News & Updates
The latest news and updates from companies in the WLTH portfolio.
Cerebras vs. SpaceX: Which 2026 IPO Is the Better AI Stock to Own for the Next 5 Years?
Cerebras Systems (CBRS -0.96%) and Space Exploration Technologies (SPCX +1.22%), known as SpaceX, are two prominent companies that went public in 2026. Cerebras started trading on May 14, while SpaceX followed on June 12. Cerebras builds wafer-scale artificial intelligence (AI) systems (computers built around a single large processor) and sells access to its computing power through the cloud. SpaceX operates reusable rockets, the Starlink satellite network, and an AI segment that includes the Grok large language model and AI computing infrastructure. Cerebras is much smaller than SpaceX in terms of market capitalization. However, its cloud revenue is growing rapidly at a time when more AI spending is shifting from training models toward inference or running them in production. SpaceX has already generated nearly $2.6 billion in revenue from the AI business in the second quarter of fiscal 2026 (ending June 30). But it also has its profitable Starlink-driven Connectivity business to help fund that expansion. Hence, the key question is whether Cerebras' faster growth potential can outweigh SpaceX's greater financial strength over the next five years. Cerebras could benefit more as AI spending shifts to inference Gartner expects global spending on AI inference to reach $23.3 billion in 2026, overtaking the $19 billion spent on training. Inference is expected to account for 59% of AI-optimized cloud infrastructure spending by 2027. Cerebras is already benefiting from this trend. The company's non-GAAP (generally accepted accounting principles) cloud and services revenue jumped 287% year over year to $127.7 million in the second quarter (ending June 30). Total non-GAAP revenue (core revenue) was up 103.3% year over year to $209.9 million, ahead of management's non-GAAP revenue guidance of around $194 million.The company also raised full-year core revenue guidance to $880 million to $890 million, up from the previous outlook of $855 million to $865 million. However, Cerebras is exposed to customer concentration risk. Three customers accounted for about 76% of the company's second-quarter revenue. Additionally, while Cerebras had $25.4 billion in remaining performance obligations (RPO) at the end of the second quarter, only 22% is expected to be recognized as revenue over the two years ending June 2028. SpaceX can fund its AI expansion more easily SpaceX's Connectivity segment generated around $4.3 billion of revenue and roughly $1.7 billion of operating income in the second quarter (ending June 30). This profitable business provides SpaceX with an important source of revenue to support its AI expansion. However, the AI segment posted an operating loss of around $1.3 billion while consuming $15.8 billion of capital expenditures during the quarter. Management expects SpaceX to reach a $100 billion annualized revenue run rate by December 2026, but achieving that target will require enormous investment. Which is the better AI-powered pick? Cerebras is currently trading at around 14.9 times analysts' expected 2027 revenue of $2.95 billion. SpaceX is even more expensive at roughly 17.4 times analysts' expected 2027 revenue of $105.47 billion (as of Aug. 24). While SpaceX clearly has the stronger financial base, the company's AI expansion is already extremely capital-intensive. Cerebras appears to offer the better five-year risk-reward balance. The risk is much higher, particularly because of customer concentration and the long timeline for converting its RPO into revenue. But if Cerebras can scale capacity while improving margins, its growth could justify that risk.
Cathie Wood's ARK sells AMD stock, buys Cerebras Systems By Investing.com
Cathie Wood's ARK ETF published their daily trades for Tuesday, August 25th, 2026, showcasing a strategic shift in its portfolio. The most significant move was a purchase of 93,290 shares of Cerebras Systems Inc (CBRS) across its ARKK and ARKW ETFs, amounting to a total dollar value of $17,298,764. This acquisition aligns with ARK's ongoing interest in the company, as reflected in previous trades. On the selling side, ARK divested 44,062 shares of Twist Bioscience Corporation (TWST) through its ARKK ETF, totaling $6,203,929. This sale follows a trend of reducing its position in Twist Bioscience, as observed in recent trading sessions. Advanced Micro Devices, Inc. (AMD) also saw a reduction in ARK's holdings, with the sale of 7,600 shares through its ARKW ETF, valued at $3,471,300. This continues ARK's recent pattern of offloading AMD shares. In another notable transaction, ARK sold 57,819 shares of Tempus AI, Inc. (TEM) through its ARKK ETF, amounting to $3,825,883. This move suggests a reevaluation of ARK's position in the AI sector. Additionally, ARK offloaded 8,945 shares of Roblox Corp (RBLX) through its ARKK ETF, with a total value of $346,708, further reducing its stake in the gaming platform after consistent sales over the past week. Perceptive Capital Solutions Corp (FRNM) saw ARK increasing its investment with the purchase of 14,549 shares through its ARKG ETF, totaling $200,485, marking a continued interest in this company. Lastly, ARK sold 9,063 shares of Brera Holdings PLC (SLMT) across its ARKK, ARKW, and ARKF ETFs, with a total dollar value of $37,702, maintaining its trend of decreasing exposure to this entity. These trades reflect ARK's dynamic approach to portfolio management, balancing between technology and biotech investments while realigning its focus on emerging opportunities. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Cerebras CS-4 Delivers A 30x Uplift In AI This Year, But Next-Gen Racks Already In Works With CS-5 Pumping Out 10K TPS Per User In 2027 & CS-6 Bringing 3D Wafer-Scale SRAM
Cerebras is rolling out its CS-4 AI rack-scale solution this year but is also working on its next-gen CS-5 and CS6 solutions. Cerebras Takes Wafer Scale Engine To The Next-Level With CS-4, CS-5, and CS-6 AI Racks Last week, Cerebras took the curtains off its CS-4 rack-scale solution, which is powered by the WSE-3T chip. The WSE-3T is a boosted version of the WSE-3 (Wafer Scale Engine), offering much higher capabilities. At Hot Chips 2026, Cerebras is providing a deeper dive into its rack-scale solutions while also giving us a look at its next-gen solutions. So starting off with the Cerebras CS-4, it offers up to a 2x uplift in token generation speed and up to a 10x uplift in throughput per watt versus Cerebras's CS-3 solution. Being much larger than any GPU or compute accelerator due to its wafer-scale design, the current-gen WS-3 is already much ahead of the aforementioned solutions in Token Generation speed. With CS-4, that lead is taken up to 30x across various models. One of the advantages of the wafer-scale design is that Cerebras has a lot of room to expand. The chip is massive in size versus today's leading AI accelerator, NVIDIA Rubin. A single NVIDIA Rubin chip delivers up to 22 TB/s memory bandwidth, and AMD's MI455X delivers up to 23.3 TB/s of raw memory bandwidth. Cerebras CS-4 with a single WSE-3T chip offers 43,200 TB/s bandwidth, which is 2000x more bandwidth than Rubin. But we also need to understand that the bandwidth figures for NVIDIA and AMD chips are based on HBM4 solutions, while Cerebras is measuring the raw BW offered by the SRAM onboard the wafer. Moving forward, Cerebras is integrating the WSE-3T chips on CS-4 within its nexus rack-scale platform. Compared to CS-3, the new solution is designed with modularity in mind, offering a simpler build, faster deployment, and independent integration of power, compute, and IO. Nexus Goes Modular With WSE Backpacks & A Wire-Free Package Each Nexus rack is attached to pluggable backpacks, which contain one WSE-3T chip, each. Each of these backpacks is an innovation on its own, featuring a wafer package attached to twice the cooling and power, a wafer IO module with twice the bandwidth, 2x faster latency and room for additional modular upgrades, and the whole pack leverages an efficient manufacturing process which uses 50% fewer components and is 60% automated versus CS-3. Power distribution is important for AI factories. Each loss can lead to a severe lack of compute output. On Rubin, it is claimed that the 50mm distance between the converters and silicon leads to major power losses along paths within the PCB. As such, the system requires more copper layers to reduce resistive losses, which add to the costs and complexity of the system. Cerebras bypasses these losses through its 54.5VDC Busbar which involves no PCB between the power and the chip. The chip sits directly on the DC/DC Power convertors, and then there's also the shorter distance between the array of AC/DC power converters, which reduces extra resistive power losses and parasitic inductances. The result is a 100x improvement versus a traditional GPU setup since the distances are cut down to just 0.5mm (vs 50mm). For IO, Cerebras makes use of a next-gen interface module which extends the fabric from wafer edges and is both modular and programmable for the future. The IO interface is also low latency and high bandwidth, made possible through new direct wafer link interfaces and a standard RoCE protocol network. Each backpack also includes integrated water conditioning. The pack houses a flow regulation actuator which guarantees proper wafer flow rate, a leak detection module, valved dry quick disconnects, and an energy meter, making it easy to install while monitoring the system for potential leaks. The cooling itself goes in the rear. On the front, Cerebras houses the power, which includes AC/DC PSUs with up to 277VAC input and 54.5VDC output. There are up to 30x PSU modules per backpack, so 90 in total, and all of these are air-cooled with dedicated fan modules for cooling smaller devices in the backpack. Another area in which Cerebras shows its rack prowess is the fabric. CS-4 features a 53.5 PB/s fabric on the wafer itself and has no need for cables. Meanwhile, NVIDIA's Rubin NVL72 racks feature 5000 cables, offering up to 260 TB/s of NVLINK fabric speeds. This means CS-4 offers 200x higher fabric bandwidth than GPU interconnects. The bandwidth and latency advantages don't stop at the fabric. The WSE-3T chip offers 2.4 Tb/s of aggregate bandwidth at 3us latency, while the network latency between the wafers is 1.7x higher. We then move to a generalized comparison between the CS-3 and CS-4 rack-scale solutions. CS-3 was capable of 125 PFLOPs on a single WSE-3 chip while CS-4 offers 750 PFLOPs of AI compute with three WSE-3T chips (250 PFLOPs per chip). It has 132 GB of SRAM (44 GB per chip) versus 44 GB on the previous rack, with much higher bandwidth and less than half the bandwidth. With the speeds and feeds done, Cerebras showcases what to expect in terms of AI compute while also highlighting the capabilities of its current CS-3 rack, which it claims already runs the largest frontier model (GPT-5.6 SOL @ 10T parameters). Lastly, for the CS-4, Cerebras has already announced that the rack is in early access and general availability is scheduled for Q3 2026. CS-5 Tackles The AI Wall With Boosted Capabilities While CS-6 Goes 3D But there's more: Cerebras is also announcing its next-gen CS-5 and CS-6 rack-scale solutions for the first time. According to Cerebras, CS-5 will be launching in 2027 and is "Designed to set another standard of speed and efficiency". This solution will scale from 30B to multi-trillion-parameter models. For Gemma 4 31B and gpt-oss 120B, the company estimates up to 10,000 tokens per second per user, and in frontier models such as DeepSeek, Kimi, GPT 5.6 SOL, CS-5 is expected to hit up to 5000 tokens per second per user with up to 3 million tokens per second per MW. There's also CS-6, which is expected to take full advantage of 3D packaging solutions with a yield-resilient architecture, a vertical power delivery solution, & a fully integrated cooling methodology. The Wafer Scale Engine for CS-6 will integrate Wafer-Scale SCRAM on top of the WSE chip through 3D integration, while being an order of magnitude smaller in footprint with the fastest AI inference speeds on the market. This is a very forward-looking design for now, but it looks like Cerebras has the stage set for future AI models and is scaling its wafer-scale engines to meet the accelerated AI growth big time. Follow Wccftech on Google to get more of our news coverage in your feeds.
As Cerebras Launches a New, Record-Setting AI Accelerator, Here's How You Should Play CBRS Stock
Cerebras Systems (CBRS) is giving investors another reason to pay attention to its ambitions in the rapidly expanding artificial intelligence (AI) accelerator market. On Aug. 18, the company unveiled its new CS-4 rack-scale platform, which it says can deliver up to 30 times faster AI inference than comparable GPU-based systems. Built around three new WSE-3 Turbo processors, CS-4 delivers 750 petaflops of AI compute, 7.2 terabits per second of I/O bandwidth, and 129.6 petabytes per second of memory bandwidth. The launch comes at a critical time for Cerebras. The company is seeking to establish itself as a credible alternative to Nvidia (NVDA) in AI inference, where demand is rising as businesses deploy increasingly sophisticated generative AI and agentic applications. Cerebras says CS-4 can support models exceeding 50 trillion parameters and reduce wafer-to-wafer latency to as little as two microseconds, potentially giving customers a significant speed advantage for latency-sensitive workloads. More News from Barchart However, the technology opportunity must be weighed against Cerebras' execution challenges. In its second quarter, reported revenue reached $180.1 million. Yet profitability remains a concern, and CBRS shares have shown considerable volatility following the company's recent earnings report. For investors, CS-4 could strengthen the long-term bullish case, but the stock remains a high-risk AI play. About Cerebras Systems Stock Cerebras Systems is a Sunnyvale, California-based artificial intelligence semiconductor company that develops specialized computing systems and processors designed to accelerate AI workloads, particularly inference. Its flagship Wafer-Scale Engine (WSE) technology integrates compute and memory on a single wafer, offering an alternative to conventional GPU-based architectures. The company has a market cap of around $49.1 billion. Cerebras has experienced significant volatility since its Nasdaq debut, as investor excitement over the AI infrastructure opportunity has been tempered by concerns surrounding its valuation and profitability. The company priced its IPO at $185 per share and started trading on May 14, 2026. CBRS opened at $350 and ended its first trading session at $311.07, marking a 68.2% gain over its IPO price and placing it among the year's strongest new listings.
Nvidia reportedly eyes another investment in Perplexity AI at a $30B valuation
Nvidia reportedly eyes another investment in Perplexity AI at a $30B valuation Nvidia Corp. is reportedly considering making another investment in the artificial intelligence search startup Perplexity AI Inc. A report by The Information says the chipmaker is holding talks with Perplexity over an investment that could push the startup's valuation to more than $30 billion. That would represent a jump of more than 50% from the $20 billion valuation Perplexity finalized about a year ago, when it last raised money. The size of Nvidia's potential investment was not disclosed, and there's no guarantee that any deal would be reached, The Information said, citing anonymous sources who are familiar with the discussions. Neither Nvidia nor Perplexity would comment on the reported discussions. Perplexity is an attractive target for investors for its business has continued to grow at a rapid rate. According to The Information, the startup has grown its annualized revenue run rate to an impressive $750 million, up from less than $250 million at the start of the year. If true, that would mean it has managed to triple its revenue run rate in just eight months. One of the main reasons for that impressive growth is Perplexity Computer, a cloud-based AI agent that was first released in April for Mac computers and later expanded to Windows devices. Perplexity Computer is designed to automate computer tasks for professional users. It acts as a general-purpose digital worker that can access authorized files and applications on a user's computer. Users can ask it to create or edit Word documents, update Excel spreadsheets, organize files, conduct online research and complete workflows involving multiple applications. The proposed investment would deepen an existing relationship between Nvidia and Perplexity. The chipmaker is already one of its main financial backers, alongside Amazon.com Inc. founder Jeff Bezos and SoftBank Group Corp. Nvidia has become an increasingly important partner for AI startups like Perplexity, and sees its bet on the startup as an investment in its future. As the world's top supplier of silicon for high-frequency AI inference, it has a vested interest in making sure that the search layer - which is a massive compute ecosystem - remains aligned with its chip ecosystem. What Nvidia doesn't want is for the likes of Perplexity and others to go sniffing around rival chipmakers such as Advanced Micro Devices Inc. and Cerebras Systems Inc., which both offer alternative chips for AI inference. In that way, Nvidia is investing in Perplexity as a kind of insurance policy to safeguard its future revenue stream against possible shifts in AI search architecture. Perplexity's strategic importance to Nvidia is amplified by its distribution efforts, such as its integration with Samsung Electronics Co. Ltd.'s Bixby assistant, which brings its search capabilities to around 800 million devices globally. The AI search firm is also believed to be fixed on a 2028 initial public offering, which means Nvidia has a clear timeline to realize a return on its investment. Nvidia's broader portfolio includes many of its major compute customers, including OpenAI Group PBC, Anthropic PBC, SpaceX Corp.'s xAI, Poolside Inc. and Safe Superintelligence Inc. It shows how the chipmaker has taken a systematic approach to ensuring its market dominance. By supplying the critical infrastructure and acting as a key investor at the application layer, Nvidia has effectively built a self-reinforcing cycle of demand for its chips. Nvidia is also trying to provide direct funding to customers that need to invest in its AI compute hardware. It recently struck a deal with six of Wall Street's biggest financial institutions to provide more than $500 billion in financing for AI infrastructure projects, including its own and those of its customers. Meanwhile, Perplexity has been racing to build out the infrastructure foundation it needs to support its own growth. Earlier this year, it struck a $750 million deal with Microsoft Corp. that will see it adopt that company's Azure cloud services to help run its AI workloads.
Cerebras Systems (CBRS) Revenue Surges: Why Did CBRS Stock Crash, and What About AMD?
On August 12, 2026, Cerebras Systems Inc. (NASDAQ:CBRS) shares tumbled about 14% in extended trading, even after the AI chipmaker's second-quarter revenue rose 74.3% year over year and it raised its full-year guidance for the second time since going public in May 2026. Why This Matters Cerebras positioned itself as a genuine Nvidia challenger at its May 2026 IPO. This quarter's mixed results, a revenue miss paired with a smaller-than-expected loss, test how investors read a business leaning more on cloud revenue than chip sales. That raises the real question: is Cerebras becoming a cloud-services company that happens to make chips, rather than the chip challenger investors bought into? The Bull Case: Cerebras Total second-quarter revenue rose 74.3% year over year to $180.1 million, though that missed the $194.2 million analysts expected, according to LSEG. The adjusted loss narrowed sharply to 5 cents a share, well inside the 17 cents analysts modeled and below the $40.5 million adjusted loss posted a year earlier. CEO Andrew Feldman said AI demand is "through the roof," as fast-inference pricing lifts margins. Cerebras Systems Inc. (NASDAQ:CBRS) raised its full-year core revenue guidance to $880 million to $890 million, up from $855 million to $865 million, and lifted its annual adjusted gross margin target to 41% to 43% from 38% to 41%. The firm ended the quarter with $25.4 billion in remaining performance obligations. OpenAI can now use Cerebras chips for its latest model. Despite the post-earnings slide, shares closed that day at $262.06, still up 42% from the $185 IPO price. The Bear Case: Cerebras The headline number is still unattractive: Cerebras posted a GAAP net loss of $450.5 million for the quarter, compared with a $309.5 million profit a year earlier. Even though most of that swing came from $386.6 million in stock-based compensation costs rather than the underlying business. Hardware sales, including its core AI chips, actually declined to $54.1 million from $70.3 million a year earlier, which means more of Cerebras Systems Inc. (NASDAQ:CBRS)'s growth now comes from renting back its own systems to cloud customers than from selling chips outright. Gross margin fell to 40.6% from 46.5% in the prior quarter for the same reason. Morgan Stanley analysts said "execution remains the key debate" given the scale and speed of the capacity buildout required. Both Citi and Mizuho trimmed their price targets after the results.
Cerebras Systems (CBRS) Revenue Surges: Why Did CBRS Stock Crash, and What About AMD?
On August 12, 2026, Cerebras Systems Inc. (NASDAQ:CBRS) shares tumbled about 14% in extended trading, even after the AI chipmaker's second-quarter revenue rose 74.3% year over year and it raised its full-year guidance for the second time since going public in May 2026. Why This Matters Cerebras positioned itself as a genuine Nvidia challenger at its May 2026 IPO. This quarter's mixed results, a revenue miss paired with a smaller-than-expected loss, test how investors read a business leaning more on cloud revenue than chip sales. That raises the real question: is Cerebras becoming a cloud-services company that happens to make chips, rather than the chip challenger investors bought into? The Bull Case: Cerebras Total second-quarter revenue rose 74.3% year over year to $180.1 million, though that missed the $194.2 million analysts expected, according to LSEG. The adjusted loss narrowed sharply to 5 cents a share, well inside the 17 cents analysts modeled and below the $40.5 million adjusted loss posted a year earlier. CEO Andrew Feldman said AI demand is "through the roof," as fast-inference pricing lifts margins. Cerebras Systems Inc. (NASDAQ:CBRS) raised its full-year core revenue guidance to $880 million to $890 million, up from $855 million to $865 million, and lifted its annual adjusted gross margin target to 41% to 43% from 38% to 41%. The firm ended the quarter with $25.4 billion in remaining performance obligations. OpenAI can now use Cerebras chips for its latest model. Despite the post-earnings slide, shares closed that day at $262.06, still up 42% from the $185 IPO price. The Bear Case: Cerebras The headline number is still unattractive: Cerebras posted a GAAP net loss of $450.5 million for the quarter, compared with a $309.5 million profit a year earlier. Even though most of that swing came from $386.6 million in stock-based compensation costs rather than the underlying business. Hardware sales, including its core AI chips, actually declined to $54.1 million from $70.3 million a year earlier, which means more of Cerebras Systems Inc. (NASDAQ:CBRS)'s growth now comes from renting back its own systems to cloud customers than from selling chips outright. Gross margin fell to 40.6% from 46.5% in the prior quarter for the same reason. Morgan Stanley analysts said "execution remains the key debate" given the scale and speed of the capacity buildout required. Both Citi and Mizuho trimmed their price targets after the results.
Cisco & Cerebras Orders Up, Stocks Down
In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss: * Cisco earnings. * Strong hardware, weak software. * Cerebras, making sense of its confusing earnings. * Can innovations like Cerebras threaten the AI incumbents? * Hidden Gems earnings lightning round. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue " A full transcript is below. Should you buy stock in Cisco Systems right now? Before you buy stock in Cisco Systems, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Cisco Systems wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $429,223!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,318,055!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks " *Stock Advisor returns as of August 22, 2026. This podcast was recorded on Aug. 13, 2026. Tyler Crowe: The wild ups and downs of earnings season continues. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Jon Quast and Matt Frankel. Guys, it has been a wild up and down of the second quarter. Look, we could go into the several reasons, and maybe once the earning season dies down, we'll really do a postmortem of why this seems to be happening more with the AI trade recently and the volatility of the recent stock market. But we're a little busy with earnings right now. We had a couple of big earnings reports. We had Cisco, we had Cerebras, which is a new IPO, a lot of investor excitement around that. Then we really dug into some under-the-radar stocks, doing a little bit of a lightning round, letting us indulge our analyst tendencies a little bit here. But let's start with Cisco. Shares of Cisco are down 7.4% as we record. Considering the moves we've seen so far in the second quarter, that's actually a rather mild reaction for the stock. As with anything that's selling equipment to data centers and AI, sales growth looked great. But it seems as though the fly in the soup was related to service revenue, which came in a little lower than expected. Matt, to start with you. What stood out in the report?
Cisco & Cerebras Orders Up, Stocks Down
In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss: * Cisco earnings. * Strong hardware, weak software. * Cerebras, making sense of its confusing earnings. * Can innovations like Cerebras threaten the AI incumbents? * Hidden Gems earnings lightning round. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue " A full transcript is below. Should you buy stock in Cisco Systems right now? Before you buy stock in Cisco Systems, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Cisco Systems wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $429,223!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,318,055!* Now, it's worth noting Stock Advisor's total average return is 965% -- a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks " *Stock Advisor returns as of August 22, 2026. This podcast was recorded on Aug. 13, 2026. Tyler Crowe: The wild ups and downs of earnings season continues. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Jon Quast and Matt Frankel. Guys, it has been a wild up and down of the second quarter. Look, we could go into the several reasons, and maybe once the earning season dies down, we'll really do a postmortem of why this seems to be happening more with the AI trade recently and the volatility of the recent stock market. But we're a little busy with earnings right now. We had a couple of big earnings reports. We had Cisco, we had Cerebras, which is a new IPO, a lot of investor excitement around that. Then we really dug into some under-the-radar stocks, doing a little bit of a lightning round, letting us indulge our analyst tendencies a little bit here. But let's start with Cisco. Shares of Cisco are down 7.4% as we record. Considering the moves we've seen so far in the second quarter, that's actually a rather mild reaction for the stock. As with anything that's selling equipment to data centers and AI, sales growth looked great. But it seems as though the fly in the soup was related to service revenue, which came in a little lower than expected. Matt, to start with you. What stood out in the report? Matt Frankel: About 85% of the companies in the S&P 500 have beat earnings expectations this quarter. It begs the question, why do we have earnings expectations at this point? But an earnings beat alone isn't enough to move the needle, it seems, this quarter. Even a beaten raise is not enough to move the needle here. Cisco itself has now beaten earnings estimates for the past five quarters in a row, so it's just expected at this point. The AI story was impressive. The latest guidance, which was already revised upward several times, was calling for about nine billion dollars in AI orders this year, and Cisco produced 9.3 billion. But honestly, that's not as impressive of a beat as we've seen Cisco make in recent quarters. Remember their original guidance was for $5 billion. They beat that through three quarters. That was an impressive beat. Maybe the market's starting to think that the growth is appropriately priced in. Future revenue growth could be a lot stronger than the numbers suggest. Cisco's product orders in Q4 grew by 35% year over year compared with just an 18% revenue growth rate. That implies we might see an acceleration coming up. Notably, though, management didn't provide new guidance for that AI order number. I was certainly looking for that for the 2027 fiscal year, and I have to believe many investors were, as well. Even after today's reaction, Cisco is trading for about 40 times earnings, and it's still within a few percentage points if it's all time high. It seems the beaten raise it just simply didn't live up to expectations, but all in all, a very solid quarter. Jon Quast: What decade is it? Cisco, this is incredible revenue growth, and it's not just revenue growth that stood out for me, Tyler. It's also the earnings growth. We did have the 12% top line growth for the whole year. But you look at the earnings per share growth. That's profit minus the share account divided over the share account, 31% growth for earnings per share. That is a good sign when earnings per share are growing faster than revenue. Then, for the upcoming year also expecting maybe 16% revenue growth, so a slight acceleration into the coming year, but then also that earnings per share growth, once again, projecting better than 20% growth for the earnings in the upcoming year. Yes, Matt is right. It is trading at a premium valuation at 37 times earnings. That said, the top-line growth is great. The profit growth is even better, and the strong demand that it is seeing certainly helps with that profitability. That's what stood out to me. Tyler Crowe: For what it's worth, forward estimates have it at about a price-to-earnings of about 26. But as Matt said, everyone's beating expectations all the time, so maybe that's even sandbagging it a little bit here, doing the dog-and-pony show of earnings expectations and all that stuff. Now, look, the stock is down, so I did try to dig and be like, well, why is that? Everything you guys mentioned all seems pretty good. Something that stood out was the remaining performance obligations. RPOs, if you want to use cool kid jargon, it grew about 7% in the most recent quarter. Compared to other AI hardware and software companies, that is rather light. As much as there is demand, and it is incredibly fierce demand. At the same time, competition in this industry is getting stronger, as well as new technologies are coming out that could somewhat displace a little bit of what Cisco may be doing. My question to you guys was seeing those RPO numbers maybe being a little bit more tepid. Is this a case where Cisco may be losing shares to the Arista Networks or someone else in this industry that I might not be considering. Jon Quast: Well, I think we need to be very careful looking at the percentage numbers when it comes to Cisco, especially in comparison to other companies that are reporting percentages. You think about Cisco, and the reason I did jokingly say, what decade is this is that this is a legacy business. This company has been around a while, already generates more than $60 billion in annual revenue. This is a very large business, and many of Cisco's customers are more of these legacy customers. There is a component here that you're remaining performance obligations, if they're being driven by AI, that's going to be somewhat lost in the overall mix of the business because it has so many legacy customers. Whereas maybe a more pure-play competitor isn't going to experience that, so the percentage numbers are going to look a lot different. I think we need to be careful from drawing too many conclusions with that. If we can just zoom out, I think from a Hidden Gems Investing perspective, we are looking for not necessarily a hidden company, but something hidden in the business analytics that maybe people are overlooking for this reason or the other, that we're looking for something hidden that contribute to a stock performing well over time, I want to give Dell as an example here. Just a couple of years ago, Dell's AI server numbers were just a very small percentage of the business, but they were really starting to uptick really rapidly. You could start seeing that, hey, Dell is this huge legacy business, but all of a sudden becoming an AI player. Now that stock is up nearly 800% in just three years, but some of the signs were there earlier for those who were going to dig beneath the surface. I think that, that generally speaking, can be the case. When you see a legacy business that's all of a sudden benefiting from some booming industry, it might be getting lost. Those numbers, that narrative might be getting lost in the mix. Taking some time, digging deeper beneath the surface can sometimes yield something really important from a Hidden Gems perspective. I'd say for Cisco, don't dismiss it. We are looking at AI infrastructure orders up nearly 400% year over year, and it's fiscal 2026, looking for nearly 90% growth in those AI infrastructure orders in the coming year. That is hidden beneath the surface, and it's worth paying attention to. Matt Frankel: To unpack your question a little bit more, Tyler, Cisco was losing to Arista at first when the AI boom first came up. Then they made a really smart decision to unbundle their full hardware stack, meaning that Cisco chips could be installed in devices they didn't make. That really helped them gain ground. You're right. The RPO looks like. But Cisco's RPO is majority made up of software renewals, the legacy business Jon was talking about. As Jon said, for now, AI is just a small percentage of what it does. The orderbook grew sharply, as I mentioned, 35% year over year, and that doesn't show up mostly in the RPO numbers because Cisco is shipping these products honestly too quick for them to just sit on the backlog. Arista is growing faster than Cisco right now, if you look at just the top line. But it's really a case of pure play versus conglomerate. It'd be comparing Berkshire Hathaway to a pure-play energy company when you're looking at energy growth. The company's order book shows that it is still gaining AI traction, as Jon just mentioned. Their blended growth looks slower for sure, but right now, the rising hit is lifting all shifts in AI network. Tyler Crowe: Well, hopefully, we'll have a repeat performance from Cisco that we saw from Dell over the past three years. It's certainly trending that way with the stock up 62% over the past year. Maybe 7% seems pretty small pennies by comparison. Coming up to the break, we're going to look into Cerebras' earnings. ADVERTISEMENT: You just found out that your sales team is at risk of missing quota. Don't panic, just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk and fix it before it's missed. Question answered, action taken, crisis averted. When you have critical business questions that need answers, don't just file a ticket and wait weeks for an outdated report. Describe what you need and have Rippling AI build it instantly from your live people and business data, whether it's a dashboard with detailed charts or automated workflows with the right triggers, conditions, and approvals. Ready to rule your business, head to rippling.ai/fool to get the only AI built to give you full visibility and take complex actions across your entire organization. That's rippling.ai/fool. Sign up for exclusive access today rippling.ai/fool. ADVERTISEMENT: The people who seem to get more done than everyone else, they're not working longer hours or running on more caffeine. They've just stopped wasting time on the stuff that doesn't move work forward. Switching apps, re-explaining context, hunting for files. Those aren't small inefficiencies. There hours wasted every week. Superhuman Go gives you those hours back. From the makers of Grammarly, Go is an AI chat that sits inside every tab and tool you already use. Always available and ready to help you with what you're working on. Ask it to draft something, summarize a long thread, pull up a file, or prep you for a meeting. Go handles it without you ever leaving the page you're on. This is what it looks like when AI actually fits into your work instead of adding to it. It's like having a teammate whose only job is to help you be better at yours. Go keeps up so you can move forward. With Go working with you, you can show off what you do best. See what Superhuman Go can do at superhuman.com. That's superhuman.com. Tyler Crowe: I got to admit, in between segments, I realized I made a bit of a mistake. It is not Cerebras, apparently. I stay working from home way too much and don't get out and hear other people talking. Cerebras Systems is the company we're going to be talking about. This is what I get for not listening on the conference calls again. Everyone can make fun of me in the comments for mispronouncing this company's name. Makes me look like I don't know what I'm talking about. But well, we're going to do it anyways. The funny thing is here is, this is a company, it's gotten a lot of Wall Street and investor buzz, and it's not having a great day on Wall Street. Company reported earnings that were after the close yesterday, and the stocks down about 13% as we're taping. This is a novel concept for computing an inference that recently went public. Guys, what did Cerebras Systems report say, and what were your reactions? Jon Quast: Well, look, Tyler, everything about this company is confusing, from what it does to how it reports its numbers, apparently, to how its name is pronounced. Investors can be forgiven here if they needed a minute just to take some time and process what this report was all about. Matt Frankel: At the core, the idea behind this business is simple. They build larger chips than any of the other ones that essentially take the place of several Nvidia chips and other components being networked together. That's the idea. It would take less power, lower latency, things like that. The two revenue numbers in the report are uniquely confusing. They report GAAP revenue, which is what we all expect, and then a number called core revenue, which is actually not only different but higher. That could be confusing to investors. GAAP revenue grew 74%, but that missed estimates. Cerebras' core revenue more than doubled and beat management's own guidance. Now, their core revenue, it excludes the impact of warrants that the company issues to some of its largest customers, specifically OpenAI. Accounting rules say that you have to account for the value of those warrants and subtract them from your revenue. It's not really a revenue hit, which is why they choose to report core revenue, but it's confusing. During the quarter, the revenue mix shifted toward Cloud revenue away from hardware, driven by its OpenAI deployments, while hardware revenue actually fell by 23%, so that could right there tell you why the stock fell. Their core gross margins, or because of some other factors, fell by nearly six percentage points. It's temporarily renting back some of the hardware previously sold. Management said Q3 should be the low point for margins, and it should come up. But with the money-losing business that a lot of people don't really understand the accounting behind and things like that, it just adds to the confusion. Cerebras' bulkase it's got over a $25 billion backlog. It has nearly $9 billion dollars of cash on its balance sheet, and management specifically said, and I'm quoting, "that AI demand is through the roof, and revenue will triple year over year in 2027." This is a business that investors understandably simply seem to be having a tough time wrapping their heads around, and I really don't blame them with a revenue miss, margin issues, and a net loss that was surprisingly not great. I'm not terribly surprised that the stock fell in reaction to this quarter's report. Jon Quast: You look at the guidance, and I do want to just correct the record here from some of the chatter I've seen on social media, some investors out there saying, Cerebras is intending to 10X its revenue in the coming year. That is not what the company said. Matt pointed out the correct number. It expects to triple its revenue year over year in the coming year, which would be absolutely incredible, and I wish him well. But the 10X number, that is for the manufacturing. This is a fabulous semiconductor company, which means it doesn't make its own stuff. That is made by other companies, specifically, Taiwan Semiconductor is the supplier here. That 10X number is from its partners saying that they're going to increase the manufacturing. You look at Taiwan Semiconductor, it's a pretty conservative company, so I do think that in a way, this is a vote of confidence to dedicate some energy to making sure that it can 10X the supply of Cerebras' products. But I do want to point out the difference here. The revenue we're talking core revenue not actual revenue. The core revenue looking to triple, but the manufacturing looking to 10X, there's going to be, then that is a huge expected increase of revenue ongoing beyond the coming year. Tyler Crowe: Jon, I'm shocked to discover that things that are said on social media aren't necessarily correct. Look, Cerebras hits at one of the challenges that I have been struggling with to work through with all of this AI spending, AI infrastructure build-out stuff. It claims it's AI chips, which look closer to the size of bathroom floor tiles than what we would normally see in CPUs or GPOs. They claim they're faster. They have higher on chip memory. They require less power than current offerings. If it is as powerful as it claims, whether that's true or not, it remains to be seen, I would, in theory, solve a lot of the problems we see with memory and electricity demand because we can do more with less. One of the things I've always said is with the current spending and the trajectory of what we have with the equipment we have, it's not going to work because it just will take too much power, basically. To me this seems to undermine a case for some of the biggest winners so far, like Nvidia some of the memory ship members, and we can even go further down the AI infrastructure chain of, like, maybe we just need a couple fewer data centers of the line here. Do you agree with this, or am I perhaps reading it wrong? Matt Frankel: It certainly feels Cerebras is doing more with less should hurt Nvidia and the memory companies and the other chipmakers. But so far in this cycle of AI adoption, every single efficiency gain we've seen has just expanded the appetite overall. In other words, right now, there's so much demand that both Cerebras and Nvidia can grow exponentially. Nvidia might be nearing the end of its exponential growth because its revenue is more than Walmart, not really but getting close. But right now cheaper AI has meant more AI, not less, and the disruption is real. But the fact that Cerebras is relatively tiny compared to Nvidia and has some margin issues of its own and production issues and ramp up issues, it really shows in Nvidia's moat right now. I don't think Nvidia should be too worried for the time being, and Nvidia is not exactly just laying down and letting themselves be disrupted. They have a much deeper pockets than even Cerebras for innovation. I don't think they should be too worried. Jon Quast: I don't think it's as simple as saying Nvidia versus Cerebras. I think the answer is much more complicated and nuanced than that because of how they actually work in the real world. Nvidia, of course, with its graphics processing units, GPUs, by the way, Nvidia didn't invent those for AI. They preexist the current boom in AI. The reason that they were adopted into AI, specifically training, was because they were very good at general-purpose activities. What Cerebras is building is an ASIC. This is a custom thing. This is very good at a specialized activity and specifically inference, but for specific configurations. This is why it's partnered with OpenAI, for example, so that OpenAI can partner with Cerebras for certain configurations for its custom hardware option. You look at that, you're basically answering a question between generalization and specialization. Is all of the AI out there going to start specializing, and that is going to give greater rise to a player such as Cerebras, or are all of these software products out there are going to say more general purpose, in which case that favors a more general hardware option? I don't know if that's an easy question to answer. I think that my answer is probably both. I think that you're going to see a rise generally speaking, and that's going to be good for GPUs. But I do think that you're going to start seeing some specialization and that's going to give rise to some niche markets that Cerebras can fill. The question then becomes, how big are those niches? Tyler Crowe: It certainly going to be the battle of the AI data enter space over the next couple of years as these models become more powerful and more stuff is custom built for these models. It's coming up after the break. We're going to indulge our analyst tendencies a little bit and do a lightning round of earnings so far this quarter. Jon, in our first segment, you were mentioning the Hidden Gems being the hidden assets of companies, and part of Hidden Gems Investing style isn't just obscure companies, but there is also the hidden aspect where it is hidden companies, maybe off not the companies most people would think of. We've been getting a lot of feedback from listeners that we should probably indulge in a classical Hidden Gems part of the phrase and indulge a little bit more here. We're going to do basically the stock market equivalent of some deep cut or live album indie band stuff for this lightning round here. Earnings are starting to wind down, and so we're doing a lightning round of under-the-radar earnings reports. The companies that we love, we don't get to talk them much about. Guys, you get to go full stock market sicko here. What do you want to highlight? Jon, we'll start with. Jon Quast: I love highlighting Xometry. Anytime I get a chance, that is ticker symbol XMTR. This is a company that I was fortunate enough to find when it was trading down in the teens, now up in the 90s, but this is a company for most people who don't know what this company does. Think of all your custom manufacturing that exists in the world. Most of that is offline. Most of that you need to be close to a shop. You need to email them if you need something made, manufactured, you need some bolts made, whatever. You have to then talk to them on email maybe, or just go into the shop, and it's got to be close to where you need the product. Xometry changes that by creating basically the ecommerce of custom manufacturing, and what its secret sauce is, is basically you submit your plans through the Xometry portal and it is able to give you through AI instant pricing. It prices the job instantly, and you can take it or leave it. Lead times are cut drastically down, and then it shops out its bid to these custom manufacturers who can actually do the work. It chops it out at a slightly different price. The spread is what its revenue, what its profit is. It's not ever going to be a great gross margin business necessarily, but the revenue growth and the case for this, I think is huge, and the top line growth is showing up 41% in the most recent quarter. Last week that it reported it has reported four straight quarters of accelerating growth right now. One of the things that attracted me to Xometry early on, it's not the first company to try this, but the user growth has been just fantastic. Active buyers on the platform up 20% in the most recent quarter, record new addition. The adoption curve is what showed me that this could be a winner long-term. Still less than 1% penetrated into its total addressable market. But what I think could be huge here is it just partnered with Siemens. This is a company that helps automakers and airlines start to plan out their products and draw it all up, design the products that they need. Integration with Xometry now helps them have pricing in real time. Then, when they get everything just the way that they want, they can basically hit a buy button, and now all of a sudden, that is being shopped out on the Xometry platform. I think that this could be a huge adoption driver long term. Xometry is a company that I'm happy to highlight. Matt Frankel: I wanted to bring up a fintech company, a surprise that I haven't talked about in a while. It's called Marqeta, ticker symbol is MQ. They're known for providing third-party payment infrastructure for other companies. Most notably, their biggest customer is Block. They provide the card payment infrastructure for Cash App. That makes up a little over 41% of their revenue, but that's down significantly. It was 46% a year ago. It was the majority of their income a couple years ago. They got some much-needed diversification, and I really wanted to highlight this one because it feels like they've turned a corner profitability-wise. A total payment volume of $120 billion. That was up 32% year over year, the fourth straight quarter where that growth rate was above 30%. Not just that, they actually had positive net income on a GAAP basis, not just on an adjusted basis or something like that. The second quarter since they've turned profitable, adjusted EBITDA margin is now at 21% in climbing, they're buying back shares because they think it's cheap. Marqeta had its struggles. It actually did a reverse split not that long ago because it had been beaten down. This was a COVID-era IPO. The stock was down on this report due to a accelerating growth forecast. A lot of that's because Cash App is not an accelerating source of growth for them anymore. It's very cheaply valued on a price to sales ratio historically for this stock. The question is long term, can it keep those growth rates up while diversifying away from Block? That remains to be seen. That's why it's cheap, but it's one that's definitely back on my radar right now. Tyler Crowe: Well, I went through my Rolodex, trying to find the obscure stock I wanted to go through, and I saw that BBB Foods, ticker TBBB reported today, and the stocks up 15%. I was like, well, I just got to cover this one. For those who may have not have heard this company, it is a hard discount grocery retailer. Think like Aldi, maybe Lidl, if you live in Europe, that no-frills, not a lot of decoration. Just moving product as quickly you can at a relatively low price. This company is completely based in Mexico, has about 3,000 stores. For the quarter, sales were up 38.7% year over year, and same-store sales growth. The comps basically at the existing stores was up 20%, which I think was absolutely incredible. I haven't seen a lot of retailers these days putting up same-store sales memories like that. Store account growth was about 9%. They added about 125 new locations in the quarter, puts them on pace for about 500, 5,600 they want to put in this year? It sounds a lot, but with 3,200 so far, they're aiming for 14,000 total all across Mexico, so there's a lot of left to growth there. What was surprising to me. Again, they're growing really fast, and despite the high investment levels, they're generating free cash flow, basically because they're moving products so quickly. Again, that rapid same-store sales growth. They're generating free cash flow. It's just the turnover this company has been absolutely incredible, they're generating immense amounts of free cash for what is a relatively small start-up Mexican grocery retailer. I fell in love with this company when I read the IPO prospectus a couple of years ago, bought shares, and I've been delighted with this success so far. Hopefully, and we can make this a tradition of every earnings report we get to indulge in the obscure stocks that we love to follow every once in a while, and hope the listeners enjoyed it, as well. But that is all the time we have for today. Matt, Jon, thanks for your insights. I'm going to hit "Disclosure" and we'll get out of here. As always, people in the program may have interest in the stocks to talk about, and The Motley Fool may have recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. See our full advertising disclosure, please check out our shown out. Thanks to you producer Bart Shannon and the rest of The Motley Fool team. Jon, Matt, and myself, thanks for listening, and we'll chat again soon. Jon Quast has positions in Xometry. Matt Frankel, CFP® has positions in Berkshire Hathaway and Block. Tyler Crowe has positions in BBB Foods and Berkshire Hathaway. The Motley Fool has positions in and recommends Arista Networks, BBB Foods, Berkshire Hathaway, Block, Cisco Systems, Nvidia, Taiwan Semiconductor Manufacturing, Walmart, and Xometry. The Motley Fool recommends Marqeta. The Motley Fool has a disclosure policy.
Cisco & Cerebras Orders Up, Stocks Down
In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss: * Cisco earnings. * Strong hardware, weak software. * Cerebras, making sense of its confusing earnings. * Can innovations like Cerebras threaten the AI incumbents? * Hidden Gems earnings lightning round. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. This podcast was recorded on Aug. 13, 2026. Tyler Crowe: The wild ups and downs of earnings season continues. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Jon Quast and Matt Frankel. Guys, it has been a wild up and down of the second quarter. Look, we could go into the several reasons, and maybe once the earning season dies down, we'll really do a postmortem of why this seems to be happening more with the AI trade recently and the volatility of the recent stock market. But we're a little busy with earnings right now. We had a couple of big earnings reports. We had Cisco, we had Cerebras, which is a new IPO, a lot of investor excitement around that. Then we really dug into some under-the-radar stocks, doing a little bit of a lightning round, letting us indulge our analyst tendencies a little bit here. But let's start with Cisco. Shares of Cisco are down 7.4% as we record. Considering the moves we've seen so far in the second quarter, that's actually a rather mild reaction for the stock. As with anything that's selling equipment to data centers and AI, sales growth looked great. But it seems as though the fly in the soup was related to service revenue, which came in a little lower than expected. Matt, to start with you. What stood out in the report? Matt Frankel: About 85% of the companies in the S&P 500 have beat earnings expectations this quarter. It begs the question, why do we have earnings expectations at this point? But an earnings beat alone isn't enough to move the needle, it seems, this quarter. Even a beaten raise is not enough to move the needle here. Cisco itself has now beaten earnings estimates for the past five quarters in a row, so it's just expected at this point. The AI story was impressive. The latest guidance, which was already revised upward several times, was calling for about nine billion dollars in AI orders this year, and Cisco produced 9.3 billion. But honestly, that's not as impressive of a beat as we've seen Cisco make in recent quarters. Remember their original guidance was for $5 billion. They beat that through three quarters. That was an impressive beat. Maybe the market's starting to think that the growth is appropriately priced in. Future revenue growth could be a lot stronger than the numbers suggest. Cisco's product orders in Q4 grew by 35% year over year compared with just an 18% revenue growth rate. That implies we might see an acceleration coming up. Notably, though, management didn't provide new guidance for that AI order number. I was certainly looking for that for the 2027 fiscal year, and I have to believe many investors were, as well. Even after today's reaction, Cisco is trading for about 40 times earnings, and it's still within a few percentage points if it's all time high. It seems the beaten raise it just simply didn't live up to expectations, but all in all, a very solid quarter. Jon Quast: What decade is it? Cisco, this is incredible revenue growth, and it's not just revenue growth that stood out for me, Tyler. It's also the earnings growth. We did have the 12% top line growth for the whole year. But you look at the earnings per share growth. That's profit minus the share account divided over the share account, 31% growth for earnings per share. That is a good sign when earnings per share are growing faster than revenue. Then, for the upcoming year also expecting maybe 16% revenue growth, so a slight acceleration into the coming year, but then also that earnings per share growth, once again, projecting better than 20% growth for the earnings in the upcoming year. Yes, Matt is right. It is trading at a premium valuation at 37 times earnings. That said, the top-line growth is great. The profit growth is even better, and the strong demand that it is seeing certainly helps with that profitability. That's what stood out to me. Tyler Crowe: For what it's worth, forward estimates have it at about a price-to-earnings of about 26. But as Matt said, everyone's beating expectations all the time, so maybe that's even sandbagging it a little bit here, doing the dog-and-pony show of earnings expectations and all that stuff. Now, look, the stock is down, so I did try to dig and be like, well, why is that? Everything you guys mentioned all seems pretty good. Something that stood out was the remaining performance obligations. RPOs, if you want to use cool kid jargon, it grew about 7% in the most recent quarter. Compared to other AI hardware and software companies, that is rather light. As much as there is demand, and it is incredibly fierce demand. At the same time, competition in this industry is getting stronger, as well as new technologies are coming out that could somewhat displace a little bit of what Cisco may be doing. My question to you guys was seeing those RPO numbers maybe being a little bit more tepid. Is this a case where Cisco may be losing shares to the Arista Networks or someone else in this industry that I might not be considering. Jon Quast: Well, I think we need to be very careful looking at the percentage numbers when it comes to Cisco, especially in comparison to other companies that are reporting percentages. You think about Cisco, and the reason I did jokingly say, what decade is this is that this is a legacy business. This company has been around a while, already generates more than $60 billion in annual revenue. This is a very large business, and many of Cisco's customers are more of these legacy customers. There is a component here that you're remaining performance obligations, if they're being driven by AI, that's going to be somewhat lost in the overall mix of the business because it has so many legacy customers. Whereas maybe a more pure-play competitor isn't going to experience that, so the percentage numbers are going to look a lot different. I think we need to be careful from drawing too many conclusions with that. If we can just zoom out, I think from a Hidden Gems Investing perspective, we are looking for not necessarily a hidden company, but something hidden in the business analytics that maybe people are overlooking for this reason or the other, that we're looking for something hidden that contribute to a stock performing well over time, I want to give Dell as an example here. Just a couple of years ago, Dell's AI server numbers were just a very small percentage of the business, but they were really starting to uptick really rapidly. You could start seeing that, hey, Dell is this huge legacy business, but all of a sudden becoming an AI player. Now that stock is up nearly 800% in just three years, but some of the signs were there earlier for those who were going to dig beneath the surface. I think that, that generally speaking, can be the case. When you see a legacy business that's all of a sudden benefiting from some booming industry, it might be getting lost. Those numbers, that narrative might be getting lost in the mix. Taking some time, digging deeper beneath the surface can sometimes yield something really important from a Hidden Gems perspective. I'd say for Cisco, don't dismiss it. We are looking at AI infrastructure orders up nearly 400% year over year, and it's fiscal 2026, looking for nearly 90% growth in those AI infrastructure orders in the coming year. That is hidden beneath the surface, and it's worth paying attention to. Matt Frankel: To unpack your question a little bit more, Tyler, Cisco was losing to Arista at first when the AI boom first came up. Then they made a really smart decision to unbundle their full hardware stack, meaning that Cisco chips could be installed in devices they didn't make. That really helped them gain ground. You're right. The RPO looks like. But Cisco's RPO is majority made up of software renewals, the legacy business Jon was talking about. As Jon said, for now, AI is just a small percentage of what it does. The orderbook grew sharply, as I mentioned, 35% year over year, and that doesn't show up mostly in the RPO numbers because Cisco is shipping these products honestly too quick for them to just sit on the backlog. Arista is growing faster than Cisco right now, if you look at just the top line. But it's really a case of pure play versus conglomerate. It'd be comparing Berkshire Hathaway to a pure-play energy company when you're looking at energy growth. The company's order book shows that it is still gaining AI traction, as Jon just mentioned. Their blended growth looks slower for sure, but right now, the rising hit is lifting all shifts in AI network. Tyler Crowe: Well, hopefully, we'll have a repeat performance from Cisco that we saw from Dell over the past three years. It's certainly trending that way with the stock up 62% over the past year. Maybe 7% seems pretty small pennies by comparison. Coming up to the break, we're going to look into Cerebras' earnings. ADVERTISEMENT: You just found out that your sales team is at risk of missing quota. Don't panic, just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk and fix it before it's missed. Question answered, action taken, crisis averted. When you have critical business questions that need answers, don't just file a ticket and wait weeks for an outdated report. Describe what you need and have Rippling AI build it instantly from your live people and business data, whether it's a dashboard with detailed charts or automated workflows with the right triggers, conditions, and approvals. Ready to rule your business, head to rippling.ai/fool to get the only AI built to give you full visibility and take complex actions across your entire organization. That's rippling.ai/fool. Sign up for exclusive access today rippling.ai/fool. ADVERTISEMENT: The people who seem to get more done than everyone else, they're not working longer hours or running on more caffeine. They've just stopped wasting time on the stuff that doesn't move work forward. Switching apps, re-explaining context, hunting for files. Those aren't small inefficiencies. There hours wasted every week. Superhuman Go gives you those hours back. From the makers of Grammarly, Go is an AI chat that sits inside every tab and tool you already use. Always available and ready to help you with what you're working on. Ask it to draft something, summarize a long thread, pull up a file, or prep you for a meeting. Go handles it without you ever leaving the page you're on. This is what it looks like when AI actually fits into your work instead of adding to it. It's like having a teammate whose only job is to help you be better at yours. Go keeps up so you can move forward. With Go working with you, you can show off what you do best. See what Superhuman Go can do at superhuman.com. That's superhuman.com. Tyler Crowe: I got to admit, in between segments, I realized I made a bit of a mistake. It is not Cerebras, apparently. I stay working from home way too much and don't get out and hear other people talking. Cerebras Systems is the company we're going to be talking about. This is what I get for not listening on the conference calls again. Everyone can make fun of me in the comments for mispronouncing this company's name. Makes me look like I don't know what I'm talking about. But well, we're going to do it anyways. The funny thing is here is, this is a company, it's gotten a lot of Wall Street and investor buzz, and it's not having a great day on Wall Street. Company reported earnings that were after the close yesterday, and the stocks down about 13% as we're taping. This is a novel concept for computing an inference that recently went public. Guys, what did Cerebras Systems report say, and what were your reactions? Jon Quast: Well, look, Tyler, everything about this company is confusing, from what it does to how it reports its numbers, apparently, to how its name is pronounced. Investors can be forgiven here if they needed a minute just to take some time and process what this report was all about. Matt Frankel: At the core, the idea behind this business is simple. They build larger chips than any of the other ones that essentially take the place of several Nvidia chips and other components being networked together. That's the idea. It would take less power, lower latency, things like that. The two revenue numbers in the report are uniquely confusing. They report GAAP revenue, which is what we all expect, and then a number called core revenue, which is actually not only different but higher. That could be confusing to investors. GAAP revenue grew 74%, but that missed estimates. Cerebras' core revenue more than doubled and beat management's own guidance. Now, their core revenue, it excludes the impact of warrants that the company issues to some of its largest customers, specifically OpenAI. Accounting rules say that you have to account for the value of those warrants and subtract them from your revenue. It's not really a revenue hit, which is why they choose to report core revenue, but it's confusing. During the quarter, the revenue mix shifted toward Cloud revenue away from hardware, driven by its OpenAI deployments, while hardware revenue actually fell by 23%, so that could right there tell you why the stock fell. Their core gross margins, or because of some other factors, fell by nearly six percentage points. It's temporarily renting back some of the hardware previously sold. Management said Q3 should be the low point for margins, and it should come up. But with the money-losing business that a lot of people don't really understand the accounting behind and things like that, it just adds to the confusion. Cerebras' bulkase it's got over a $25 billion backlog. It has nearly $9 billion dollars of cash on its balance sheet, and management specifically said, and I'm quoting, "that AI demand is through the roof, and revenue will triple year over year in 2027." This is a business that investors understandably simply seem to be having a tough time wrapping their heads around, and I really don't blame them with a revenue miss, margin issues, and a net loss that was surprisingly not great. I'm not terribly surprised that the stock fell in reaction to this quarter's report. Jon Quast: You look at the guidance, and I do want to just correct the record here from some of the chatter I've seen on social media, some investors out there saying, Cerebras is intending to 10X its revenue in the coming year. That is not what the company said. Matt pointed out the correct number. It expects to triple its revenue year over year in the coming year, which would be absolutely incredible, and I wish him well. But the 10X number, that is for the manufacturing. This is a fabulous semiconductor company, which means it doesn't make its own stuff. That is made by other companies, specifically, Taiwan Semiconductor is the supplier here. That 10X number is from its partners saying that they're going to increase the manufacturing. You look at Taiwan Semiconductor, it's a pretty conservative company, so I do think that in a way, this is a vote of confidence to dedicate some energy to making sure that it can 10X the supply of Cerebras' products. But I do want to point out the difference here. The revenue we're talking core revenue not actual revenue. The core revenue looking to triple, but the manufacturing looking to 10X, there's going to be, then that is a huge expected increase of revenue ongoing beyond the coming year. Tyler Crowe: Jon, I'm shocked to discover that things that are said on social media aren't necessarily correct. Look, Cerebras hits at one of the challenges that I have been struggling with to work through with all of this AI spending, AI infrastructure build-out stuff. It claims it's AI chips, which look closer to the size of bathroom floor tiles than what we would normally see in CPUs or GPOs. They claim they're faster. They have higher on chip memory. They require less power than current offerings. If it is as powerful as it claims, whether that's true or not, it remains to be seen, I would, in theory, solve a lot of the problems we see with memory and electricity demand because we can do more with less. One of the things I've always said is with the current spending and the trajectory of what we have with the equipment we have, it's not going to work because it just will take too much power, basically. To me this seems to undermine a case for some of the biggest winners so far, like Nvidia some of the memory ship members, and we can even go further down the AI infrastructure chain of, like, maybe we just need a couple fewer data centers of the line here. Do you agree with this, or am I perhaps reading it wrong? Matt Frankel: It certainly feels Cerebras is doing more with less should hurt Nvidia and the memory companies and the other chipmakers. But so far in this cycle of AI adoption, every single efficiency gain we've seen has just expanded the appetite overall. In other words, right now, there's so much demand that both Cerebras and Nvidia can grow exponentially. Nvidia might be nearing the end of its exponential growth because its revenue is more than Walmart, not really but getting close. But right now cheaper AI has meant more AI, not less, and the disruption is real. But the fact that Cerebras is relatively tiny compared to Nvidia and has some margin issues of its own and production issues and ramp up issues, it really shows in Nvidia's moat right now. I don't think Nvidia should be too worried for the time being, and Nvidia is not exactly just laying down and letting themselves be disrupted. They have a much deeper pockets than even Cerebras for innovation. I don't think they should be too worried. Jon Quast: I don't think it's as simple as saying Nvidia versus Cerebras. I think the answer is much more complicated and nuanced than that because of how they actually work in the real world. Nvidia, of course, with its graphics processing units, GPUs, by the way, Nvidia didn't invent those for AI. They preexist the current boom in AI. The reason that they were adopted into AI, specifically training, was because they were very good at general-purpose activities. What Cerebras is building is an ASIC. This is a custom thing. This is very good at a specialized activity and specifically inference, but for specific configurations. This is why it's partnered with OpenAI, for example, so that OpenAI can partner with Cerebras for certain configurations for its custom hardware option. You look at that, you're basically answering a question between generalization and specialization. Is all of the AI out there going to start specializing, and that is going to give greater rise to a player such as Cerebras, or are all of these software products out there are going to say more general purpose, in which case that favors a more general hardware option? I don't know if that's an easy question to answer. I think that my answer is probably both. I think that you're going to see a rise generally speaking, and that's going to be good for GPUs. But I do think that you're going to start seeing some specialization and that's going to give rise to some niche markets that Cerebras can fill. The question then becomes, how big are those niches? Tyler Crowe: It certainly going to be the battle of the AI data enter space over the next couple of years as these models become more powerful and more stuff is custom built for these models. It's coming up after the break. We're going to indulge our analyst tendencies a little bit and do a lightning round of earnings so far this quarter. Jon, in our first segment, you were mentioning the Hidden Gems being the hidden assets of companies, and part of Hidden Gems Investing style isn't just obscure companies, but there is also the hidden aspect where it is hidden companies, maybe off not the companies most people would think of. We've been getting a lot of feedback from listeners that we should probably indulge in a classical Hidden Gems part of the phrase and indulge a little bit more here. We're going to do basically the stock market equivalent of some deep cut or live album indie band stuff for this lightning round here. Earnings are starting to wind down, and so we're doing a lightning round of under-the-radar earnings reports. The companies that we love, we don't get to talk them much about. Guys, you get to go full stock market sicko here. What do you want to highlight? Jon, we'll start with. Jon Quast: I love highlighting Xometry. Anytime I get a chance, that is ticker symbol XMTR. This is a company that I was fortunate enough to find when it was trading down in the teens, now up in the 90s, but this is a company for most people who don't know what this company does. Think of all your custom manufacturing that exists in the world. Most of that is offline. Most of that you need to be close to a shop. You need to email them if you need something made, manufactured, you need some bolts made, whatever. You have to then talk to them on email maybe, or just go into the shop, and it's got to be close to where you need the product. Xometry changes that by creating basically the ecommerce of custom manufacturing, and what its secret sauce is, is basically you submit your plans through the Xometry portal and it is able to give you through AI instant pricing. It prices the job instantly, and you can take it or leave it. Lead times are cut drastically down, and then it shops out its bid to these custom manufacturers who can actually do the work. It chops it out at a slightly different price. The spread is what its revenue, what its profit is. It's not ever going to be a great gross margin business necessarily, but the revenue growth and the case for this, I think is huge, and the top line growth is showing up 41% in the most recent quarter. Last week that it reported it has reported four straight quarters of accelerating growth right now. One of the things that attracted me to Xometry early on, it's not the first company to try this, but the user growth has been just fantastic. Active buyers on the platform up 20% in the most recent quarter, record new addition. The adoption curve is what showed me that this could be a winner long-term. Still less than 1% penetrated into its total addressable market. But what I think could be huge here is it just partnered with Siemens. This is a company that helps automakers and airlines start to plan out their products and draw it all up, design the products that they need. Integration with Xometry now helps them have pricing in real time. Then, when they get everything just the way that they want, they can basically hit a buy button, and now all of a sudden, that is being shopped out on the Xometry platform. I think that this could be a huge adoption driver long term. Xometry is a company that I'm happy to highlight. Matt Frankel: I wanted to bring up a fintech company, a surprise that I haven't talked about in a while. It's called Marqeta, ticker symbol is MQ. They're known for providing third-party payment infrastructure for other companies. Most notably, their biggest customer is Block. They provide the card payment infrastructure for Cash App. That makes up a little over 41% of their revenue, but that's down significantly. It was 46% a year ago. It was the majority of their income a couple years ago. They got some much-needed diversification, and I really wanted to highlight this one because it feels like they've turned a corner profitability-wise. A total payment volume of $120 billion. That was up 32% year over year, the fourth straight quarter where that growth rate was above 30%. Not just that, they actually had positive net income on a GAAP basis, not just on an adjusted basis or something like that. The second quarter since they've turned profitable, adjusted EBITDA margin is now at 21% in climbing, they're buying back shares because they think it's cheap. Marqeta had its struggles. It actually did a reverse split not that long ago because it had been beaten down. This was a COVID-era IPO. The stock was down on this report due to a accelerating growth forecast. A lot of that's because Cash App is not an accelerating source of growth for them anymore. It's very cheaply valued on a price to sales ratio historically for this stock. The question is long term, can it keep those growth rates up while diversifying away from Block? That remains to be seen. That's why it's cheap, but it's one that's definitely back on my radar right now. Tyler Crowe: Well, I went through my Rolodex, trying to find the obscure stock I wanted to go through, and I saw that BBB Foods, ticker TBBB reported today, and the stocks up 15%. I was like, well, I just got to cover this one. For those who may have not have heard this company, it is a hard discount grocery retailer. Think like Aldi, maybe Lidl, if you live in Europe, that no-frills, not a lot of decoration. Just moving product as quickly you can at a relatively low price. This company is completely based in Mexico, has about 3,000 stores. For the quarter, sales were up 38.7% year over year, and same-store sales growth. The comps basically at the existing stores was up 20%, which I think was absolutely incredible. I haven't seen a lot of retailers these days putting up same-store sales memories like that. Store account growth was about 9%. They added about 125 new locations in the quarter, puts them on pace for about 500, 5,600 they want to put in this year? It sounds a lot, but with 3,200 so far, they're aiming for 14,000 total all across Mexico, so there's a lot of left to growth there. What was surprising to me. Again, they're growing really fast, and despite the high investment levels, they're generating free cash flow, basically because they're moving products so quickly. Again, that rapid same-store sales growth. They're generating free cash flow. It's just the turnover this company has been absolutely incredible, they're generating immense amounts of free cash for what is a relatively small start-up Mexican grocery retailer. I fell in love with this company when I read the IPO prospectus a couple of years ago, bought shares, and I've been delighted with this success so far. Hopefully, and we can make this a tradition of every earnings report we get to indulge in the obscure stocks that we love to follow every once in a while, and hope the listeners enjoyed it, as well. But that is all the time we have for today. Matt, Jon, thanks for your insights. I'm going to hit "Disclosure" and we'll get out of here. As always, people in the program may have interest in the stocks to talk about, and The Motley Fool may have recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. See our full advertising disclosure, please check out our shown out. Thanks to you producer Bart Shannon and the rest of The Motley Fool team. Jon, Matt, and myself, thanks for listening, and we'll chat again soon.
