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Sub-sector: Technology
Tencent
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 28 Nov 2025We maintain our O/P recommendation on Tencent. In 3Q25, revenues accelerated and were ahead of expectations, EBITDA margin expanded on an improved revenue mix, FOCF remained robust, debt metrics improved. We view Tencent as a core holding in China and Asia IG credits, and it is our preferred duration play. While valuations of Tencent is less compelling compared to YE24, its longer duration bonds still offer ~20 bp of spread pick up against Chinese SOEs of similar tenors. We like Tencent’s strong and improving credit outlook compared to its Chinese tech peers, rock solid balance sheet and robust free operating cash flow. We prefer its 2041 bond which offer the highest 20-35 bp spread pick up against Asia A corporate and Chinese SOEs
Business Description
AS OF 28 Nov 2025- Founded in November 1998, Tencent is a leading provider of Internet value added services in China. Since its establishment, Tencent has ventured into instant messaging, social networking, online payments, digital entertainment, and PC and smartphone gaming. Most recently, it has also forayed into high-tech areas such as artificial intelligence, and cloud computing.
- Tencent's leading Internet platforms in China include Weixin/WeChat (online messaging), QQ Instant Messenger (online messaging), Tencent Games (gaming), Tencent Video/Weixin Video Accounts (video platforms), WeChat Pay (payments), and Tencent Cloud. The combined monthly average users (MAU) of Weixin and Wechat reached 1.40 bn as of 31 March 2025.
- In 3Q25, 50% of revenues came from Value Added Services (which consist of Domestic Games, International Games, and Social Networks), 30% came from FinTech and Business Services (e.g. commercial payments and cloud), and 19% from Online Advertising.
- Tencent is currently primarily listed on the Hong Kong Stock Exchange, with a market capitalization of HKD 5.6 tn as of 27 November 2025.
Risk & Catalysts
AS OF 28 Nov 2025While Chinese regulators have adopted a more friendly stance towards tech companies, any regulatory clampdowns abroad and domestically (e.g. antitrust rules, data security, personal information protection laws) may affect Tencent’s business. Tencent’s gaming, music streaming, and online payment units are among those that have come under regulatory scrutiny in the past.
Tencent uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers, which poses regulatory risks. Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 28 Nov 2025| RMB bn | FY21 | FY22 | FY23 | FY24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 27.0% | 31.4% | 29.8% | 25.4% | 24.5% |
| Net Debt to Book Cap | 6.0% | 8.5% | 1.0% | 2.3% | 1.4% |
| Debt/Total Equity | 36.9% | 45.9% | 42.5% | 34.0% | 32.5% |
| Debt/Total Assets | 20.1% | 22.8% | 23.5% | 20.1% | 19.7% |
| Gross Leverage | 1.7x | 1.9x | 1.6x | 1.3x | 1.2x |
| Net Leverage | 0.4x | 0.5x | 0.1x | 0.1x | 0.1x |
| Interest Coverage | 24.7x | 19.0x | 19.9x | 22.5x | 24.4x |
| EBITDA Margin | 34.9% | 34.3% | 38.9% | 42.4% | 45.0% |
CreditSight View Comment
AS OF 14 Nov 2025We maintain our O/P recommendation on Tencent. In 3Q25, revenues accelerated and were ahead of expectations, EBITDA margin expanded on an improved revenue mix, FOCF remained robust, debt metrics improved. We view Tencent as a core holding in China and Asia IG credits, and it is our preferred duration play. While valuations of Tencent is less compelling compared to YE24, its longer duration bonds still offer ~20 bp of spread pick up against Chinese SOEs of similar tenors. We like Tencent’s strong and improving credit outlook compared to its Chinese tech peers, rock solid balance sheet and robust free operating cash flow. We prefer its 2041 bond which offer the highest 20-35 bp spread pick up against Asia A corporate and Chinese SOEs
Recommendation Reviewed: November 14, 2025
Recommendation Changed: August 18, 2022
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Search topics about wealth insights and investments.Netflix Inc
- Sector: Media
- Sub Sector: Technology
- Region: US
- Bond: NFLX 4.875 30
- Indicative Yield-to-Maturity (YTM): 4.30%
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Fundamental View
AS OF 28 Oct 2025- Netflix is one of the few clear winners in the industry’s transition to streaming, and we believe the group’s leading position will be bolstered in 2025/2026 as legacy media companies continue to rein in spending and international ambitions.
- From a financial perspective, we expect Netflix will deliver ~25% EBITDA growth in 2025 driven by a mix of subscriber growth, price hikes and margin expansion.
- Netflix’s financial policy is relatively conservative. While the company no longer targets $10-15 billion of gross debt, we view Netflix’s new financial policy as an evolution rather than a revolution and expect credit metrics to remain best in class.
Business Description
AS OF 28 Oct 2025- NFLX is the world's leading subscription streaming entertainment service with ~300+ mn paid streaming subs in 190+ countries around the world. NFLX's programming includes original & acquired TV series, documentaries and feature films.
- NFLX began expanding internationally with the launch of services in Canada (Sep 2010), followed by LatAm (Sep 2011), and the UK and Ireland (Jan 2012). NFLX launched services in 17 more markets at a measured pace through the end of 2015 before launching in the rest of the world in Jan 2016 (ex-China, N Korea, Syria, Crimea).
- As of FY24, Netflix's regional subscriber breakdown was as follows: (1) EMEA - 101.1 mn; (2) UCAN - 89.6 mn; (3) APAC - 57.5 mn and (4) LATAM - 53.3 mn.
- Ted Sarandos and Greg Peters are Co-CEOs, with Mr. Sarandos appointed to the position in July 2020 and Mr. Peters in January 2023. Co-founder Reed Hastings was appointed as executive chairman of the Board in January 2023.
Risk & Catalysts
AS OF 28 Oct 2025- M&A Risk: Warner Bros. Discovery is actively considering asset sales. We believe Netflix has no interest in linear TV assets, but could be open to a studio purchase under the right circumstances. Additionally, Netflix is in the early stages of an expansion into video games and has already acquired several studios.
- Increased Competition: Several large competitors including Amazon and Apple are increasingly leaning into DTC video offerings on a global basis. Heightened competition may result in rising churn & declining gross additions for NFLX.
- Market Saturation: Netflix is highly penetrated in the US market, so future growth will become increasingly dependent on price increases, uptake of the ad tier and success on the password sharing crackdown. The recent WWE and NFL deals also opens the door to higher-priced sports programming.
Key Metric
AS OF 28 Oct 2025| $ mn | FY21 | FY22 | FY23 | FY24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Revenue | 29,698 | 31,616 | 33,723 | 39,001 | 43,379 |
| Revenue YoY % | 18.8% | 6.5% | 6.7% | 15.6% | 15.4% |
| EBITDA | 6,806 | 6,695 | 7,650 | 11,019 | 13,265 |
| EBITDA Growth | 33% | (2%) | 14% | 44% | 29% |
| Cash Content Expense | 17,469 | 16,660 | 13,140 | 17,003 | 17,209 |
| CFO - CapEx | (132) | 1,619 | 6,926 | 6,922 | 8,967 |
| Dividends/CFO-Capex | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| LTM CFO-CapEx to Debt | (0.9%) | 11.3% | 47.6% | 44.4% | 62.0% |
CreditSight View Comment
AS OF 10 Dec 2025Netflix is one of the few clear winners in the industry’s transition to streaming, and we believe the group is well positioned to maintain its double-digit top line and profit growth in 2025 and 2026. The company’s gross leverage is already best in class at ~1.1x, and we expect Netflix can generate ~$9 billion of FCF in FY25 with a FCF to debt ratio in the ~60% area. However, Netflix’s plan to acquire Warner Bros marks an abrupt shift in its historical (and extremely successful) strategy focused on organic investment. While WB is admittedly a one of a kind asset, an acquisition of this magnitude would subject the company to significant integration/execution risks and raises questions about whether Netflix’s growth algorithm is running out of steam.
Recommendation Reviewed: December 10, 2025
Recommendation Changed: December 04, 2025
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Search topics about wealth insights and investments.Alibaba
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 15 Sep 2025We maintain our O/P recommendation on BABA post its decent F1Q26 results; topline growth missed expectations, EBITDA margin fell 1 ppt, and FOCF turned negative; that said, gross leverage remained modest, with a strong net cash position intact. We view BABA as a core holding in China/Asia IG credits, and it is our preferred duration play. Its longer duration bonds trade ~40 bp wider than Chinese SOEs of similar tenors. In particular, we like BABA 2035. Within China tech credits, we prefer BABA over BIDU/JD, which are rated 1-2 notches lower but trade only marginally wider. We also view BABA to be more defensive compared to high beta BBB China tech credits while offering value.
Business Description
AS OF 15 Sep 2025- Founded in 1999, Alibaba is the largest retail commerce company in the world based on gross merchandise volume (GMV) as of 31 March 2023.
- The company's business segments comprise Taobao & Tmall Group (39% of F4Q25 revenue; China e-commerce incl. Taobao, Tmall, Taobao Deals, Taocaicai, 1688.com), International Digital Commerce (13%; incl. Lazada, AliExpress, Trendyol and Daraz), Cloud Intelligence Group (11%; incl. AliCloud, AI), logistic provider Cainiao (8%), Local Consumer Services (6%; incl. Ele.me, Amap), and Digital Media and Entertainment (2%, incl. Youku & Alibaba Pictures) and Others (21%; incl. Freshippo, Fliggy, Alibaba Health, Intelligent Information Platform, SunArt, DingTalk).
- Taobao/Tmall is Alibaba's core business and the main EBITA & cash generation unit of the group. Alibaba's annual active consumer exceeded 1 bn in June-2022.
- Alibaba had a market capitalization of RMB 2.7 tn as of 15 September 2025.
Risk & Catalysts
AS OF 15 Sep 2025While Chinese policymakers have adopted an increasingly friendly stance towards tech platforms, regulatory clampdown (e.g. anti-monopoly guidelines, data security laws, personal information protection laws) may still affect Alibaba as it increases compliance cost. There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Intensifying competition amongst eCommerce platforms may result in slower topline growth and weaker EBITDA margins.
Alibaba does not control Alipay but relies on Alipay to conduct substantially all the payment processing and escrow services on its marketplaces.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Alibaba against international peers.
Key Metric
AS OF 15 Sep 2025| CNY BN | FY22 | FY23 | FY24 | FY25 | LTM F1Q26 |
|---|---|---|---|---|---|
| Debt to Book Cap | 11.6% | 12.6% | 13.3% | 17.5% | 17.5% |
| Debt/Total Equity | 13.1% | 14.4% | 15.3% | 21.2% | 21.2% |
| Debt/Total Assets | 8.3% | 9.2% | 9.7% | 12.8% | 12.6% |
| Gross Leverage | 0.9x | 0.9x | 0.9x | 1.2x | 1.2x |
| Interest Coverage | 32.2x | 29.6x | 24.0x | 20.7x | 19.9x |
| EBITDA Margin | 18.5% | 20.2% | 20.3% | 19.9% | 19.6% |
CreditSight View Comment
AS OF 26 Nov 2025We maintain our O/P recc on Alibaba post its F2Q26 results; topline growth accelerated and was ahead of expectations; but EBITDA margin weakened due to hefty spending to expand its quick commerce segment; FOCF turned negative due to elevated capex for cloud and quick commerce; gross leverage weakened and net cash shrunk; that said, we still expect the company to maintain its net cash position over the next 6 months, and we project for its debt metrics to recover in FY27. We view Alibaba as a core holding in China and Asia IG credits, and it is our preferred duration play. Alibaba now trades on average 10 bp wider than Asia A corporate and 30 bp wider than Chinese SOEs which we view as attractive. We like BABA 5.25% 2035 for 30 bp of spread pick up against Chinese SOEs of similar tenors.
Recommendation Reviewed: November 26, 2025
Recommendation Changed: August 05, 2022
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Search topics about wealth insights and investments.JD.com
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 21 Aug 2025We maintain our M/P recommendation on JD post its weak 2Q25 results; topline growth was a strong beat, but EBITDA margin materially narrowed due to hefty spending for its food delivery business; FOCF also contracted and gross debt metrics weakened, but JD still retained a strong net cash position. JD trades largely in-line to Asia A- corp which we view as fair; while we expect JD’s gross debt metrics to temporarily weaken over 2H25 due to its hefty investments into food delivery, we do not expect downgrade risk for the credit given the strong performance of its core retail and logistic segments, and we expect JD to still maintain a strong net cash position over the 12 months. Amongst the A-rated China tech credits, we continue to prefer Alibaba and Tencent.
Business Description
AS OF 21 Aug 2025- JD is one of China's leading e-commerce and retail infrastructure service providers.
- JD has a large fulfillment infrastructure which includes over 1,600 warehouses operated by the company, and 2,000 cloud warehouses operated by third-party warehouse owner-operators under JD Logistics Open Warehouse Platform. Its warehouse network had an aggregate gross floor area of approximately over 32 mn square meters, as of 31 December 2024.
- JD has 3 operating segments, namely (1) JD Retail (82% of 2Q25 revenues), which includes JD Health and JD Industrials, and the segment mainly engages in online retail, online marketplace and marketing services in China; (2) JD Logistics (14%) which includes both internal and external logistic businesses; and (3) New businesses (4%) which consist of food delivery, Dada, JD Property, Jingxi and overseas businesses.
- JD had a market capitalization of RMB 325.1 bn as of 21 Aug 2025.
Risk & Catalysts
AS OF 21 Aug 2025While Chinese regulators have adopted a friendlier stance towards tech companies, any regulatory clampdowns may still adversely affect the business of JD (e.g. antitrust rules, data security & personal data protection laws).
Intensifying competition amongst Chinese eCommerce platforms with the entrance of new live-streaming/short-form video platforms and group buying discount platforms may result in slower topline growth and weaker EBITDA margin for JD as its increase its user/merchant incentives and promotional activities to defend its market share.
There are regulatory risks involving the use of variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs). Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
Key Metric
AS OF 21 Aug 2025| RMB mn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.2% | 19.2% | 18.8% | 22.3% | 25.3% |
| Debt/Total Equity | 13.8% | 23.7% | 23.1% | 28.7% | 33.9% |
| Debt/Total Assets | 6.9% | 10.9% | 10.9% | 12.9% | 14.3% |
| Gross Leverage | 1.8x | 1.9x | 1.5x | 1.7x | 2.2x |
| Interest Coverage | 16.1x | 16.3x | 15.5x | 18.5x | 16.2x |
| EBITDA Margin | 2.0% | 3.3% | 4.1% | 4.6% | 3.6% |
CreditSight View Comment
AS OF 14 Nov 2025We maintain our U/P recommendation on JD post its weak 3Q25 results. Revenues were ahead of expectations but EBITDA margin remained very weak at 0.8% due to losses for its new business initiatives such as food delivery and international expansion, FOCF stayed negative, net cash contracted, and debt metrics worsened. We expect JD’s debt metrics to further weaken over the next 6 months, and we see reduced rating headroom for JD and expect S&P to revise its positive outlook on JD back to stable. We think JD is expensive as it trades 10-15 bp tighter than Asia A-/A corporate, in-line to BABA and only 12 bp tighter than Tencent; this is much tighter than the average spread differential of 27 bp for A3 and A1 Asia corporate; as such, we think its bond has not priced in its weaker credit outlook.
Recommendation Reviewed: November 14, 2025
Recommendation Changed: September 05, 2025
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Search topics about wealth insights and investments.Baidu
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 21 Aug 2025We lowered our recommendation on Baidu to Underperform from Market perform post its weak 2Q25 results; revenues contracted and EBITDA margin fell sharply due to low advertising monetization rate; free operating cash flow was negative for a second consecutive quarter, and net cash narrowed; we expect Baidu’s credit outlook to further weaken over the next 12 months and we see reduced rating headroom at Moody’s as we expect gross leverage to trend higher in 2H25 to 2.8x. We view its bonds as rich compared to A-rated China tech and Asia corporate peers; for example, Baidu trades only 3-5 bp tighter than Alibaba and Tencent, and it is 11/6 bp tighter than Asia A- and A rated corporates; as a gauge, the average spread differential is 23 bp for A3 and A1 rated Asian $ bonds.
Business Description
AS OF 21 Aug 2025- Founded in 2000, Baidu started out as a search engine business and began its development into artificial intelligent (AI) since 2010.
- Baidu Core is the main revenue driver of the company (80% of 2Q25 revenues) which provides search-based, feed-based and other online marketing services (total: 50% of revenues), as well as products and services from new AI initiatives (31% of revenues); Baidu's AI initiatives include AI cloud (enterprise & public sector cloud, and personal cloud), Intelligent Group Driving (Apollo Go, Apollo auto solutions, and intelligent EVs under Jidu Auto), Mobile Ecosystem (Baidu App, ERNIE Bot, Haokan and Baidu Post), and other growth initiatives (ie. Xiaodu smart devices powered by DuerOS smart assistant and AI chips).
- iQiyi accounts for the remaining revenues of Baidu; iQIYI is an online video platform with a content library that includes licensed movies, television series, cartoons, and other programs.
- Baidu launched ERNIE bot in Mar-23, a generative AI chatbot powered by ERNIE, Baidu's in-house foundation model.
- Baidu has a market capitalization of RMB 238.4 bn as of 21 August 2025.
Risk & Catalysts
AS OF 21 Aug 2025Any regulatory clampdowns abroad and domestically (e.g. potential US investment ban, antitrust rules, data security and personal information protection laws) may adversely affect the business of Baidu. The interpretation of Chinese laws and regulations involves some degree of uncertainty.
There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Baidu has made significant investments into long-term AI-related projects, which may take time to turn profitable. A potential escalation of the US chip restriction could have a material negative impact its AI related business (ie. cloud, ernie bot, autonomous driving).
Key Metric
AS OF 21 Aug 2025| RMB bn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 29.7% | 28.5% | 25.0% | 22.5% | 24.4% |
| Debt/Total Equity | 42.2% | 39.8% | 33.4% | 29.0% | 32.2% |
| Debt/Total Assets | 24.1% | 23.4% | 20.8% | 18.5% | 20.4% |
| Gross Leverage | 3.3x | 2.8x | 2.2x | 2.0x | 2.5x |
| Interest Coverage | 8.2x | 11.4x | 12.1x | 13.8x | 12.8x |
| EBITDA Margin | 22.6% | 26.8% | 29.2% | 29.3% | 27.2% |
CreditSight View Comment
AS OF 19 Nov 2025We maintain our Underperform recommendation on Baidu (A3/NR/A; Stb/NR/Neg) following its weak 3Q25 results; which reported a sharper decline in revenues as its search engine revamp pressured its online ad segment; EBITDA margin fell, FOCF remained negative, and debt metrics weakened. We expect a marginal improvement to Baidu’s credit metrics in FY26, but to remain weak compared to historical levels and we see reduced rating headroom from Moody’s and Fitch. Baidu trades 7-10 bp tighter on average than Asia A- and A rated corporates which we view as rich. Compared to Alibaba and Tencent, we view Baidu as rich as it trades only ~3-13 bp wider, which is tighter than the average spread differential of 26 bp for A3 and A1 rated Asian $ bonds.
Recommendation Reviewed: November 19, 2025
Recommendation Changed: August 21, 2025
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Search topics about wealth insights and investments.Meta Platforms
- Sector: TechnologyTechnology Media and Telecommunications
- Sub Sector: Technology
- Country: US
- Bond: META 4.95 33
- Indicative Yield-to-Maturity (YTM): 4.95%
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Fundamental View
AS OF 13 Aug 2025While Meta is executing strongly from a product perspective, we are concerned by its surging AI investments and regulatory risks. Meta acquired a 49% stake in Scale AI for $14 bn in 2Q25. The company expects capex to have “similarly significant” dollar growth in 2026; this implies it could be ~$100 bn or ~45% of sales in 2026.
There are also concerns on the regulatory front. We could potentially see a ruling in the next several months from the FTC suit which is seeking to unwind prior acquisitions of Instagram and WhatsApp. In addition, the EC’s DMA decision could require modifications that impact its European revenue. Gross leverage is 0.3x although net cash declined sharply to $18.2 bn in 2Q25. We also think Meta could be in the market fairly soon with a jumbo bond deal.
Business Description
AS OF 13 Aug 2025- Meta Platforms is the largest social networking company in the world. Meta's advertising revenue is primiarly from Facebook and Instagram, although also on Messenger, Whatsapp, Threads, and third-party affiliated websites and apps.
- In 2Q25, Family of Apps was 99% of revenue (98.0% from advertising and 1.2% from other) and Reality Labs was 1% of revenue. Reality Labs generated $18.1 bn in operating losses during LTM 2Q25.
- There are 3.48 bn Family Daily Active People (DAP) as of 2Q25, and the Family Average Revenue per Person (ARPP) was $13.65 quarterly in 2Q25.
- Meta is headquartered in Menlo Park, California. Employee headcount was >75.9k at 2Q25.
Risk & Catalysts
AS OF 13 Aug 2025In December 2020, the FTC filed a lawsuit against Meta seeking to unwind prior acquisitions of Instagram and Whatsapp.
Meta’s business model relies almost entirely on user-generated content, exposing it to customer privacy concerns and regulatory changes (e.g., Section 230 protections).
Surging capex for AI and continued investments in Reality Labs could weaken the balance sheet although Meta has reportedly raised $29 bn in external financing from PIMCO and Blue Owl for its Louisiana data center project.
We continue to expect Meta to be a regular/annual issuer to fund its shareholder returns and massive investments.
A potential ban of TikTok (extended through 9/17/2025) would positively impact Meta and others with short-form video products.
Key Metric
AS OF 13 Aug 2025| $ mn | 2021 | 2022 | 2023 | 2024 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue YoY % | 37.2% | (1.1%) | 15.7% | 21.9% | 19.4% |
| EBITDA | 63,882 | 49,622 | 71,955 | 101,568 | 112,933 |
| EBITDA Margin | 54.2% | 42.6% | 53.3% | 61.7% | 63.2% |
| CapEx % of Sales | 16.3% | 27.5% | 20.8% | 23.8% | 30.6% |
| Sh. Ret. % of CFO-CapEx | 116% | 152% | 46% | 68% | 78% |
| Net Debt | (47,998) | (30,815) | (47,018) | (48,989) | (18,239) |
| Gross Leverage | 0.0x | 0.2x | 0.3x | 0.3x | 0.3x |
| EV / EBITDA | 14.0x | 5.8x | 12.3x | 14.5x | 16.6x |
CreditSight View Comment
AS OF 18 Nov 2025Meta delivered strong revenue growth in its 3Q25 results and 4Q25 guidance, which were both above consensus expectations. However, total expenses are now expected to grow “significantly” faster in 2026 relative to the 22-24% YoY implied growth in 2025. Also, capex will have “notably larger” dollar growth in 2026. We estimate this could imply $115-120 capex or ~50% of sales in 2026. As a result, we think FCF could be slightly negative in 2026. Meta just launched $30 bn IG bonds which is on the heels of the recent $27 bn off balance sheet Meta JV bond deal. Pro forma for $30 bn issuance, gross leverage is 0.5x (0.2x at 3Q25) and lease-adjusted leverage is 0.7x (0.4x at 3Q25). Net cash was $15.6 bn at 3Q25. Meta recently prevailed in the FTC’s monopoly litigation.
Recommendation Reviewed: November 18, 2025
Recommendation Changed: July 31, 2025
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Search topics about wealth insights and investments.Amazon.com
- Sector: ConsumerTechnology Media and Telecommunications
- Sub Sector: Retail/GrocersTechnology
- Region: US
- Bond: AMZN 4.65 29
- Indicative Yield-to-Maturity (YTM): 3.99%
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Fundamental View
AS OF 13 Aug 2025- We continue to have confidence in CEO Andy Jassy and the company’s long-term business for both AWS and Stores. While the AWS growth rate is below peers, it is a $123 bn run-rate business with high-teens growth and operating margins in the 30s%. We continue to believe that Amazon will be a winner in Generative AI given the breadth of its cloud business, custom silicon (Trainium, Inferentia), and Bedrock platform.
- Leverage declined slightly to 0.4x gross and 0.9x lease-adjusted gross. While Amazon’s capex has been ramping, along with other hyperscalers, we are encouraged by its debt reduction over the past few years and zero shareholder returns. Also, Amazon’s market cap is $2.4 tn. There are risks related to the FTC suit although we view a breakup as unlikely.
Business Description
AS OF 13 Aug 2025- Amazon is an e-commerce company which sells a wide range of its own products and those of 3rd party sellers. Amazon offers fulfillment services for 3rd party sellers (FBA) and sells cloud computing services (AWS). In 2Q25, 3rd party units were 62% of total paid units, and FBA units are a majority of 3rd party units.
- In LTM 2Q25, NA segment was 60% of sales, International was 22% of sales, and AWS was 17% of sales.
- Amazon disclosed it surpassed 200 mn Prime members in April 2021. The annual membership was increased in February 2022 from $119 to $139 in the US, although fees vary by country. In mid-2019, Amazon Prime began to transition from 2-day to 1-day shipping. Amazon Prime also offers Prime Video, streaming music, and other benefits.
- In 2006, Amazon launched AWS which remains the leader in cloud computing (IaaS/PaaS). Amazon sells its own devices (e-reader, smart speaker, streaming media player, etc.).
Risk & Catalysts
AS OF 13 Aug 2025- We think Amazon has moderate event risk given its large size (~$2.4 tn market cap).
- While Amazon is increasing its Capex spend, we are encouraged by the ~$19.6 bn reduction in lease-adjusted debt from its peak in 1Q23 through 2Q25.
- Amazon continues to face regulatory scrutiny. In September 2023, the FTC and 17 states filed a lawsuit against Amazon and accused the company of (1) punishing sellers for offering lower prices elsewhere and (2) making Prime eligibility conditional on usage of fulfillment services. The biggest risk would be a breakup, although we view that as unlikely.
- Amazon’s $14 bn acquisition of Whole Foods has shown its proclivity for large M&A, although the regulatory environment could make large deals challenging.
Key Metric
AS OF 13 Aug 2025| $ mn | 2020 | 2021 | 2022 | 2023 | 2024 | LTM 2Q25 |
|---|---|---|---|---|---|---|
| Revenue YoY % | 37.6% | 21.7% | 9.4% | 11.8% | 11.0% | 10.9% |
| EBITDA | 57,284 | 71,994 | 74,593 | 110,305 | 144,162 | 156,248 |
| EBITDA Margin | 14.8% | 15.3% | 14.5% | 19.2% | 22.6% | 23.3% |
| CapEx % of Sales | 12.1% | 13.3% | 11.5% | 8.5% | 12.3% | 15.6% |
| Sh. Ret. % of CFO-CapEx | 0% | 0% | n/m | 0% | 0% | 0% |
| Net Debt | (50,497) | (44,453) | 8,516 | (19,451) | (43,051) | (36,925) |
| Gross Leverage | 0.6x | 0.7x | 1.1x | 0.6x | 0.4x | 0.4x |
| EV / EBITDA | 28.3x | 23.3x | 11.7x | 14.4x | 16.1x | 14.9x |
CreditSight View Comment
AS OF 17 Nov 2025We continue to have confidence in CEO Andy Jassy and the long-term business for AWS and Stores. AWS is a $132 bn run-rate business growing at 20% with GAAP OM% in the 30s%. The 3Q25 results and commentary supports our view that Amazon will be a winner in Generative AI given the breadth of its cloud business, custom silicon (Trainium), and Bedrock service. While AMZN’s capex has been ramping, along with other hyperscalers, we are encouraged by its debt reduction over the past few years and zero shareholder returns. There are risks related to its ongoing FTC suit (not the one that was recently settled on Prime subscriptions) although we view a breakup as unlikely. Pro forma for $15 bn issuance and $1.25 bn upcoming maturity, gross lease-adjusted leverage will increase by one tick to 1.0x.
Recommendation Reviewed: November 17, 2025
Recommendation Changed: May 01, 2024
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