2Q26 Earnings Updates: Part One – IBM, GOOG, TMUS, META, AAPL, VICI, SONY

IBM (IBM): IBM’s second quarter disappointed after several large mainframe-related software and hardware transactions slipped out of the period. Revenue increased only 1%, Software growth slowed to 5%, and Transaction Processing declined 9%. The weakness was concentrated rather than broad-based: Red Hat accelerated to 11% growth, Data remained healthy, Consulting signings improved, and IBM maintained its full-year free cash flow outlook despite reducing revenue expectations. Management also said about one-third of the delayed transactions had already closed after quarter-end, supporting the view that timing, not a sudden drop in demand, drove much of the shortfall. Even so, the quarter exposed more dependence on mainframe transaction timing than investors had appreciated and raised the burden of proof for the second half. IBM now needs to convert delayed business into revenue and restore healthier organic software growth. We continue to see long-term value in Red Hat, hybrid cloud, enterprise AI, and data infrastructure, supported by ongoing productivity gains. The sharp decline following the preannouncement has made the valuation more attractive, but the stock will likely remain sensitive until management delivers cleaner execution and rebuilds confidence in the software growth outlook.

Alphabet (GOOG/GOOGL): Alphabet’s quarter showed that artificial intelligence is becoming a meaningful growth engine rather than simply a threat to Search. Revenue rose 24%, Google Search grew 17%, and Google Cloud revenue increased 82%. Search benefited from higher paid clicks, suggesting that AI Overviews and AI Mode are expanding usage without undermining advertiser demand. Cloud also became a much larger earnings contributor, with operating profit more than tripling and backlog reaching roughly $514 billion. The strategic position is unusually broad: Alphabet participates through consumer products, advertising, enterprise software, Cloud infrastructure, Gemini models, and proprietary TPU chips. The trade-off is cost. Management raised its 2026 capital-spending outlook to $195-$205 billion and expects another significant increase in 2027. Capital expenditures exceeded operating cash flow during the quarter, free cash flow turned negative, and the company raised substantial debt and equity capital while pausing repurchases. We view the business outlook as materially stronger after the quarter, with Search durable, Cloud scaling rapidly, and AI monetization becoming more visible. The stock case now depends on whether Alphabet can convert enormous infrastructure investment into sustained earnings and free-cash-flow growth without excessive dilution. We are comfortable maintaining the position but remain disciplined about adding until the per-share return framework becomes clearer.

T-Mobile (TMUS): T-Mobile produced another strong quarter, exceeding expectations for postpaid phone additions while maintaining industry-leading service revenue growth, low churn, and expanding free cash flow. Management also raised full-year free cash flow guidance, reinforcing the company’s position as the strongest operator in U.S. wireless. The more important development was a shift in how management describes the next phase of growth. T-Mobile is placing greater emphasis on customer lifetime value, premium plan adoption, and the economics of serving existing customers rather than maximizing subscriber additions at any cost. That is a logical evolution for a business that has already captured substantial share, but it also changes what investors will need to see. Future returns should depend less on repeated subscriber outperformance and more on sustained growth in earnings and cash flow per customer. The stock has pulled back as investors debate slower industry growth and longer-term threats from satellite providers such as Starlink, including possible pressure on Fixed Wireless Access. Those risks deserve monitoring, but they have not yet weakened current operating performance. T-Mobile continues to benefit from network quality, customer satisfaction, and disciplined execution. Following the pullback, valuation is more balanced. We remain constructive, while recognizing that the company must prove stronger customer economics can offset a more mature subscriber-growth profile.

Meta Platforms (META): Meta’s second quarter showed that AI is already strengthening the core advertising business, even though the stock initially fell about 8% after hours before recovering part of the decline. Revenue increased 28% to $60.8 billion, advertising revenue rose 27%, ad impressions grew 14%, and pricing increased 12%. Management also provided further evidence that AI is improving engagement, ad relevance, clicks, conversions, and advertiser returns. Investors focused instead on third-quarter revenue guidance that was modestly below expectations and on uncertainty surrounding 2027 capital spending. Meta did not materially raise its 2026 capital-expenditure outlook, narrowing the range to $130-$145 billion, but the next stage requires measurable returns from newer products such as paid messaging, Business Agents, subscriptions, APIs, and potentially external compute. Meta has successfully managed major platform transitions before, including desktop to mobile and Feed to Stories and Reels. Reality Labs remains the counterexample, with losses still exceeding $4 billion per quarter. We remain constructive but demanding. This AI transition is already improving the economics of Meta’s core business, which makes it different from the metaverse spending cycle. The company still needs clearer 2027 spending visibility and more evidence that new AI products can scale. Our current valuation range remains $740-$800, based on 20-22 times 2027 consensus earnings.

Apple (AAPL): Apple’s fiscal third quarter was strong, with revenue up 16%, iPhone sales up 22%, Mac sales up 29%, and the active-device installed base surpassing 2.5 billion. Those results reinforced the durability of the ecosystem and showed healthy demand across products and geographies. The concern was the outlook. Apple guided September-quarter revenue growth to 9%-11%, below investor expectations, as advanced-chip supply constraints and foreign-exchange pressure limit shipments. Rising memory costs are also expected to weigh meaningfully on underlying gross margin, while Services growth slowed to 12%, raising questions about App Store trends and whether the segment can return to its former mid-teens pace. None of this suggests that demand has broken or that Apple’s competitive position has weakened. The company continues to gain share, attract record numbers of upgraders, generate exceptional cash flow, and make progress with Siri AI. The issue is timing: supply constraints, component inflation, and slower Services growth may limit earnings upside over the next several quarters while the stock still carries a premium valuation. We expect Apple to remain in the penalty box until visibility improves. Northlake has owned the shares for roughly 20 years, and our current plan is to hold, while trimming oversized positions where appropriate for risk management.

VICI Properties (VICI): VICI Properties delivered another steady quarter, with adjusted funds from operations per share rising 4.6% to $0.62 and management lifting the low end of full-year guidance to $2.45-$2.47. The results reinforced the appeal of VICI’s model: long-term triple-net leases, contractual rent increases, a well-covered dividend, and limited sensitivity to short-term economic volatility. The company also added three new tenants – Clairvest, Golden Entertainment, and Club Med – while expanding into the Las Vegas locals market, Canada, and the Caribbean. These transactions broaden the portfolio and create additional paths for growth beyond the largest casino operators. The main debate remains VICI’s exposure to Caesars, particularly the regional casino lease and the possibility of a change in Caesars’ ownership. Management said regional gaming trends have improved and described discussions with Caesars as active and constructive, but acknowledged that the lease may eventually require further discussion. That uncertainty will likely continue to restrain the valuation until there is more clarity. VICI’s balance sheet remains sound, with leverage below management’s target range and ample liquidity after recent acquisitions. At roughly 10-11 times expected funds from operations and a dividend yield near 7%, the shares appear inexpensive for such predictable cash flows. We continue to view VICI as a durable income compounder, with additional upside if the Caesars issue is resolved on manageable terms.

Sony Group (SONY): Sony exited the quarter with a stronger earnings outlook and a still-unproven rerating story. Image sensors delivered a major improvement in profitability, Music continued to grow steadily, PlayStation maintained a large and active user base, and Sony’s anime assets kept expanding. Management raised full-year operating-income guidance, but most of the increase reflected tariff refunds and favorable currency movements rather than the underlying strength of the quarter. Importantly, management did not pass through much of that operating upside, leaving a credible path for earnings to move closer to ¥1.8 trillion if second-half game and film releases perform well and image-sensor margins remain strong. We remain constructive. The most likely near-term path is continued support for earnings estimates and gradual appreciation in the shares. A larger rerating will require several more quarters of evidence that the higher earnings level is sustainable and not simply the result of refunds, currency, and favorable product mix, while Sony also proves that its growing investments in music, imaging, and semiconductor partnerships can earn attractive returns.

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