Date: 2026-02-25 Quarter: Q4 FY25 (Dec 2025) GauchoRico position going in: 16.2% (9.10% shares + 7.10% LEAPS)
Rule of 40 = 150. That's not a typo — 66% revenue growth + 84% EBITDA margin. The company generated $1.31 billion in free cash flow in a single quarter. Every single metric hit an all-time high. And the stock sits 41% below its peak on narrative fears the business itself is rebutting with every number it prints. This was an exceptional quarter.
| Q2_FY25 | Q3_FY25 | Q4_FY25 | YoY | |
|---|---|---|---|---|
| Revenue ($M) | 1,259 | 1,405 | 1,658 | +66% |
| QoQ | — | +11.6% | +18.0% | — |
| EBITDA Margin | 81% | 82% | 84% | +7pp |
| FCF Margin | 61% | 75% | 79% | +9pp |
| FCF ($M) | 768 | 1,049 | 1,309 | +88% |
| Beat vs Guide | +4.5% | +5.6% | +4.6% | — |
Q1 FY26 guidance: 1.745–1.775B at 84% EBITDA — above typical Q1 seasonality. The beat pattern (4–8% over four quarters running) implies Q1 FY26 actual is more likely $1.85B than $1.76B.
The market is not arguing about whether these numbers are good. It's arguing about whether they're sustainable. Two specific fears:
1. AI competition will commoditize AXON. Foroughi's answer is right: AXON's moat is not the ML architecture, it's a decade of training data from the world's largest mobile gaming mediation network. CloudX (Microsoft/OpenAI) launched February 4 — the proximate cause of the selloff — but they have zero mobile gaming training data. Meta is more concerning but is constrained by Apple ToS on no-IDFA traffic. The bid density argument actually makes sense: when competitors win low-value impressions, APP collects a 5% fee and AXON keeps the high-value inventory. Competition in the MAX auction is net positive for APP's economics. I believe the argument. The moat is real.
2. SEC probe. This one I take seriously. Bloomberg confirmed February 20 it's active and ongoing — focused on whether AXON's ML training data was collected via fingerprinting in violation of Apple/Google ToS. If true, remediation could impair the core model. No timeline for resolution. This is the only reason I'm not at maximum conviction on this position. It's not a reason to sell — it's a reason not to go to 25%+.
Going in I described APP as a pure-play AI advertising business with no credible challenger, extraordinary operating leverage, and an early-innings e-commerce expansion that could double the addressable market. Q4 confirms that thesis is strengthening, not weakening. The business is executing at a level most companies never achieve — $4.5B EBITDA on ~1,600 employees is remarkable. The SaaS rule-of-thumb metrics don't even apply here. APP has invented its own benchmark.
I'm maintaining at 16.2% of portfolio. The SEC probe prevents me from adding here — I need to see resolution before increasing further. The LEAPS position already provides the leverage exposure I want if the stock re-rates toward fundamentals. If the SEC probe resolves cleanly, this becomes a 20%+ position immediately.
Thesis status: Strengthening.
Action: Hold. Watch SEC probe resolution and Q1 FY26 actuals vs guide.
We will see what happens...
GR