3Q25 Earnings Updates: Part One – IBM, TMUS, META, GOOG, LLY, VICI, and AAPL

IBM (IBM): IBM is growing again and the long-term setup looks better, but the stock’s run has lifted expectations. The focus now is on Software turning strong orders into recognized revenue, and on AI showing up clearly in earnings, with Red Hat anchoring the mix and durability of that growth. Early-cycle mainframe strength and tight cost control are helping margins and free cash flow, and the infrastructure cycle remains a quiet stabilizer. Consulting margins have improved, yet signings flow though to revenue has been uneven, which keeps investors cautious about near-term acceleration. Financial execution is strong, though it is unclear how much growth is organic versus acquired. Northlake plans to continue holding IBM while the shares are supported by strong cash generation and an improving portfolio mix. The next leg likely requires unmistakable evidence that Software is converting, AI is flowing through, and associated mainframe software benefits are showing up in the numbers.

T Mobile (TMUS): TMUS has traded lower with the wireless and broadband group as investors brace for tougher competition in saturated markets. The company delivered a solid quarter highlighted by one million net mobile adds. Upfront acquisition costs muted the financial upside, so headline metrics landed in line and the stock kept sliding. Investors worry that a mature industry forces higher opex and capex to grow, even while TMUS gains market share. Leadership changes at both TMUS and Verizon add uncertainty, and Verizon’s outsider CEO complicates the read. That backdrop drives multiple compression, including for TMUS, despite ongoing share gains. We support TMUS ’s push to accelerate subscriber growth as a defense in a harder market. The strategy sustains high single-digit revenue growth and faster growth in free cash flow, with new customers acquired at lifetime values consistent with history. Easing comparisons and lighter investment in 2026 and 2027 should improve conversion of growth to earnings. TMUS also carries a strong balance sheet and preserves a roughly $20 billion capital allocation cushion that could shift to buybacks after the pullback. The company remains the clear industry leader and fits Northlake’s blue chip growth profile. We continue to hold and look for better performance next year.

META (META): META beat expectations with record revenue and healthy ad momentum, but investors focused on a fresh jump in planned 2026 capex and opex. The ad engine stayed strong with more impressions and higher pricing. Family of Apps (Facebook, Instagram, Messenger, and WhatsApp) carried results while Reality Labs remained deeply in the red. Management guided to a solid holiday quarter and argued that heavy AI spend will strengthen the core digital advertising business. The environment is similar to 2021–2022 when expenses surged, Apple’s privacy changes hit targeting, and TikTok took share. Those scars help explain the sharp pushback to another spending wave. Management counters that even if standalone AI products fall short, the investment will still lift ads performance. The near-term debate is clear: can ad growth and AI monetization outrun higher spend. Meta’s execution and strategic track record suggest the answer will be yes. Investors may have to wait longer for evidence at META than they will for peers like Alphabet, Microsoft, and Amazon that monetize AI more directly through cloud services.

Alphabet (GOOG): GOOG posted broad strength in Search, YouTube, and Cloud, beating consensus on revenue and EPS. The stock added about 5%, extending gains since a favorable damages ruling in its main antitrust case. Adjusting for a European fine, operating margins topped expectations. Management again stressed disciplined cost control, which has earned investor trust even as AI spend rises. Management also lifted this year’s capex to expand AI and cloud capacity. The market accepts the increase given visible cloud demand, recent wins, and ongoing benefits to the advertising flywheel. On the call, leaders pushed back on fears that ChatGPT threatens Search. Recent progress in Google’s AI Mode and Gemini suggests the company can defend its Search position. From here, investors want proof that heavier AI investment converts to durable profits. Our conviction in Alphabet’s moat has strengthened, and we see further upside in shares that trade at a modest premium to the market and a discount to peers like Nvidia, Broadcom, and Microsoft.

Eli Lilly (LLY): LLY delivered a clear upside surprise as surging GLP-1 demand powered a beat and a higher full-year outlook. Mounjaro and Zepbound led the gains, and management emphasized new manufacturing capacity that should ease supply concerns. Recent worries about price pressure, tariffs, formulary shifts, and one-time charges stayed in the background. The next phase is execution on the oral obesity pill, which can broaden the patient pool and offer a maintenance path after injectable regimens. The pill also expands geographic reach because it does not require refrigeration and is a simple small molecule to produce; LLY is already making millions of doses ahead of an anticipated 2026 approval. Beyond obesity, investors are watching encouraging early Alzheimer’s data that could open another multi-billion opportunity. Obesity growth into the next decade supports the premium multiple, and we see further upside. LLY fits Northlake’s blue chip growth strategy and diversifies our portfolio beyond consumer discretionary.

VICI Properties (VICI): VICI reinforced our thesis of a steady compounder by delivering another solid quarter. Management executed cleanly and nudged guidance slightly higher. The simple message remains that predictable income from long-term leases linked to inflation provide a steady base. VICI remains active to find deals to broaden the tenant base as shown by the recently announced MGM Northfield Park handoff deal with new tenant Clairvest. The balance sheet remains flexible, the dividend path is intact, and capital deployment is about finding the right deals at the right times. With no splashy M&A, the focus is on organic rent growth, selective sale-leasebacks that clear today’s funding costs, and pipeline color beyond gaming, while investors watch Caesars for potential signs of weakness. VICI offers dependable, mid-single-digit compounding growth with optionality from external growth as markets open. We expect the stock to have a baseline total return of the dividend yield plus low-to-mid single-digit AFFO growth with a steady multiple. There is longer term upside from multiple expansion if funding costs ease or new deals accelerate, and downside risks from tenant stress or a slower deal pipeline.

Apple (AAPL): AAPL posted a slight beat to close fiscal 2025 and guided above expectations for the holiday quarter. The stock popped after hours, then slipped the next morning as investors nitpicked what we view as constructive results that set up further gains in coming months. Services delivered its fastest revenue growth in years and gross margin reached a record. iPhone revenue missed by a small amount, almost entirely from China where supply constraints pinched September sales. Apple resolved those constraints in early October, so China should rebound in December. Guidance called for revenue up 10% to 12% versus consensus at roughly 6%. Gross margins should tick higher than the September quarter, but by less than the typical seasonal lift. Operating expense will run higher as Apple funds AI feature development across iPhone, iPad, and Mac. A low inventory starting point also supports the top line upside. EPS estimates are moving up for the December quarter and for fiscal 2026. We weigh the iPhone shortfall and higher AI spend as secondary to the upside in near-term and full-year earnings. Valuation remains rich, similar to other large-cap tech and AI names, which limits room for error. The latest print, stronger guide, and iPhone 17 cycle argue for a better 12 to 18 months. We see a path to $300 and above, with the caveat that ongoing strength in the Mag 7 remains in place.

IBM, TMUS, META, GOOG/L, LLY, VICI, and AAPL are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is the sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.