Cycle Upside
In this edition of the Smart Investor newsletter, we spotlight the stock of one of the world’s leading real estate services and investment management firms. But first, let’s dive into the latest portfolio news and updates.
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Portfolio News and Updates
❖ Nvidia’s latest results may have disappointed some investors, but they definitely signal positive growth prospects for Taiwan Semiconductor Manufacturing (TSM), its advanced-chip supplier. The AI leader’s revenue growth continues to be driven by data-center chips, particularly those made with advanced manufacturing processes that only TSMC – the world’s largest and most advanced foundry – can provide at scale.
Nvidia has pointed to supply constraints as its key growth holdup, pressing TSMC to further ramp up production and invest in cutting-edge process nodes (2nm/3nm) and advanced AI packaging. This reinforces TSMC’s own guidance of a record $42 billion capex plan for 2025 to expand advanced chip capacity. This massive investment isn’t seen as a risk – quite the opposite, and some analysts expect the company to continue increasing capex at a fast clip to meet the accelerating and prolonged demand signaled by Nvidia’s capex and hyperscaler partners’ huge plans.
CEO Jensen Huang cited that hyperscalers’ AI and data center capex are now running at a $600 billion annualized pace, and estimated that it would accelerate to $3-4 trillion globally by decade’s end, reflecting large-scale, multi-quarter investment that outpaces any previous tech cycle. These investments flow to the AI darling – but also to TSMC, which makes Nvidia’s Blackwell line of AI accelerators, along with proprietary chips for tech giants like Alphabet’s Google (GOOGL), Microsoft (MSFT), Amazon, and Meta. Tech leaders’ compounding demand is creating supply bottlenecks, which allows TSMC to charge premium prices on leading-edge manufacturing, supporting strong profit margins.
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❖ In a less positive turn of events for TSMC (TSM), the U.S. revoked its validated end user (VEU) status for its Nanjing site in China, removing the automatic clearance to ship U.S. chipmaking tools. The change, which also affected Samsung and SK Hynix facilities in China, means future shipments will require case-by-case export licenses. TSMC said it remains committed to uninterrupted operations and is in talks with U.S. officials. The move does not pose an immediate revenue hit, as Nanjing produces older 28nm chips, but it underscores growing geopolitical headwinds and limits flexibility for TSMC’s China operations, reinforcing its shift toward fabs in Taiwan, Japan, and the U.S.
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❖ Microsoft (MSFT) has unveiled its first internally developed AI models, MAI-Voice-1 and MAI-1-preview, signaling a move to reduce reliance on OpenAI. MAI-Voice-1 is a high-efficiency speech-generation model that produces a minute of audio in under one second on a single Nvidia GPU. It is already integrated into products like Copilot Daily and Copilot Labs. MAI-1-preview is a text-based foundational model trained entirely in-house on approximately 15,000 Nvidia H100 GPUs and is available for public testing on the LMArena benchmarking site. Microsoft plans to incorporate this model into its Copilot ecosystem over the coming weeks. The company emphasized the importance of building strong in-house expertise and developing highly efficient, cost-effective AI models. The move aims to reduce MSFT’s reliance on OpenAI – while still maintaining partnership – giving the company for more control over their AI roadmap.
In other company news, Microsoft struck a deal with the U.S. General Services Administration offering steep discounts on Azure, Microsoft 365, Dynamics 365, and Sentinel, plus free Copilot access for federal employees. The program, open to agencies through September 2026, is expected to save taxpayers over $3 billion in the first year. While the deep discounts trim near-term margins, the pact effectively locks in one of the world’s largest enterprise customers for multi-year spend, embedding Microsoft AI and cloud tools into federal workflows. The free Copilot rollout is a strategic land-grab, making it the default option across government agencies and offices. By aligning with the Trump administration’s OneGov initiative, Microsoft gains reputational capital while securing long-term cloud and AI growth.
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❖ Alphabet (GOOGL) bucked the market’s downtrend last week. The company’s shares continued to be lifted by enthusiasm about its AI advancements, particularly its Google Gemini AI model, which investors see as gaining ground against competitors like OpenAI’s ChatGPT. The announcement of the new Google Pixel 10 series and associated AI features at the “Made by Google 2025” on August 20 showcased Google’s AI leadership in consumer hardware and strengthened investor confidence in Alphabet’s AI-driven growth narrative, providing a fresh catalyst for the stock.
GOOGL also surged in extended trading after Judge Amit Mehta ruled it would not be forced to sell its Chrome browser business. The company will still be allowed to pay partners – including Apple – for default browser placement, though this decision may be revisited if competition is not substantially restored. The federal judge did impose some remedies, such as requiring Google to share portions of search data with rivals and stop tying Android app bundles to Play Store access – but these were far less harsh than feared. Mehta wrote that the government “overreached in seeking forced divestiture of key assets.” Beyond being a win for Alphabet’s Google, the ruling could also serve as a blueprint for lawsuits against other technology majors like Meta, Apple, or Amazon.
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❖ According to media, Abu Dhabi’s G42 is in talks with major U.S. tech firms to anchor its planned UAE-US AI Campus, with Microsoft (MSFT) and Alphabet’s Google (GOOGL) reportedly furthest along in negotiations to secure computing capacity. The project aims to establish a large-scale AI hub while diversifying chip suppliers beyond Nvidia, with G42 also engaging AMD, Qualcomm, and Cerebras. For Microsoft, already a G42 shareholder, the deal would deepen its Middle East footprint and reinforce its cloud-AI distribution strategy. For Google, participation would expand global AI infrastructure reach and strengthen enterprise positioning. While financial details are not disclosed, the talks underscore how U.S. cloud leaders are extending AI capacity into new regions, signaling long-term demand growth and entrenchment for both MSFT and GOOGL.
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❖ Broadcom (AVGO) has been selected as a strategic vendor for virtualization software solutions for Walmart in a collaboration that will deploy a modern private cloud and edge computing environment using VMware Cloud Foundation (VCF), aiming to support the retailer giant’s efforts to improve the shopping experience and accelerate innovative service delivery. The deal highlights AVGO’s strong positioning in the growing AI-driven cloud infrastructure market, leveraging VCF – a key component of Broadcom’s enterprise software segment, which has shown robust revenue growth. Walmart is the largest enterprise client to publicly adopt the latest VCF 9 platform since its release, highlighting market confidence in Broadcom’s technologies. This strategic initiative is a major commercial win for AVGO, highlighting its leadership in AI-ready private cloud platforms, a growth area critical to its long-term revenue and recurring subscription models.
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❖ According to media reports, India is finalizing a $1 billion deal with GE Aerospace (GE) for 113 F404-IN20 fighter jet engines to power its indigenous Light Combat Aircraft (LCA Mk1A). This deal follows additional orders for the LCA that were cleared by the Cabinet earlier in August. The order for the engines is in the final stages of discussion between GE and Hindustan Aeronautics Limited (HAL) and is likely to be signed by next month.
This deal is separate from ongoing advanced-stage negotiations for a larger $1.5 billion technology transfer agreement to manufacture F414 engines for the next-generation LCA Mk2 fighters. The Manufacturing License Agreement for the F414 deal was signed back in July, and contract finalization and indigenous manufacturing are targeted for fiscal year 2025-26 onwards.
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❖ Blackstone (BX) is planning to invest an additional EUR 4.3 billion (approximately $5 billion) to expand its data center project in Spain’s Aragon region. This expansion follows an initial EUR 7.5 billion investment pledged over nine years, making the total planned investment around EUR 11.8 billion ($13-14 billion). The project aims to build multiple data centers, a power substation, and renewable energy facilities. Aragon is strategically positioned as a major European cloud computing hub, attracting data center investments from other tech giants like Microsoft (MSFT) and Amazon. This large-scale data center expansion represents a key growth engine for Blackstone, highlighting its strategic move into high-demand infrastructure assets in fast-growing digital and cloud markets. The scale and commitment reinforce Blackstone’s position as a leading investor in data center real estate with significant long-term growth potential.
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❖ BlackRock (BLK) has finalized its acquisition of ElmTree Funds, adding $7.3 billion in assets under management and bolstering its Private Financing Solutions platform. ElmTree, known for expertise in the commercial net-lease sector, is expected to expand BlackRock’s range of private financing products aimed at clients seeking long-dated contractual income, while supporting corporate infrastructure and growth needs across the U.S. The deal follows a string of acquisitions, including HPS Investment Partners, Global Infrastructure Partners, and Preqin, bringing BlackRock’s recent private market investments close to $30 billion. Collectively, these moves highlight the firm’s strategy to diversify beyond public markets and double private markets’ share of total revenues to 30% by 2030.
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❖ Autodesk (ADSK) was the Smart Portfolio’s best-performing stock last week, soaring nearly 10% in reaction to its “beat and raise” earnings report.
In fiscal Q2 2026, the professional software giant’s revenue and non-GAAP EPS topped estimates as well as the higher end of its prior guidance ranges. Revenue grew 17% year-over-year – with billings surging 36% – while EPS surged 22%. GAAP and non-GAAP operating margins widened to 25% and 39%, with expectations of reaching 41% in fiscal 2029. Cash flow from operating activities surged 117% YoY, while FCF jumped 122%.
Demand for design software related to AI data centers and growth in sectors like architecture, construction, and manufacturing have driven FQ2 26 outperformance, and is expected to continue supporting earnings growth and market share expansion. Adoption of AI has accelerated demand for skills in design and manufacturing jobs, with the company continuing to invest heavily in cloud and AI technologies to maintain competitive advantage. Autodesk aims to integrate more AI capabilities across its offerings to further improve operational efficiency and creativity for its users.
Autodesk raised its full fiscal-year revenue guidance to $7.025-7.075 billion and adjusted EPS guidance to $9.80-9.98, reflecting strong confidence in continued growth. Billings are expected at $7.36-7.46 billion, and non-GAAP operating margin at approximately 37%. Additionally, ADSK increased its share repurchase plan to between $1.2 billion and $1.3 billion.
Following the FQ2 results and raised guidance, ADSK has seen surging analyst support, with over a dozen top Wall Street firms raising their price targets on the stock. The average PT now stands at $362, implying a potential upside of over 15% from current levels, with most analysts providing bullish forecasts.
For example, Piper Sandler said ADSK ticked all boxes in its earnings report, including billings growth, operating margin and free cash flow, as well as a raise to FY26 revenue growth. Stiefel cited “one of its cleanest prints in recent memory” and said that even raised guidance may prove conservative. This chimes UBS’s note accompanying its Street-high $385 target, which said Autodesk’s fiscal Q2 was one of the “cleanest” earnings reports seen in software-as-a-service this earnings season. Berenberg highlighted the management’s commitment to long-term margin targets that imply about 400 basis points of expansion between FY26 and FY29. Meanwhile, Oppenheimer praised the management’s financial conservatism, and said that it now sees a clear path to double-digit core revenue growth with expanding medium- and long-term margins.
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❖ CrowdStrike Holdings (CRWD) also provided a “beat and raise” report for its fiscal Q2 2026, but the market reaction was not as positive.
Revenue rose 21% YoY to $1.17 billion – above estimates and ahead of guidance. The cybersecurity champion posted record net new ARR, with total ARR up more than 20% to its second-highest level ever, while cloud ARR grew over 35%. Both revenue and adjusted EPS surpassed expectations, with earnings-per-share declining less than projected. Free cash flow and operating income both reached record levels, with margins at 24% and 22%, respectively. Management also highlighted plans to expand through acquisitions, including the proposed purchase of Onum to enhance data pipeline capabilities.
Looking forward, CRWD expects high single-digit sequential net new ARR growth in FQ3 and at least 40% YoY net new ARR growth in the back half of the year. For FY26 overall, management forecasts ending ARR growth of over 22%. ARR remains the key metric for SaaS-like businesses, and the outlook underscores the stickiness of CRWD’s Falcon platform.
Still, headline guidance continues to sway short-term sentiment. The Q3 revenue forecast triggered a post-earnings stock pullback, as management projected sales broadly in line with expectations. Incentive programs and discounts tied to last year’s outage are weighing on subscription revenue timing, creating a $10-15 million gap between ARR growth and reported subscription revenue through the remainder of fiscal 2026, with normalization expected in FY27.
Despite the conservative H2 F26 outlook, full-year guidance was nudged higher. Annual revenue is now expected to grow 20-21% YoY, non-GAAP operating income is expected to reach $1.00-1.04 billion, and adjusted EPS guidance was raised to $3.60-3.72 (from $3.44-3.56). Free cash flow margin is projected at 27% in FQ4 and 30%+ in FY27.
Analyst sentiment remains bullish. While several firms trimmed price targets after the sell-off, there were no ratings downgrades and nearly all analysts reiterated “Buy” recommendations. Wedbush and others emphasized the long-term potential of CrowdStrike’s AI-driven platform. Analysts generally viewed the drop as the result of inflated near-term expectations going into the report, amplified by tech-sector volatility.
CrowdStrike remains a clear leader in endpoint security, with impressive gross and net retention metrics confirming Falcon’s stickiness. Growth beyond endpoint – in cloud, identity, and security operations – is further embedding the company into customer ecosystems, while strong end-market demand provides additional tailwinds. Overall, CRWD is rated a “Moderate Buy” with an average price target implying ~14% upside from current levels. While the stock may see some pressure in the near term, it is seen as a long-term beneficiary of the market consolidation amid surging security demand and rising threats.
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Portfolio Stocks Under Review
❖ We are keeping Cisco Systems (CSCO) under review due to the stock’s underperformance over the past month amid broad tech-sector jitters and lingering investor caution about AI momentum validation.
Cisco delivered a strong fiscal Q4, with both revenue and EPS above expectations, and trailing‑twelve‑month AI infrastructure product orders topping $2 billion – more than double the company’s own full‑year target. Splunk has now been fully integrated, contributing to renewed strength in the security segment. CSCO’s legacy networking business also posted double‑digit growth, even as capex declined.
Guidance for FY26 was solid, with total revenue growth expected to remain at about 5% and adjusted EPS growth forecasted to accelerate to near 6% (from 2% last fiscal year). While headline numbers look unimpressive compared to some high-growth tech large caps, they represent strong results for a company many had written off as a legacy laggard just two years ago.
The company continues to reinvent itself, gradually transforming its identity from a legacy networking company into the indispensable architect of enterprise AI infrastructure. Cisco has launched a comprehensive strategy designed to help it become AI infrastructure leader – similar to its position as a global leader in networking hardware and enterprise networking solutions in the pre-AI era.
The “networking global leader” experience significantly helps its transition into AI leadership cohort. CSCO’s decades of expertise in building and managing complex global networks provide a unique foundation for supporting AI workloads that require high bandwidth, low latency, and robust security. The company’s scale in connecting over 35 million network devices and powering more than 1 billion clients gives it unparalleled operational knowledge and data insights to engineer AI-optimized networking solutions. Moreover, its unified portfolio of hardware, software, and cloud management solutions designed for networking environments makes it well-positioned to provide integrated AI infrastructure across various networks, while purpose-built AI technologies like the Deep Network Model – a LLM trained specifically on network data – leverages its deep networking experience to deliver superior AI-driven network management and automation. Cisco’s collaborations with Nvidia, Microsoft, and sovereign AI players like Saudi Arabia’s HUMAIN reflect a long‑term vision to anchor the next wave of scalable, secure AI networks, supporting the transformation.
As such, there is little doubt among industry analysts and strategists that longer term, Cisco is slated to become one of the pillars of global AI buildout. Meanwhile, in near term, some execution risks remain, and the progress shouldn’t be expected to be linear, as a lot depends on macro conditions, regulatory frameworks, enterprise capex plans, and other external factors. However, looking at the recent earnings results and guidance – as well as Cisco’s $2 billion in AI infrastructure orders and rising R&D investment point to a company laying the groundwork for long‑term relevance. As traction continues, we expect the stock to gradually revalue higher as confidence builds.
Though analyst sentiment is not euphoric, it is far from bearish. No firms moved to “Sell” post‑earnings. In fact, most came away incrementally more constructive, raising price targets. The upgrades weren’t just mechanical responses to guidance, but reflected improving fundamentals and growing confidence in Cisco’s positioning – alongside its relative resilience compared to peers exposed to more cyclical hardware.
The two latest PT increases came from Citic Securities (from $70 to $75) and Argus Research (from $70 to $80), with both noting optimism around Cisco’s strong positioning in AI‑enabled enterprise data center networking, including its partnership with Nvidia for AI‑ready data center architecture. Both view Cisco’s AI‑driven transition and partnerships as clear growth drivers, justifying higher targets.
We are inclined to continue holding the stock. But we want to see sentiment catch up to fundamentals – or fundamentals break out from here – before removing our magnifying glass from CSCO.
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❖ We are keeping MACOM Technology Solutions (MTSI) under review as we watch whether the stock’s volatility can evolve into a sustained recovery. While business performance remains fundamentally strong and analyst sentiment is resolutely bullish, recent price action – a sharp drawdown followed by only a partial rebound – argues for caution before reestablishing conviction.
Fiscal Q3 2025 results confirmed robust execution, with revenue and earnings slightly above expectations, supported by broad-based strength across MACOM’s divisions and surging demand for high-speed optics, GaN, and secure RF components. The Data Center and Telecom segments delivered solid growth, while Industrial & Defense posted record revenue. Total revenue reached an all-time high. Q4 guidance topped consensus, projecting sequential growth in industrial and data center even as telecom moderates.
MACOM’s strategic positioning remains a core strength. It benefits from accelerating AI infrastructure demand, owns a U.S.-based RF fab (RTP), and is expanding into high-frequency, high-power applications – with long-term EPS guidance above $4 on a $1 billion revenue base. Despite the early transfer of RTP ownership and some one-time capex noise, management expects gross margin to reach 59% as FY2026 concludes.
The market, however, has yet to fully reprice these fundamentals. Shares fell ~14% after earnings before regaining only part of the loss. Sell-the-news dynamics, softer sector commentary, and broad market turbulence contributed to technical weakness and clouded near-term momentum.
Analysts, by contrast, remain overwhelmingly positive. At least 12 major firms – including JPMorgan, BofA, Evercore, and Stifel – raised price targets post-earnings, citing strong financial health and sustained revenue growth. Guidance for continued expansion through CY 2025-2026, along with capacity increases at RTP, underpins those views. The stock carries a “Strong Buy” rating with an average target implying more than 21% upside..
Evercore ISI has also recently highlighted MACOM as one of its top AI connectivity plays. The firm views connectivity as a key bottleneck in AI infrastructure buildout, presenting a growing investment opportunity. MTSI is entering two product cycles extending well into 2026 – a second wave of demand for Active Copper Cables (ACC) and an early-stage ramp in Long Path Optics (LPO) – with its leadership in low-latency interconnects expected to drive market-share gains and customer wins. Strong demand across MACOM’s core end markets, including U.S. and European defense, data center, and even telecom, is increasingly validated by institutional interest and fund inflows.
MTSI has entered a volatility patch, driven largely by chip-sector sentiment swings rather than company-specific issues. With analyst confidence diverging from market action, patience is warranted. Shares remain below pre-earnings levels, and while the company’s roadmap in RF, data center, and defense supports long-term upside, we prefer to wait until sentiment stabilizes and market action better reflects the company’s fundamentals. Should price action confirm renewed strength, we would revisit the position with a bias to maintain exposure.
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Portfolio Earnings and Dividend Calendar
❖ The Q2 2025 earnings season is over, but companies with fiscal years that differ from the calendar continue to report their results. Thus, Broadcom (AVGO) is scheduled to report its fiscal Q3 2025 financial results on Thursday, September 4, 2025, after the market closes.
❖ The ex-dividend date for BlackRock (BLK) is September 5, while for Alphabet (GOOGL) it is September 8.
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New Buy: Jones Lang Lasalle (JLL)
Jones Lang LaSalle is one of the world’s leading real estate services and investment management firms, advising and executing across the full property lifecycle. It connects capital, occupiers and developers through leasing, capital markets, project delivery and property management, while also managing large-scale investments via its LaSalle division. With operations spanning more than 80 countries, JLL provides integrated solutions that balance financial performance, operational efficiency and long-term asset value. Its platform blends market intelligence, global scale and specialized expertise across office, industrial, retail, life sciences and fast-growing digital infrastructure. By supporting clients with everything from workplace strategies to multi-billion-dollar development projects, JLL serves as both trusted advisor and on-the-ground operator. Positioned at the intersection of real estate and capital flows, it has become an essential partner in helping organizations navigate complexity, unlock growth opportunities and adapt to structural shifts in how and where people work.
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Capital Foundations
Jones Lang LaSalle traces its roots back more than two centuries, with its modern form created in 1999 through the merger of Jones Lang Wootton and LaSalle Partners. From that base, the company expanded aggressively, entering new geographies and broadening its offering until it became one of the few firms able to advise across the entire property lifecycle. Its reputation as a trusted global advisor was built through scale, local expertise and early recognition that clients increasingly wanted a single partner to manage complex, multinational portfolios.
A major turning point came in 2019 with the $2 billion acquisition of HFF, which vaulted JLL into a leading position in capital markets advisory. Since then, the firm has deliberately strengthened its platform through selective acquisitions and strategic alliances, consolidating share in a fragmented industry and reinforcing its role as a global powerhouse.
Over the past five years, Jones Lang LaSalle has also deepened its reach into fast-growing sectors such as logistics, life sciences and digital infrastructure. Its work in the data center space has been especially notable, positioning the firm at the center of one of the most powerful secular growth cycles in real estate. Complementing this, JLL has broadened project management and outsourcing capabilities, securing long-term contracts that generate more stable revenue and make the business less vulnerable to transaction swings.
Technology has become a defining element of this transformation. JLL Spark, its venture arm, has committed hundreds of millions of dollars to PropTech (property technology) startups, while JLL Technologies has rolled out digital platforms that embed data, analytics and automation into client workflows. Building on these capabilities, initiatives such as JLL GPT highlight the company’s adoption of AI to enhance decision-making and service delivery. Partnerships with global technology leaders have further accelerated digital integration across portfolio and facilities management. Together, these moves have positioned JLL not only as a traditional brokerage and advisory leader but also as a front-runner in real estate technology.
Taken together, the combination of scale, acquisitions, sector expansion and technology integration has reshaped Jones Lang LaSalle into a more diversified, tech-enabled enterprise. By pairing its traditional strengths with advanced digital capabilities and recurring revenue streams, JLL has cemented its position as a powerhouse with stronger fundamentals, broader reach and a clear path to future growth.
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Core and Cycle
JLL operates a two-engine model that balances scale with cyclicality – combining a large, recurring outsourcing platform with cyclical brokerage, augmented by investment management and a small tech arm. The largest part of the business is Real Estate Management Services, which accounts for nearly four-fifths of revenue and generates recurring fees from Workplace, Project, Property, and Portfolio Management services. This side of the platform has expanded as corporations consolidate vendors and outsource facilities across multiple geographies, and it now serves as the anchor that stabilizes earnings through cycles.
Complementing this is Leasing Advisory, representing about 11% of revenue, which connects occupiers and investors across offices, industrial space, retail and alternatives. Capital Markets Services (~8%) provides investment sales and debt advisory, while LaSalle Investment Management (~2%) adds diversity with approximately $85 billion in assets under management (AUM). Software and Technology Solutions remains small, only about 1% of revenue, but plays an outsized role in internal management and client operations, namely how the firm integrates data, automation and AI into client workflows.
Prospects for each business line are shaped by both cyclical property sector recovery and secular growth. On the cyclical side, commercial real estate leasing volumes are beginning to turn, with JLL reporting that it outperformed U.S. office leasing in the second quarter despite broader market sluggishness. Capital markets revenue climbed double digits year-over-year as refinancing and debt advisory activity improved, and management expects stronger momentum once the Federal Reserve resumes cutting interest rates. The resilient outsourcing segment continues to expand on multi-country contracts, underpinning more predictable fee income.
The larger opportunity lies in structural shifts. Jones Lang LaSalle has become a central player in the data center buildout linked to AI infrastructure, a sector projected to exceed $1 trillion of North American development through 2030 with more than 100 gigawatts of capacity in the pipeline. With 73% of this space already pre-leased, JLL is positioned at the center of site selection, project management and financing for hyperscale campuses. Industrial, logistics, and life sciences domains also serve as growth drivers, supported by government-led reshoring and industrial expansion policy programs, including CHIPS-related funding that is catalyzing semiconductor plants and adjacent supply-chain real estate.
Policy tailwinds extend to JLL’s technology arm. The One Big Beautiful Bill Act passed in July reinstates full expensing of domestic research and development, a modest but direct benefit to JLL’s ongoing technology initiatives and its venture arm, JLL Spark. Taken together, a scaled outsourcing core, a cyclical rebound in capital markets, and secular demand for AI-driven infrastructure give the company a clear runway for multi-year growth.
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Prime Yields
Jones Lang LaSalle delivered a strong second quarter of 2025, extending its streak of double-digit revenue gains to five consecutive quarters. Consolidated revenue rose 11% year over year to $6.25 billion, above consensus expectations of $6.23 billion, as resilient business lines continued to drive growth. Adjusted EBITDA increased 18% to $292 million, with margin expanding by nearly 30 basis points. Adjusted EPS climbed over 29% to $3.30, also ahead of analyst estimates near $3.20, reflecting stronger operating leverage and lower net interest expense. GAAP EPS was $2.32, up 32% from the prior year.
Growth was broad but tilted toward outsourcing. Real Estate Management Services rose 11% in constant currency, powered by 10% growth in Workplace Management and 22% growth in Project Management on new and expanded global contracts. Capital Markets Services advanced 12% in constant currency as Investment Sales rose 14% and Debt Advisory surged 27% on robust refinancing activity in the U.S. and Europe. Leasing Advisory improved 5%, outpacing broader U.S. office volumes in what management described as a stabilizing market. LaSalle Investment Management, with $84.9 billion of AUM at quarter-end, delivered modest fee income growth despite client dispositions. The Software and Technology segment remained small but continued to play an outsized role in driving integration of digital tools and AI applications into client workflows.
Cash generation also improved. Free cash flow for the quarter reached $207 million, up more than 20% from last year, while operating cash flow rose by over $200 million. Net leverage declined to 1.2 times EBITDA from 1.7x a year earlier, with corporate liquidity of $3.3 billion. Morningstar and other analysts noted that JLL’s stronger balance sheet supports greater flexibility heading into a cyclical recovery.
In H1 2025, consolidated revenue grew 12%, consistent with last year’s pace, while adjusted EBITDA surged by 19% year-over-year, marking a clear step-up from the prior period. Following this outcome, the company modestly lifted its full-year guidance. JLL raised the low end of its full-year adjusted EBITDA range by $50 million to $1.3-1.45 billion, citing stable pipelines and resilient demand. That aligns with Street expectations, which now cluster around the midpoint. Analysts project full-year 2025 revenue in the high single- to low double-digit growth range over 2024’s $23.4 billion, implying roughly $25.6-25.9 billion. Consensus adjusted EPS stands at $16.60-16.70, nearly 19% above 2024 levels.
Management emphasized cautious optimism for the second half of 2025. Transaction volumes remain sensitive to geopolitics and fiscal policy, particularly in Europe, and the firm recognized a $14 million incremental loan-loss expense tied to a Fannie Mae portfolio. Still, with resilient outsourcing momentum, improved capital markets pipelines, and debt markets stabilizing ahead of expected Fed cuts, JLL and its analysts both see a path to sustained profit growth through year-end.
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Positive Spread
With the economy holding better than expected, trade uncertainties subsiding, and the real estate market beginning to show signs of life – specifically as the outlook for rate cuts firmed – JLL and its peers have all demonstrated strong outperformance versus the broad market. JLL’s stock performance year to date has been similar to that of its globally diversified peers – from industry behemoths like CBRE Group to much smaller competitors like Cushman & Wakefield – though it has lagged behind the more U.S.-focused Newmark Group. Still, while Jones Lang LaSalle’s stock has broadly followed S&P 500 trends, it outperformed the market by a notable margin – with much of the excess gain arriving in the past four months, as JLL surged by over 45% from its April lows.
JLL’s robust financial health metrics, improved margin outlook, and continuous upward guidance revisions have driven up both its stock and analysts’ price targets. All four Wall Street firms that issued updates after its earnings release on August 6 – J.P. Morgan, KBW, Raymond James, and Goldman Sachs – raised their price targets by notable amounts while reiterating their “Buy” ratings, and William Blair confirmed a “Buy” without setting a target. Analysts cite strong earnings momentum and efficient capital management as factors supporting JLL’s substantial upside potential, with an average Street price target implying over 15% upside from current levels.
Despite the strong performance, valuations remain attractive, even compared with Real Estate sector median metrics – let alone with direct peers. While analysts expect JLL to deliver the strongest adjusted earnings growth among peers over the next 12 months, its forward non-GAAP P/E and EV/EBITDA ratios sit in the middle of the peer valuation scale, with forward GAAP P/E and EV/Sales toward the bottom. The most striking disparity between market appraisal and actual and forecasted results is reflected in JLL’s PEG ratios. Its forward non-GAAP PEG ratio of 0.31 is low in absolute terms and significantly below that of peers, while its TTM GAAP PEG of 0.98 is also the lowest in the peer group, indicating attractive growth relative to valuation.
Jones Lang LaSalle does not pay dividends, as the company has historically chosen to reinvest in the business and maintain flexibility rather than commit to a payout. However, it conducts occasional buybacks, albeit at a modest pace. In Q2 2025, JLL repurchased about $41 million of stock, roughly double the $20 million in the prior year’s quarter, and management signaled an intention to step up repurchases in the second half of 2025.
With rate cuts on the horizon and structural growth drivers firmly in place, the market’s muted appraisal of JLL’s prospects looks increasingly out of sync with the company’s performance. For investors willing to look past near-term volatility, the current setup offers a rare opportunity to own a sector leader at mid-cycle multiples just as the upcycle begins.
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Investing Takeaway
Jones Lang LaSalle offers investors a blend of cyclical recovery and structural growth, supported by a platform that spans global outsourcing, capital markets, and investment management. Its recurring service base provides resilience across cycles, while its role in high-growth sectors such as data centers and logistics positions it to capture secular tailwinds. A sharpened focus on technology – from PropTech investments to AI-enabled client solutions – enhances efficiency and deepens client integration. With stronger financial discipline and a flexible balance sheet, the firm is well equipped to navigate macro volatility while capitalizing on emerging demand drivers. Trading at valuations that remain appealing relative to its growth prospects, JLL stands out as a sector leader with durable upside potential for long-term investors.
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New Sell: Applied Materials (AMAT)
We are selling Applied Materials from the Portfolio due to rising near-term risks around China exposure, export restrictions, and softening guidance despite strong long-term fundamentals.
Applied Materials remains the world’s largest wafer fabrication equipment supplier with 19-20% global market share, backed by broad exposure to secular technology drivers such as AI, advanced packaging, and OLED displays. Its heavy R&D commitment – more than 12% of annual revenue – and leadership across deposition, etching, ion implantation, and process control support a durable growth trajectory. Over the past five years, AMAT has delivered 12.1% revenue CAGR, 274 basis points of gross margin expansion, and growing services revenue that cushions cyclicality.
Geographic diversification has positioned the company to benefit from semiconductor sovereignty programs such as the U.S. CHIPS Act, the European Chips Act, and similar initiatives in Asia. Yet diversification also magnifies short-term risk. China remains AMAT’s single largest market at ~35% of annual revenue, and pressures are mounting: U.S. export restrictions, weaker local demand, and rising Chinese competitors have weighed on growth. Management now expects China revenues to fall 15-20% this fiscal year – a 5.25-7% drag on total revenue.
Moreover, recent regulatory actions targeting semiconductor exports to China further complicate the picture. The U.S. Commerce Department has revoked exemptions that previously allowed Samsung, SK Hynix, and Intel to import U.S. chipmaking equipment into China without licenses. This shift is likely to weigh on demand for U.S. equipment suppliers, including Applied Materials, by limiting access to a key customer base. Applied is offsetting these pressures by doubling down on AI-related tools, advanced memory (including HBM), and GAA transistor technologies, while expanding capacity in Arizona and Singapore to strengthen domestic and allied-market exposure.
These investments reinforce long-term leadership but do not eliminate near-term vulnerability – which was again highlighted in the latest results: FQ3 revenue and EPS beat expectations, but current-quarter guidance pointed to sequential declines. Management cited cooling Chinese demand, export-license delays, and uneven leading-edge orders – signaling the growth path ahead will be choppier than hoped. Shares sold off sharply post-earnings, reflecting a sentiment gap between strong fundamentals and investor unease over geopolitical headwinds. In short, stellar headline numbers and strong long-term outlook failed to convince investors – particularly mutual funds and other institutionals – reducing exposure to short-term risks associated with spiking levels of geopolitical uncertainty.
Analyst sentiment is mixed, with BofA, Daiwa, and Mizuho downgrading from “Buy” to “Hold,” while TD Cowen, Argus, JPMorgan, Goldman Sachs, Evercore ISI, Stifel, and others reaffirming “Buy” ratings. Price-target action also showed significant divergence, with targets ranging from $150 to $240 – underlining the uncertainty around the stock’s prospects in the next few quarters.
We continue to view AMAT as a core enabler of AI-era semiconductor scaling, but given heightened short-term risks and sentiment volatility, we are stepping aside for now and plan to revisit when fundamentals and market perception come back into alignment.
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
Markets have been volatile, and the Winners ranks have lost their newest member, UBER, which fell through the 30% threshold – but is still hanging on the edge. The exclusive club now counts 10 stocks: GE, AVGO, ANET, EME, ORCL, HWM, APH, TSM, IBKR, and PH.
The first contender for the Club’s entry is now UBER with 29.70% gain since purchase, followed by CRWD with a 27.22% gain. Will one of them return to the ranks of the Winners, or will another stock outrun them to the finish line?
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