Big jump in Q4 to close out the year, good to see after YoY declines in the first 3 quarters of the year. FY 2025 aEBITDA was down 6.2%, with management highlighting double-digit price compression in multiple markets. Note that management is adjusting out the licensing fees paid to partner-asset Rythm in this figure now.* **Gross Margins:** QoQ 49.4% to 45.4% / YoY: 53.7% to 45.4% FY: 52.9% to 48.9% *Steep drop sequentially, YoY, and for the FY 2025, with management again pointing towards price compression as the culprit. Note that the Q4 figure includes the licensing fee to Rythm for the first time, so a comparable figure would be 47.6% with the $6.8M licensing fee added back.* **Operating Expenses:** QoQ: $107.3M to $122.3M / YoY: $101.0M to $122.3M FY: $376.7M to $437.2M *Big jump to close out the year, in part due to new licensing fees but also with added costs for new store openings and increased SBC.* **Operational Cash Flow:** QoQ: $74.1M to $90.1M FY: $294.9M to $195.2M *Big OCF generational to close out the year as GTI stopped paying 280e taxes like peers as they expect rescheduling in 2026. 280e adjusted OCF was $177M in 2025 compared to $199.6M in 2024. CapEx was $14.7M in Q4 and $81M for 2025, in-line with 2024 and forecasting a similar spend for 2026.* **Cash:** QoQ: $226.2M to $274.3M / YoY: $171.7M to $274.3M *Big jump to close out the year driven by the OCF generation, offset somewhat by CapEx and share repurchases ($14.1M in Q4 and $38.9M in 2025). Note that GTI took out an additional $50M in debt in Q1 and also won a $17M legal judgment from Ascend so this will balloon further in Q1- certainly bringing up the question of where they want to spend beyond the $80M capex forecast.*
I would say RDDT has potential. It’s at least a multibagger, probably a 10x over a much longer period of time, but I think is undervalued. I think people are too focused on the trees to see the forest. Yes, the conversion rate on recent earnings are not ideal and they may not be able to increase revenue as quickly from ad load in the future. Yes, they can still get hit pretty hard by an unstable economy and SBC is hitting investors hard. But this is still a company in its early profitability stage that’s still learning what levers to pull and cash on hand greatly outstrips the debt, so they won’t die if that road gets a bit bumpy (which it probably will).
Anybody else in LASR? They've got contracts with the military for drone and missile defense systems. Lockheed’s spectral beam combining laser (SBC) approach demonstrated a 300-kW output, presenting a power level necessary for shooting down fast-moving rockets, mortars and cruise missiles. A competitor, nLight (LASR), proved even more successful by using a coherent beam combining (CBC) laser to demonstrate a power level slightly over 300 kW.
The bear case often centers on trust and competition. Even with new leadership, the "runtime fee" fallout damaged developer loyalty, leading some to migrate. While strong in mobile, Unity faces high SBC (stock-based comp) and heavy pressure to reach consistent GAAP profitability.
That’s a fair criticism and something I spent time looking at. SBC has historically been high for Salesforce around $3B annually recently which obviously dilutes shareholders. What makes the situation interesting now is that they’ve started doing large buybacks ($12B+ per year), which offsets a big portion of that dilution. So part of the question becomes whether the company is transitioning from “growth SaaS behavior” (heavy SBC) to “cash-return mode.” That shift is still playing out.
Salesforce’s value isn’t actually its software. It’s the data it has collected. It has a database with more business data than maybe only three other companies in the world. AI has the potential to unlock any unrealized value in that data. The quality of its software going forward will be secondary to its ability to be a business matchmaker and intelligence provider (it’s gonna steal a lot of consulting business). The potential is huge. That said, I haven’t bought any of it because I think it’s a poorly run business. 1) Benioff is a piece of shit. Other than his donations to children’s hospitals, he’s a fake MF. 2) their questionable M&A choices of the past have only been made worse by their seeming inability to integrate them and monetize them. 3) they not only have high SBC, but high operating costs for a software company, 4) this choice to use debt to do share repurchase is stupid. If a company doesn’t have the FCF or Cash to buy back shares, it simply shouldn’t. It’s another example of bad management.
Salesforce’s value isn’t actually its software. It’s the data it has. It has a database with more business data than maybe only three other companies in the world. AI has the potential to unlock any unrealized value in that data. The quality of its software going forward will be secondary to its ability to be a business matchmaker and intelligence provider (it’s gonna steal a lot of consulting business). The potential is huge. That said, I haven’t bought any of it because I think it’s a poorly run business. 1) Benioff is a piece of shit. Other than his donations to children’s hospitals, he’s a fake MF. 2) their questionable M&A choices of the past have only been made worse by their seeming inability to integrate them and monetize them. 3) they not only have high SBC, but high operating costs for a software company, 4) this choice to use debt to do share repurchase is stupid. If a company doesn’t have the FCF or Cash to buy back shares, it simply shouldn’t. It’s another example of bad management.
I guess the argument for investors is that they are bidding on the underlying business. If shit hit the fan, SBC can be clawed back. I’m not saying it’s a great argument but it can explain how it trades like that.
Pretty sure their GAAP number is like 35x, which includes SBC. Adjusted number is like 17x.
I was bullish on CRM until I saw this: "Something to consider with $CRM is this company has a bonkers SBC program that really dilutes shareholder value. Their TTM stock based compensation is 3 billion dollars! That's more than Vermont's state general fund budget. So their diluted SBC per share is 3.2! Compare this to their non-gaap ttm eps of 6.89 (their real non- gaap TTM eps should be 3.89 per share). If you go on a financial site and see 35 ttm PE...they are basing this off a non-gaap eps WITHOUT SBC. If you add back in SBC that number would be way worse. When you see Salesforce's P/E of 35x on a major finance site, you are being shown an artificially low number. The true cost of your investment is almost double that advertised rate, due to the $3 billion annual SBC cost."
Hey Manu, great writeup. Your timeline of how GAAP accounting has evolved is spot on and really helpful context for understanding the denominator in today's P/E. That said, I have to push back hard on the math in the "Normalizing Adjustment" section. It seems to me that adding these expenses back to earnings creates a phantom multiple: 1. SBC was very likely in the low single digits in the 90s. A big factor is that the 1990s S&P 500 was dominated by industrials, banks, and retailers (like GE and Walmart) that paid their massive workforces in cash. Stock options were an exclusive perk, most likely only 3-5%. Today, tech companies use RSUs to pay almost every engineer on staff. Giving today's tech companies a "free pass" on what is now a 10-15% index-wide payroll expense, just to match a 1990s rounding error, completely breaks the historical comparison. 2. The SBC add-back doesn't account for real dilution. You can't add the 10-15% SBC expense back to earnings to lower today's P/E to 25.8x. SBC is an active shareholder dilution. When tech companies print shares to pay engineers, our slice of the pie gets smaller. To put it practically: If a company makes $100 profit across 10 shares, the EPS is $10. If they print 2 new shares to pay an employee instead of using cash, the company still has the $100, but it’s now split across 12 shares. The EPS drops to $8.33. If you add that expense back to the bottom line to make the market look cheaper, you are double-counting by valuing the S&P 500 based on cash that the shareholder doesn't actually get to claim because it was given away as equity. 3. The R&D capitalisation illusion. Applying a 12% earnings boost by treating software R&D like a factory (capitalising it) is an accounting mirage. If we capitalise software R&D, we are forced to depreciate it. A physical factory depreciates over 30 years (a tiny annual hit). Software becomes obsolete in 3 to 5 years. If a tech company capitalises $30 billion in software today, they have to take a $10 billion depreciation hit every year for the next three years. Because tech monopolies have been spending massive amounts on R&D for a decade, the overlapping depreciation from their past software would completely wipe out the "boost" of capitalising today's software. The earnings would be crushed right back down to where they are now. The "boost" doesn't actually exist. Your reverse adjustment at the very end of your post actually nailed the true reality. I appreciate trying to make an apples-to-apples comparison between today's earnings and the past. However, as your post does a great job explaining why the old accounting principles were fundamentally flawed, applying them to today's numbers just exposes those flaws even more (such as allowing the 3-4x higher SBC today to sneak through). Instead I think a better comparison would be to apply today's improved principles to the past, and see how the P/E moves. If we apply today's strict, honest GAAP rules to the last 50 years, the historical baseline isn't 16x, it's probably more like 18x to 19x. The ruler just shifted up a few notches. Thanks again for the post, it's a great dive into the accounting mechanics and really piqued my interest!
Hey Manu, great writeup. Your timeline of how GAAP accounting has evolved is spot on and really helpful context for understanding the denominator in today's P/E. That said, I have to push back hard on the math in the "Normalizing Adjustment" section. It seems to me that adding these expenses back to earnings creates a phantom multiple: **1. SBC was very likely in the low single digits in the 90s** A big factor is that the 1990s S&P 500 was dominated by industrials, banks, and retailers (like GE and Walmart) that paid their massive workforces in cash. Stock options were an exclusive perk, most likely only 3-5%. Today, tech companies use RSUs to pay almost every engineer on staff. Giving today's tech companies a "free pass" on what is now a 10-15% index-wide payroll expense, just to match a 1990s rounding error, completely breaks the historical comparison. **2. The SBC add-back doesn't account for real dilution** You can't add the 10-15% SBC expense back to earnings to lower today's P/E to 25.8x. SBC is an active shareholder dilution. When tech companies print shares to pay engineers, our slice of the pie gets smaller. To put it practically: If a company makes $100 profit across 10 shares, the EPS is $10. If they print 2 new shares to pay an employee instead of using cash, the company still has the $100, but it’s now split across 12 shares. The EPS drops to $8.33. If you add that expense back to the bottom line to make the market look cheaper, you are double-counting by valuing the S&P 500 based on cash that the shareholder doesn't actually get to claim because it was given away as equity. **3. The R&D capitalisation illusion** Applying a 12% earnings boost by treating software R&D like a factory (capitalising it) is an accounting mirage. If we capitalise software R&D, we are forced to depreciate it. A physical factory depreciates over 30 years (a tiny annual hit). Software becomes obsolete in 3 to 5 years. If a tech company capitalises $30 billion in software today, they have to take a $10 billion depreciation hit every year for the next three years. Because tech monopolies have been spending massive amounts on R&D for a decade, the overlapping depreciation from their past software would completely wipe out the "boost" of capitalising today's software. The earnings would be crushed right back down to where they are now. The "boost" doesn't actually exist. **The Takeaway** Your reverse adjustment at the very end of your post actually nailed the true reality. I appreciate trying to make an apples-to-apples comparison between today's earnings and the past. However, as your post does a great job explaining why the old accounting principles were fundamentally flawed, applying them to today's numbers just exposes those flaws even more (such as allowing the 3-4x higher SBC today to sneak through). Instead I think a better comparison would be to apply today's improved principles to the past, and see how the P/E moves. If we apply today's strict, honest GAAP rules to the last 50 years, the historical baseline isn't 16x, it's probably more like 18x to 19x. The ruler just shifted up a few notches. Thanks again for the post, it's a great dive into the accounting mechanics and really piqued my interest!
Canva only reports adjusted EBITDA, which excludes SBC and other non cash expenses. So, my comment still stands. There is no evidence that they make more than they spend. Salaries are being paid with stock and they don't make public the yearly losses.
> Re valuations, S&P forward PE is 21 forward PE is a garbage metric because you are dividing by an estimate. And valuations over the past 5 years have been extremely high so try using any longer time frame. EPS numbers are cooked as hell with random adjustments, SBC making them look high, phony depreciation making them look higher, etc.
I looked into them recently and want to point out a huge red flag, stock based comp consumes 60% of their operating earnings. In their non GAAP “adjusted earnings” they don’t treat SBC as an expense. Which wildly inflates their profitability compared to what I would consider “economic reality” as the reality is they are diluting your ownership to pay their employees, and if they had instead used cash it would cut 60% of their operating earnings. The fact that they don’t consider this an “expense” in their adjusted earnings reporting says something about managements integrity and honesty.
The SBC has been good in the past when the stock was overvalued. You can effectively trade the valuation premium with a a real world benefit (staff compensation). They managed to pay big tech salaries and retain top talent. Things are different now. I hope management will refuse to grant any new stock options below a certain price say 150 USD. If they don't effectively they are giving the upside of the stock to it's employees (mostly to management themselves).
I bought due to EV/FCF 15 and revenue growth at 23%. Selling at rebound to 100-115 (depending on new developements, earnings) I'd keep for longer (140+) but the SBC is so bad actual valuation multiple is masked and probably should be EV/FCF 25+ (if they paid more normal salaries). This is not a shareholder friendly company, so I only see it as a swing trade.
I don’t think the growth is slowing. When you compare covid driven 50-60% growth to current levels, you’ll obviously feel growth is slowing. But, the last quarter results were around 25% growth compared to 18-20% growth for the previous 2-3 quarters. YoY, it’s still doing a healthy 20% growth. About profitability, my guess is their acquisitions in the last couple of years have been eating into that. And with frankly those acquisitions have been awful. SBC is high, but they have to retain talent, which will become even harder with falling stock price. This is the one concern I have about this stock. Other than that, their products are sticky and we’ll know in the industry. They also have a strong data moat with Confluence, I wonder why there’s no data about any of that. Overall, I think the sell off was steep and probably overdone. I see this recovering to $120-$150 levels fairly quickly. (They’re also doubling down on stock buy backs - with what money, I don’t know)
$148M of his own money is hard to dismiss as a PR move. That's real skin in the game. The SBC point is interesting too — when your stock drops 85%, those RSUs that were supposed to retain your best engineers are suddenly worth pennies. CEO buying at these levels is partly a signal to employees that the ship isn't sinking. Whether it marks the actual bottom is a different question, but insider buys at this scale have historically been a better indicator than any analyst target.
My issue with TEAM is that their SBC eats up their entire FCF so it's not even a profitable business on any dimension and the growth is slowing. I actually think their products are sticky and I don't believe in the sell off. I was eyeing selling some puts the day it was at 70 but then I took a deeper look at financials and I just can't see a floor here on any foundational basis. Contrast to something like PYPL which is also in a mad selloff but actually makes net income and you can calculate a reasonable clearing price based on comparable PEs of "slow bleed" dying cash cows like comcast.
DDOG guided for 19% at the midpoint. More importantly, they accelerated revenue last year for the first time since 2021. And they historically sandbag guidance. The closest they came to guidance is when they beat in 2023 by 3% (guided 24% at the mid, reported 27%). I wouldn't be surprised to see topline rev growth in 2026 come in at 30%+. Regarding OI, they were GAAP profitable in 2024 with $54MM. I'd like to see OI profit again as a shareholder. And yeah, SBC needs to start trending down while OI margins improve. Overall, I think they are an AI beneficiary though which is why I still hold. Not adding here as I don't think the valuation makes sense but definitely not selling.
Looking at $DDOG and include SBC as an actual expense they had an operating loss of 44 million last year. $DDOG also guided for 2026 in the 20% revenue growth range. A lot of these SAAS stocks don't work unless they significantly reduce SBC or show accelerating revenues and durability with the threat of AI imo. I think there is a lot of opportunity in the software space - but I lack the knowledge to project outward. If DDOG is an AI beneficiary then its an opportunity.
SBC does not incur the company any cash costs, but add to dilutions
> And no, their SBC is not astronomical for tech. Yes it is. Bye Felicia! 🤣
But it’s not entirely propped up by treasury yields. Are you even reading what I’m saying? And no, their SBC is not astronomical for tech. I do not misunderstand how pod shops work. Yeah they’re going long on it… regardless of the exact strategy, that means they at least think it’s a halfway decent pick right now 😂 You are a troglodyte and I guarantee you’re a terrible investor. More concerned with trying to talk down to me than actually engaging with what I’m saying. I’m assuming you’re an index fund investor
Their operating cash flow also showed positive improvement. You think I can’t read a 10-Q? Come on. I’m way way ahead of you bro They’ve cut SBC in the past year by something like 15% Finally, the implication that I’m just copying trades from 13F filings is disrespectful. I’m simply pointing out that smart money is positioning itself for the coming run. Point72’s track record speaks for itself. Any rebuttal?
Totally agree. At least with most of the semi's we have earnings, so we have a PE and PEG lol. I get stuck sometimes trying to piece out the SBC with these adjusted EPS figures.
SBC is slowing NVDA stock from climbing. Too many people with too many given shares want to convert those shares to cash and who could blame them. Less stock compensation and more aggressive buybacks will be the key to reduce self inflicted dilution
My favorite thing about MELI is they almost never dilute shareholders. Since 2013, their shares outstanding (basic and diluted) have increased just 15%. Of that 15%, nearly 65% of the dilution was in 2019 as part of a larger strategic investment from PayPal. MELI raised $1.85B ($750MM from PayPal) to invest in MercadoPago, which has paid off handsomely. Their S/O dilution is at just 1.2% annually since 2013. SBC as a % of revenue has peaked at 3.3% (2020) and has been at or around 1% since then. That's unheard for a tech company.
You are right, their is indeed good — I guess a better measure would be GAAP since they have high reliance on SBC, which kind of masks their operational costs
The problem with Burry is he latches onto the parts that fit his narrative and refuses to look at the whole picture. And even a lot of his bear arguments are just grasping at straws (saying NVDA's SBC was too high when it's like 2-3% of their revenue is crazy.) He either doesn't really understand why those stocks are trading the way they are, or he's simply rage baiting to sell his substack. I think it's the latter since he blocks people and deletes his own tweets on Twitter instead of engaging in discussions in good faith so it's better to not give him any attention so his relevance dies.
If you include fringe costs and SBC... it's probably like $250,000 per employee per year. They are saving at least $1 billion a year from doing this. Obviously now they got to buy more AI tokens but an AI agent is probably 20x cheaper.
yup the SBC was always a shareholder scam. Should cut SBC and salaries in half.
solution seems simple. Companies can buy back enough stock to offset SBC (so neutral share count). Any additional is legal but taxed as dividends to share holders. Dividend or stock buyback should be taxed the same.
Jumped way too early on this one without properly assessing the SBC, but at $21 this screams cheap to me
SBC is not stale unfortunately, they project a 25% increase in SBC for this year. Nevertheless, I believe it is a good buying opportunity at this price.
> mag7 companies run by some very smart people You are part of the second group, so you may not understand, but the smart people at the top of those companies care about their SBC being triggered, not about you fuckers.
Exactly. All these companies are over 10 or 20 years old, have products that are ubiquitously used, and still can't make money. And they treat SBC like it's not a cost.
What's crazy to me is how a lot of these SAAS companies still aren't making money. How are these guys essentially rocking negative free cash flow after SBC this late into their existence. When do they actually start making real non-dilutive free cash flow? Also given that their MC has fallen so far, if they continue their $1.5B in SBC every year, they're diluting almost 10% every single year now. That's a big problem.
Your comment is gold! I am looking at the SBC between different SaaS companies, Gitlab indeed has a high SBC expense to revenue, but the dilution % (increase in number of shares / total shares) is not that high mainly because of the high valuation of the company (and probably lower revenue). Besides, for the DAP, why you think its release is too rush? And do you think it can really capture market share or will be destroyed by external agents like the Claude Code? I am assuming the worst case scenario: what if everyone uses Claude Code instead, can Gitlab still monetize it using the new Gitlab credits system?
I legged in strongly from 58-52$ I am down heaps and heaps of money. Whatever. My biggest concern at this point is the new CEO- he’s a cost cutter and finance guy and I worry he will squander whatever potential is in the initiatives PYPL has begun exploring. That said I ran some numbers at even at 5% yearly decline for profit/buybacks/SBC, the company goes private in 8.5 years w profits still around 4.5B per year. I ask how fast PayPal can really decline but I asked the same a month ago and then they guided for lowered everything for ‘26. I’m going to add to my position a bit when it tests 39 again but I’m not jumping for joy over it.
its going up. they said SBC will still be "mid high teens of revenue in 2026". just as it was it 2025, at book value. revenue will grow 50-70%, and so will SBC.......just stop it. you just miscalculated the market value by 500%. time for a break
it will be higher, i can guarantee you that much. there are multiple levels to this SBC monster. nobody can fully grasp all details from the outside. thats why we have to trust the insiders. but, apparently we cant. and the best prove is their communication regarding it
You being funny now ? Earnings reports always have to use SBC book value. And thats based on grant date value, which is about $25 in Reddit's case. They handed out 12m shares last year. Market value about 1.8bn
Why can't you provide a source for your information? The SBC was 300mil on 2025 according to their earnings report. That's at current market value.
I have, but these stock specific subs often are geared towards people who want to post funny memestock one-liners. also, there is a bunch of people paid to defend this bn $ scheme, of course. How is Reddit's dilution lower than Snap's ? Between the IPO and running dilution (evergreen) i would currently state it's average is double digits. And in terms of SBC at market value, Reddit kind of set a dubious record last year at 82%. |2025 Reddit|SBC Book Value|SBC Market Value|difference| |:-|:-|:-|:-| || |**Revenue**|**$2,203**|**$2,203**|$0| |**SBC Expense**|$387|**$1,800**|**+$1,413**| |**Other Costs**|$1,286|$1,286|$0| |**Net Income (Loss)**|**$530**|**($883)**|**($1,413)**| |**Net Margin**|\+24%|**-40%**|**-64%**| |**SBC % of Revenue**|18%|**82%**|**+64**%|
Interesting thought. I have one too: If I was leadership, doing a bunch of hiring to grow my ads business, and I knew was going to compensate hires via SBC, would I want to initiate these SBC packages when Reddit is $280 or $140?
Ah it's the famous AleaBito, the guy who pump-n-dumps shitcos. Ever heard of OrangePi's? Radxa's? BananaPi's? The list goes on... You can literally get a 4GB 4CPU 1GPU SBC for 25USD from China. Anyone with hobbies around IoT knows this and rarely ever buys RPis. Surprised your LLM-powered research didn't tell you that.
You’re onto something about the grant date share price being used for SBC accounting….but this is standard practice for SBC. Nothing unique to Reddit.
i agree with teh stock going down to its IPO price if SBC isnt amended. but the business itself is great. so your other claims i can not approve of. right now the stock is not attached to the business, because of insiders taking all of fcf and thensome for themselves. thats the issue
It’s being dumped with all other growth tech type stocks. Macro is bad, snap reported their typical numbers but got obliterated like most earnings have gone. I am guessing they’ll rebound but there’s no reason to think they’ll climb any further until SBC chills out.
How fast can PYPL really decline? At 5% profit decline w/ buybacks and SBC falling at the same rate they will go private in 8.5 years. At 3% just under 8 years. Flat- Just over 7y. No matter how you slice it, thats a good business. They have BNPL and Venmo growing fast enough that in 2-3 years that combo should offset any other declines and flatten out metrics. Someone tell me what I'm missing or why theyre going to decline faster than 5% a year over the next decade
Saw some good data showing that Google tends to decline after earnings reports because of how SBC is paid out to employees. Still doesn’t explain a 20% crash after the stock pumped on earnings release. Seems like the entire AI ecosystem is shitting itself now whether good or bad earnings.
All 3 are solid stocks to own, just don’t look at your port with these 3 stocks till the end of the year. I personally don’t any of the 3 out of personal principles but I do have a lot in SBC from AMZN.
Question, where are you getting this 9% dilution rate? Looking at the investor relations shows dilution being flat YoY. Anyways, that doesn’t change anything brotha! EPS and Free cash flow growth was in the hundreds of percent. Revenue growth was right around 70%. Plus, markets are forward looking. The CFO stated net dilution going forward will be 1-3% with SBC % of revenue being in the high teens due to retaining talent and onboarding some more. Looking backwards, 7-1 revenue growth to dilution is completely healthy. There’s not much of a structural drag even if dilution was 9%. Anyways, as they say, history doesn’t repeat, but it sure does rhyme.
The support levels on SNAP are interesting, but comparing the two on price action alone misses the structural drag on RDDT. While SNAP is fighting for profitability, RDDT is battling a **9.3% annual dilution rate** from stock-based compensation. Even with their $1B buyback, they are mostly just offsetting that share count expansion. If RDDT stays under 150, that SBC refresh cycle becomes a major pain trade for shareholders regardless of the revenue growth. SNAP has its issues, but RDDT’s valuation still feels heavy at 50x P/E with that kind of dilution.
The 1-3% projection for 2026 is one scenario, but the current 10-K audit shows a **9.3% dilution rate (YoY)** right now. Historical outperformance is usually based on net dilution after buybacks actually reduce the float, not just offset the SBC refresh cycle. We’re looking at the same math from two different angles—I’m just prioritizing the current structural drag over the 2026 forecast. Happy to be proven wrong by the next few quarters of filings.
A $7.5M buy-in from the board is definitely a strong signal for the long-term vision. However, 'preplanned' or not, the math on the **9.3% dilution** doesn't change. Whether the C-Suite is 'happy' selling under $200 is secondary to the fact that the share structure is expanding faster than most retailers realize. An audit on the quality of earnings usually reveals that one big buy rarely offsets a systematic SBC dilution cycle.
Yea no. The price is low because of poor management, no moat and massive shareholder dilution through SBC.
The SBC cliff is brutal but honestly if they can keep milking the AI training data deals the valuation might hold up longer than expected
You have 75 shares of NOW and don’t even know that it’s forward PE is artificially low because it’s not including SBC lol
having high gross margin is the feature of a software company. I never come across low gross margin software co before. 80 is not even that high for aofrware, I have seen 90 before. It’s what happened when u strip away all the SBC. And u get -80 net margin
The point is that it's unsustainable. CVNA investors are fooled into thinking it is sustainable... by no disclosure They're making money from SBC
Stop asking why RDDT pump...it has gone down quite a bit recently and an insider just bought 7M worth of shares and it was not part of SBC
Yeah , this lines up with how I see it too. SBC explains most of it.
Very true. However just like Palantir there is a great profitable growing business hidden behind this damn dilution scam. And it takes 10mins to update any SBC program, and cut down dilution. So, im not happy but certainly not selling either
Stock market has finally said "Seen enough. We dont trust all of you guys promising to earn more Cash Flow than you pay yourself in stocks 'soon' anymore". Snap worst of the bunch. But also Reddit, Pin, Palantir, Hims All these SBC scams get called out now and will trade at a big discount, until this issue is fixed.
Stock market has finally said "Seen enough. We dont trust all of you guys promising to earn more money than you pay yourself in stocks 'soon' anymore". Snap worst of the bunch. But there is also Reddit, Pin, Palantir, Hims All these SBC scams get called out now and will trade at a big discount, until this issue is fixed.
The rise is driven pretty much solely by SBC issued to employees/prospective talent. As you mentioned, not as concerning because Amazon is profitable with a healthy balance sheet whereas a company like SNAP is dilutive because they’re a dumpster fire on life support with no path to profitability. The bet is it’s more accretive for AMZN put their capital towards expansion projects (we can argue about AI Capex spend) betting on longer term growth over shorter term EPS pops by implementing a buyback program of lowering their employee equity comp plans.
Google buybacks counter dilution via SBC unlike Amazon/Dilutazon who keeps diluting shareholders.
I did it solely based on insiders dumping their shares heavily. Looks like they are almost solely paid by SBC.
There is only one thing you need to know to understand this. Evan Spiegel, is the worst CEO in tech. Him and Murphy have 100% of voting rights in a bizzare setup. With this power they award themselves and CO SBC and then just plow investors nonstop. As long as this setup remains, SNAP is nothing more than their personal piggy bank, and they hooked in big money during covid mania, and now feed off them like some kind of shitty vampire.
Well no. Because it describes a made up mechanism that results in interest bearing debt to own your own cash. Again the knowledge gap you have is believing this can happen, which creates a contradictory scenario. At one point I was genuinely curious what you were thinking, I honestly thought you maybe were just badly describing a potential abitrage of future stock price expectations against SBC where one could maybe argue you paid employee costs with less valuable "paper" now. But your entire argument is based upon something that literally cannot happen. It converts cash into debt, through a mechanism that doesnt work to generate a profit that cant be booked. If you understand this then the contradiction has nothing to do with then and than. Have you at least by now verified this critical assumption of yours? Curious how thats going.
Their share count has been growing like nuts. It’s a machine to pay the c suit with SBC
ROBINHOOD Q4’25 EARNINGS HIGHLIGHTS 🔹 Revenue: $1.28B (Est. $1.33B) 🔴; +27% YoY 🔹 EPS: $0.66 (Est. $0.63) 🟢; vs. $1.01 YoY 🔹 Adj. EBITDA: $761M (Est. $833.2M) 🔴; +24% YoY 🔹 Crypto Revenue: $221M (Est. $242M) 🔴; -38% YoY 🔹 Transaction-Based Revenue: $776M (Est. $791.6M) 🔴; +15% YoY Other Metrics: 🔹 Net Interest Revenue: $411M; +39% YoY 🔹 Other Revenue: $96M; +109% YoY 🔹 Options Revenue: $314M; +41% YoY 🔹 Equities Revenue: $94M; +54% YoY 🔹 Funded Customers: 27.0M; +7% YoY 🔹 Investment Accounts: 28.4M; +8% YoY 🔹 Total Platform Assets: $324B; +68% YoY 🔹 Gold Subscribers: 4.2M; +58% YoY 🔹 ARPU: $191; +16% YoY Financials: 🔹 Net Deposits: $15.9B; $68.1B TTM 🔹 Net Income: $605M 🔹 Total Operating Expenses: $633M; +38% YoY 🔹 Adj. OpEx + SBC: $597M; +18% YoY 🔹 Cash & Cash Equivalents: $4.3B Capital Return: 🔹 Buybacks: $100M (0.8M shares; avg $119.86) 🔹 Buybacks since Q3’24 start: $910M (~22M shares; avg $40.64) 🔹 FY25 Buybacks: $653M (12M shares; avg $54.30) Commentary: 🔸 “Our vision hasn’t changed: we are building the Financial SuperApp,” 🔸 “2025 was a record year where we set new highs for net deposits, Gold Subscribers, trading volumes, revenues, and profits, and we closed the year with a strong Q4,”
HOOD Q4 **1.Revenue** Q4 net revenue: $1.283B (+27% YoY) FY 2025 net revenue: $4.47B (+52% YoY) **2.What drove it (Q4 mix)** Transaction revenue: $776M (+15% YoY) Options: $314M (+41%) Equities: $94M (+54%) Crypto: $221M (-38%) Other transaction: $147M (300%+) Net interest revenue: $411M (+39%) Other revenue: $96M (+109%) Gold subscription revenue: $50M (+56%) **3.Profitability** Q4 net income: $605M, diluted EPS: $0.66 FY net income: $1.883B, diluted EPS: $2.05 Q4 adjusted EBITDA: $761M (about 59% margin) FY adjusted EBITDA: $2.52B (about 56% margin) **4.Customer and asset engine** Funded customers: 27.0M (+7% YoY) Total platform assets: $324B (+68% YoY) Net deposits: $15.9B in Q4, $68.1B for the year (about 35% growth vs prior-year platform assets) Gold subs: 4.2M (+58% YoY), adoption rate 15%+ ARPU: $191 (+16% YoY) Extra context on activity (FY 2025): Equity notional volume: $710B (+68%) Options contracts traded: 659M (+38%) Crypto notional volume: $82B (Bitstamp $48B, Robinhood app $34B) **5.Capital returns + 2026 early signal** Cash and cash equivalents: $4.3B Share repurchases: $653M in 2025 (avg $54.30), plus $100M in Q4 (avg $119.86) Prelim Jan 2026: Net deposits $4.5B Margin book $18.4B (+121% YoY) Equity notional $227B (+57% YoY) Options contracts 200M (+20% YoY) Crypto notional $22.9B (Bitstamp $14.2B, app $8.7B) 2026 cost guide (non-GAAP): adjusted operating expenses + SBC $2.6B to $2.725B (midpoint about +18% vs 2025)