DK Street Journal

Five9, which sells cloud contact-center software that routes customer calls, chats and emails for banks, outsourcers and hospital systems, told investors on 6 August that revenue from its artificial-intelligence products had grown 78% year over year, to roughly $39m — an annual run-rate above $150m — and raised its full-year AI growth target from over 40% to at least 60%. Subscription revenue rose 14%, a third straight quarter of acceleration. The shares fell on the print and then gained 19.8% the following session.

The part that did not make the headline is what the AI revenue costs to deliver. Five9's gross margin fell to 53.4% from 54.9% a year earlier, and from 55.9% in the prior quarter. Gross profit grew 7.3% while revenue grew 10.3% — the definition of a mix shift toward lower-margin work. Operating income fell to $2.0m from $18.5m three months earlier, taking the operating margin to 0.6%. A per-agent license is close to pure margin once written; AI voice and agent minutes carry an inference bill every time they run. On the evidence of one quarter, Five9's own AI product is replacing seat revenue with something less profitable rather than layering on top of it.

It is doing so from third place. In cloud contact-center software, NICE holds 22.3% of revenue and Genesys 20.0%, with Five9 third at 12.7% of an $8.4bn market. Both larger rivals were recapitalized for this transition last year: NICE bought conversational-AI vendor Cognigy for $955m, and Salesforce and ServiceNow jointly put $1.5bn into Genesys. Five9's largest disclosed win of the quarter, a Fortune 100 financial-services account worth about $100m of total contract value, is expected to ramp to $25m of annual recurring revenue — roughly 2% of guided revenue.

RingCentral shows what AI attach is actually doing

RingCentral, which sells cloud phone, meetings and contact-center service to mid-market and enterprise employers, reported the same substitution in cleaner form. Paid AI products doubled to 13% of annual recurring revenue of about $2.8bn — while total recurring revenue grew 7% and net monthly subscription dollar retention sat just above 99%. AI is not adding a layer; it is backfilling seats that leave.

The rest of the quarter was strong regardless. Revenue reached $657m, up 5.9%, with gross margin at 71.9% and operating margin at 7.7% against 6.0% a year earlier — the opposite of Five9's direction. Free cash flow was $180m, net leverage came down to 1.5x, and the company repurchased 2.2m shares for $94m while lifting the dividend 67% and renewing its distribution partnership with NICE. Diluted share count is down 6.1% year over year, which supplies a good share of reported earnings growth. On 11.9% trailing free-cash-flow yield and 2.97x forward gross profit, it is the one name here whose price still lags its cash generation.

Two of the four have disclosed nothing

Zoom Communications, the video and phone platform, and Box, which stores and governs enterprise files for about 100,000 paying organizations, have not reported since May. Zoom's advance is rotation plus a balance-sheet mark: its shares jumped after Anthropic disclosed a confidential draft IPO filing, with its 2023 stake valued at up to $4bn against a $30.7bn market capitalization. The operating business grew 5.5% last quarter, and fiscal 2026 net income of $1.90bn exceeded operating income of $1.12bn — $776m of below-the-line gains flattering a 15.1x trailing multiple. Zoom's forward price-to-earnings of 17.3x sits above trailing, the tell that consensus does not expect the gains to repeat. Box, meanwhile, is the fastest grower of the four at 10.7% and accelerating for four straight quarters, with operating margin up from 2.3% to 9.0%; it reports on 25 August.

Across the four, the month is eight sessions. Strip each name's two best days from the 30 days to 18 August and an equal-weight gain of 26.5% becomes 0.7%, with Five9 at -10.4%. Every gap dates to an event: RingCentral's results, Five9's results, and a market-wide rotation out of AI hardware into un-repriced seat software that also lifted Salesforce, ServiceNow and Workday. Because gross margins here span 53% at Five9 to 79% at Box, price-to-gross-profit is the only comparable lens. On it, Five9 stands at 3.60x forward and Box at 4.41x — both roughly 30% to 46% above where the same measure implies they stood in early May. The de-rating has been recovered; the operating question has not been answered.

The setup

Where it stands — AI attach is substituting for lost seats at both companies that reported, and at Five9 it is doing so at a lower gross margin. Would confirm — Five9's gross margin falls again in the third quarter while AI revenue keeps growing above 60%. Would invalidate — Five9 gross margin returns toward 55% with subscription growth held above 12%, or RingCentral net retention crosses 102%. Watch next — Box reports fiscal second-quarter results after the close on 25 August 2026; Zoom follows later in the month. Valuation — Five9 3.60x forward gross profit versus 3.77x trailing; RingCentral 2.97x forward, the cohort's cheapest; Zoom 7.79x.

Rambus makes the small chips that sit on a server memory module and keep signals clean at speed: register clock drivers (RCDs), power-management chips and serial-presence-detect hubs, sold to the module makers who assemble DIMMs. It also licenses the underlying memory-interface and security designs, a royalty stream that carries no cost of goods. On its July 27 call, management described Compute Express Link — the interconnect standard that lets processors reach pooled DRAM outside the server — as a "fragmented ASIC market," and said Rambus is doing enablement work for other people's chips rather than building CXL products of its own.

That matters because Rambus anchors a group of four semiconductor names grouped around memory disaggregation, and the growth it is actually reporting comes from somewhere else entirely. Server processors are adding memory channels: AMD is at 12 per socket, Intel is moving from 8 to 12, and the next generation goes to 16. Every channel populates another DIMM, and every DIMM needs another RCD and its companion chips. That is content per socket rising by arithmetic, not by architecture.

What each of the four actually sells

Rambus posted June-quarter revenue of $207.4m, up 20.4% year over year and accelerating from 8.1% in the prior quarter. Product revenue set a record at $99.2m, and third-quarter guidance puts product growth ahead of royalties. Gross margin reached 79.8%, against 74.9% a year earlier. Management said memory lead times are lengthening and expects tightness through 2027 — the consequence of DRAM makers reallocating wafers to high-bandwidth memory, which consumes roughly three times the wafer capacity per bit of standard DDR5.

Microchip, an embedded-control vendor selling microcontrollers, analog and interface parts, is the one member with disaggregation silicon that ships. Its data-center business reached about $1bn in fiscal 2026, up 69%, with 14 PCIe Generation 6 design wins — 12 switches and two retimers — entering production at the end of June. June-quarter revenue was $1.485bn, up 38%, with gross margin of 63.2% against 53.6% a year earlier.

Allegro MicroSystems makes magnetic sensor and analog power chips for cars and factories and has no memory-interface product at all. Its data-center exposure is current sensing in 800-volt direct-current racks. June-quarter revenue came in at $259m, up 27%, a sixth straight quarter of growth, with data center a record 17% of sales.

Everspin, a $433m Arizona maker of magnetoresistive memory for industrial, medical and defense sockets, grew 42% to a record $18.7m — but $3.4m was non-product revenue from a $40m, two-and-a-half-year subcontract with prime contractor Amentum under a U.S. government microelectronics program. Everspin still lost $4.4m at the operating line. Its CXL work is a September proof-of-concept demo and a memorandum of understanding with MaxLinear, with no revenue attached.

The month is one micro-cap and two sessions

From mid-July to August 17, Rambus was flat, Allegro fell 1.2% and Microchip fell 0.4%. Everspin rose 37.6%, and it carries the entire group. Strip its two best days — August 4 and August 14 — and its gain falls to 8.8%. The August 4 jump came the session before the earnings print, alongside a broad semiconductor rally; the print itself was sold, down 5.7% and then 4.7%. Everspin's twelve-month gain of 204% likewise dates to the April defense contract, which is worth roughly 72% of trailing annual revenue.

On a three-month view the group is down 22% equal-weight, and each name sits well below spring highs — Rambus 45% below its June 3 close, Everspin 58% below May. Three of the four have had their 50-day average slip below the 200-day since late July. Rambus fell about 20% after its record quarter despite beating consensus. The August 18 leg was macro: a semiconductor gauge fell 5.5% as Treasury yields pressed higher and a report of roughly $3trn in off-balance-sheet artificial-intelligence commitments circulated.

Cheaper on every lens that works

Gross margins here run from 48% to 80%, and two members have no usable earnings — Allegro's trailing price-to-earnings ratio of 486x is noise, Everspin's is negative. Price to gross profit is the comparable measure, and it compressed at all four since mid-May while trailing gross profit rose at all four:

• Rambus: about 24.4x → 17.2x trailing, 15.7x forward
• Everspin: about 26.3x → 13.2x
• Microchip: about 18.7x → 13.8x, 11.3x forward
• Allegro: about 18.6x → 16.4x

Astera Labs, which sells the standard and custom controllers that actually occupy the CXL socket and expects volume ramps at two U.S. hyperscalers in 2027, trades at 39.3x forward gross profit — roughly two and a half times Rambus.

The discount is not free. Rambus's blended margin dilutes as low-margin product outgrows the 100%-margin royalty annuity, and its RCD position is contested: the market is a three-way oligopoly with Montage and Renesas, and Renesas claimed the first sixth-generation part at the same 9,600 MT/s speed grade. Microchip's margin guide leans on lumpy licensing and a price increase management called "one and done." And the deployments the group's label describes are running elsewhere — Marvell's Structera parts are shipping and Meta has re-attached retired DDR4 over CXL as expansion memory in production.

The setup

Where it stands — Four accelerating businesses, one shared label that describes only Microchip's product line, and multiples below May at all four.

Would confirm — Rambus third-quarter product revenue landing in the guided $110-116m range with gross margin holding above 60% non-GAAP.

Would invalidate — Rambus product revenue missing guidance, or Microchip's September quarter falling short of the ~$1.603bn implied by its +8% sequential guide.

Watch next — Everspin's September proof-of-concept demonstration, and Rambus's third-quarter report in late October.

Valuation — Rambus at 17.2x trailing and 15.7x forward price-to-gross-profit, against about 24.4x in mid-May and Astera Labs' 39.3x forward.

VNET Group, a Beijing carrier-neutral data-center operator that rents cabinets and whole wholesale halls to Chinese cloud providers, delivered the kind of quarter its buildout thesis requires. Wholesale colocation revenue rose 29.3% year on year to RMB1.10bn, total net revenue rose 14.2% to RMB2.78bn — about $409.5m — and the company disclosed a 345-megawatt order from a single cloud provider, taking wholesale wins for the year to 862 megawatts. It also announced a strategic agreement with the battery maker CATL to build gigawatt-scale compute-and-energy facilities.

The stock fell roughly 17% on the session.

The rate, not the rent

It did not fall alone. Applied Digital lost 8.2%, Keel Infrastructure 15.5%, WhiteFiber 11.1%, SharonAI 10.6% and GDS Holdings 4.6% on the same day. The common event sat outside the buildings: the 30-year Treasury yield topped 5.33%, a 19-year high, on inflation and federal-spending worries. For companies that fund halls with project debt before a tenant pays rent, the discount rate is the business. Alphabet's recent 30-year paper priced near 6.4%, and hyperscalers have issued $159bn of bonds this year, up 47%.

The rest of the month tells the same story in reverse. Over 30 days the six averaged a 6.8% gain. Strip each name's two best sessions and all six turn negative — an average of -19.3%. One of those sessions is shared: on 30 July every one of them rose between 8% and 28%, the day Microsoft's cloud guidance lifted the Nasdaq 100 by 3.36% and the Philadelphia semiconductor index by 8.2%. Stretch the window to three months and the group is already down 6.7%.

Six businesses, one slogan

What they share is a customer story — the four largest cloud buyers plan up to $630bn of capital spending in 2026, against $388bn last year. What they do not share is an end market.

GDS, China's largest carrier-neutral operator, is the leading contract story and the lagging income statement. It booked a record 260 megawatts in the June quarter, doubled its full-year target to 1 gigawatt and grew backlog to 757 megawatts. Reported revenue growth nonetheless slowed from 23.6% to 6.2%, gross margin fell from 33.6% to 19.5%, and management guided monthly revenue per cabinet down about 3% by year-end as legacy contracts reprice. It trades at 14.4 times trailing EV/EBITDA and 1.44 times book.

VNET is the diverging one. At 9.4 times trailing EV/EBITDA it carries the cheapest anchor in the group, guides to 2026 revenue growth of 15.6% to 18.6%, and has 516 megawatts scheduled for delivery over twelve months. It is still loss-making, and its cash gross margin slipped to 41.8% from 43.6%. It is down 24.7% over three months.

Applied Digital, the former bitcoin miner leasing AI halls in Ellendale, North Dakota, grew fiscal-2026 revenue 183.7% to $611.3m and still lost $236.4m at the operating line. The mix matters: of $258.7m in the May quarter, only $44.1m was base rent, while $152.4m was one-time tenant fit-out work. Gross margin fell from 42.5% to 15.7%, and diluted shares rose 42%. Against roughly $36bn of contracted lease revenue, its own filings schedule $451m as due in the coming year, versus $5.0bn of debt. It trades at 64.0 times trailing gross profit, 44.8 times forward.

Keel Infrastructure, the renamed Bitfarms, has switched off mining before switching on leasing. Revenue fell 60.9% to $30.4m, gross profit was minus $86.8m, and not one high-performance-computing lease has been signed; management targets three this year. It is the only name here whose forward price-to-sales multiple, 17.1 times, sits above its trailing 12.6 times — it gets more expensive as it falls, because consensus has revenue dropping another 59.1%.

SharonAI, a two-year-old graphics-processing-unit cloud with 25 employees, reported $1.93m of quarterly revenue against a $2.41bn market value — 780 times trailing sales. Its case rests on 212 megawatts secured, $8.8bn of announced contract value and a six-year NVIDIA agreement worth up to $4.88bn. Material revenue is not expected before the fourth quarter.

WhiteFiber, spun out of miner Bit Digital, is the smallest and the plainest: revenue of $28.8m, up 54%, adjusted EBITDA of $5.5m, half of its 40-megawatt North Carolina site billing, and $540m of new multiyear cloud contracts. At 25.5 times trailing and 13.3 times forward gross profit it is the least demanding of the American names.

So the group's leasing momentum is real at three of six, absent at two, and financially unproven at one. The price action across all six has been moving as one — which is what a rate shock looks like, not a leasing cycle.

The setup

Where it stands — Six leased-compute developers fell together on a 19-year high in long-term Treasury yields, days after each reported separately and divergently. Would confirm — VNET converting its 862 megawatts of orders into delivered capacity at the guided 516 megawatts over twelve months. Would invalidate — GDS revenue per cabinet falling more than the guided 3% while backlog stalls below 757 megawatts. Watch next — Applied Digital's fiscal first-quarter report in October, the first period with 175 megawatts live at Polaris Forge. Valuation — VNET 9.4x trailing EV/EBITDA and GDS 14.4x, against Applied Digital at 64.0x trailing and 44.8x forward gross profit.

On 7 August the White House announced billions of dollars in loans, equity stakes and partnerships to build an American supply chain for critical minerals, describing it as the largest such package yet. Six companies that mine, refine or alloy those inputs jumped that day. Not one of them was named in it.

The money went elsewhere: a $1.4bn loan to battery-materials maker Sila Nanotechnologies, $400m for scandium, $150m to Niron Magnetics and $58m of Export-Import Bank financing for graphite and boron. Four of the six rose 8-15% in the session regardless.

A month built out of three days

Averaged evenly, the six gained 25.1% between 20 July and 17 August. Remove each name's two best sessions and the average collapses to 1.0%. Only REalloys, up 22.1% on that adjusted basis, and Perpetua Resources, up 19.6%, still stand; Tronox falls to -25.9% and 5N Plus to -16.8%.

The surviving days cluster on three dates. On 30 July the group averaged a 9.3% gain, the session after Energy Fuels said construction had begun on a heavy-rare-earth expansion at its White Mesa mill, with terbium and dysprosium circuits targeted for end-2027. On 7 August the average was 6.7%, on the federal announcement. On 14 August it was 4.1%, a theme-wide bid that followed MP Materials' quarterly report — a company outside this group entirely.

The metals themselves stayed put. Neodymium-praseodymium alloy was $133.67/kg in early August, barely changed from July. Dysprosium fell 11.6% month-on-month to $231.35/kg. Antimony sat at $51.80/kg, down 5.85% this year.

The one that ships

5N Plus, a Montreal producer of germanium, tellurium and bismuth compounds, semiconductor wafers and space-solar cells, is the only member with a profitable, accelerating income statement. Second-quarter revenue reached $122.4m, up 28% year on year, with net earnings of $19.7m. Its space-solar unit is sold out through 2027 and backlog sits at the company's 365-day reporting cap. Full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance of $100-105m was reaffirmed.

The shares fell 19.9% over the month and 21.9% over three months. Some of that is defensible: gross margin gave back more than four points to 30.3%, and management said recovery of metal costs lags by at least two quarters. At 45.6x forward earnings against 32.1x trailing, the stock has de-rated from roughly 74x at its high — the fall is doing rational work rather than opening a gap. Its US germanium refining expansion needs 18 to 24 months to build.

Everything else is a promise

5N Plus and Tronox produced $987m of the group's $1,019m of second-quarter revenue. The four "critical minerals" names together made $31.7m.

Tronox mines mineral sands and makes titanium-dioxide pigment for paint, plastics and paper, and has no artificial-intelligence content of any kind. Revenue rose 18.7% to $868m on record volumes, but gross margin fell to 6.3% and operating income swung to a $21m loss. It trades at 0.29x forward sales and 0.80x book, against $3.2bn of debt; its rare-earth processing plant is not scheduled to start until late 2029.

USA Rare Earth, which is building a sintered-magnet plant at Stillwater, Oklahoma, booked $5.8m in the quarter — all from a British alloys subsidiary, none from magnets — at a gross margin of -69.8%. Diluted shares went from 92.8m to 196.5m in a year, and a shareholder vote on 28 August would add 126.8m more. It trades at 32.3x forward sales.

Energy Fuels, which runs the only operating conventional uranium mill in the United States, is the clearest improver: revenue of $25.1m against $4.2m a year earlier, at a positive gross margin. But revenue fell sequentially from $35.8m and the operating loss widened to $30.6m. Perpetua Resources, whose sole asset is the Stibnite gold-antimony project in Idaho, has reported zero revenue in each of the past five fiscal years; consensus models $8m this year. REalloys made $804k of revenue against a $36.8m operating loss, and its annual revenue has shrunk for four consecutive years while the market value approached $1bn.

The chart disagrees with the month

All six trade below both their 50- and 200-day averages, and the downtrends began weeks before the bounce — Energy Fuels in early June, Tronox in July. Two got worse during the rally: USA Rare Earth's trend deteriorated further on 12 August, 5N Plus's rolled over on 13 August. Over three months the group is down 13.2%, and every member sits 35-56% below its 52-week high.

The setup

Where it stands — A 25% month resting on three catalyst sessions, inside a drawdown, with the underlying metals flat to lower.

Would confirm — USA Rare Earth booking first magnet revenue by end-2026 and closing the gap to $79.3m of consensus.

Would invalidate — Neodymium-praseodymium and antimony prices turning higher alongside signed offtake volumes at any of the four development names.

Watch next — USA Rare Earth's Serra Verde shareholder vote on 28 August 2026.

Valuation — 5N Plus at 45.6x forward earnings versus 32.1x trailing, down from about 74x at its high.

On 4 August, Cricut told investors its second-quarter profit had grown by more than half. Very little of that came from selling machines.

Cricut sells consumer cutting machines — the Joy, Explore and Maker lines — through big-box retail, and rents its Design Space software to owners through a paid subscription called Cricut Access. Revenue in the quarter was $156.3m, down 9.2% from a year earlier. The products line, which is the machines and the vinyl and paper they cut, fell 22% to $71.3m. Net income was $39.1m.

Inside that profit sat $24.3m of items that will not repeat: $17.9m of refunds from U.S. Customs and Border Protection, booked as a reduction of product cost of revenue, plus a $6.4m royalty settlement. The refunds followed the Supreme Court's February ruling that tariffs imposed under the International Emergency Economic Powers Act were unauthorized. Cricut's finance chief said that without the one-offs, gross margin would have been about 58.9% — roughly flat sequentially — against the 74.5% that printed.

The durable part is smaller and slower. Paid subscribers reached 3.10 million, up 3% year on year, and platform revenue rose 5% to $85m at an average of $56.37 per user. Machine sell-through grew double digits in units; the revenue decline came from lower prices on the new Joy 2 and Explore 5. Management said engaged users have stabilized for the first time since 2022. That is against a top line that has fallen every year since 2021, from $1.31bn to $709m last year, even as gross margin climbed from 35% to 55%.

The most telling number is the valuation. Cricut's trailing price/earnings ratio of 13.0x is flattered by the refund; its forward multiple of 19.0x sits above it, because analysts model earnings down — $0.29 a share this year against $0.35 actually earned last year, and $0.226 next. The company holds $286m of cash, carries no debt, and yields 12.8% on trailing free cash flow.

The one business that inflected

Red Cat Holdings, which builds small reconnaissance drones for the U.S. Army and allied militaries out of Puerto Rico, is the real thing in this group. Second-quarter revenue was $20.2m, up 527% year on year and 30% sequentially, with gross margin of 16.1% against 11.6% a year earlier. The customer base broadened: the Army fell below half of revenue from 73%, with Japan second and NATO's support agency third.

The arithmetic ahead is severe. Red Cat reaffirmed full-year revenue of $150–180m; first-half revenue was $35.7m, so the second half must run at three to four times the first. Management points to $50–80m of finished drones in inventory awaiting orders, and warns that the Army program office has been restructured and the timing of the transition to low-rate production is unclear. A $2.49m Air Force order placed on 30 July is a rounding error against that guide. The quarterly net loss was $35.26m.

Red Cat's cash — $325.6m at 30 June, up from $167.9m — came from investors, not customers: about 27.5m new shares priced at $9.40 in May. The shares closed 17 August only about 11% above that. On losses, the earnings multiple is meaningless; on sales the stock trades at 10.4x forward, and on forward gross profit at 193x — the price of a 16%-margin hardware line.

Flat revenue, record refills

Stratasys makes polymer 3D printers and the materials they consume, for aerospace, dental and automotive customers. Revenue was $137.6m, down 0.3%, with an operating loss of $17.4m. The mix improved while the base did not: consumables hit a record $66.3m and the parts-service arm grew 12.1% to $44.9m, while printer sales fell to $26.4m from $30.6m. Aerospace and defense, now the largest vertical, grew 17%. The company withdrew its full-year free-cash-flow target after burning $18.7m in the quarter on intellectual-property litigation, and agreed in May to buy MarkForged for $42.5m. Revenue has now declined four straight years. It is the cheapest of the three — 0.94x book, 1.35x forward sales, with $212.5m of debt-free cash against a $767m market value — and consensus still models this year up 3.1%, which the reported first half, down 1.4%, does not support.

What the month actually was

Red Cat rose 36.6% between 17 July and 17 August, Cricut 19.0%, Stratasys 8.6%. Remove each name's two strongest sessions and only Red Cat is still up, at 12.5%; Cricut turns to minus 5.8% and Stratasys to minus 4.2%, because each of those two moves is one earnings day. Red Cat's own biggest session was 14 August, when the White House imposed tariffs on foreign-made drones and parts — a policy event that lifted AeroVironment, Kratos and Ondas too. Over the same month Kratos gained 38.9% and Ondas 37.9%, both more than Red Cat. Over twelve months, all three of these shares are roughly where they started.

The setup

Where it stands — One operating inflection at Red Cat, priced as defense-sector beta; two single-session earnings pops at Cricut and Stratasys. Would confirm — Red Cat third-quarter revenue above $50m, converting the $50–80m of finished-drone inventory into deliveries. Would invalidate — Red Cat cutting or missing the $150–180m full-year guide; Cricut products revenue declining again in the third quarter. Watch next — Third-quarter results in November, and whether Stratasys closes MarkForged in the second half as scheduled. Valuation — Cricut 13.0x trailing and 19.0x forward earnings, forward above trailing on falling estimates; Red Cat 10.4x forward sales; Stratasys 0.94x book.

The order books say one thing

Coherent, which makes lasers, optics and transceivers and now draws 79% of revenue from data-center and communications customers, told investors in August that its fiscal 2027 is effectively booked out, with customer orders extending into calendar 2028. June-quarter revenue was $2.05bn, up 33.7% from a year earlier, and gross margin widened to 38.5%. The shares are down 8.2% over three months.

That pattern repeats across the group. MACOM, which designs radio-frequency and high-speed analog chips split between defense radar and data-center optics, posted a record book-to-bill of 1.6 to 1 on 6 August and data-center revenue of $138m, up 40% in a single quarter. Its stock is down 12.8% since May. Lumentum, the laser and transceiver maker, grew June-quarter revenue 109% to $1.01bn and lifted gross margin fourteen points to 47.4%; it is flat over three months. Management says all of its capacity for electro-absorption modulated lasers is locked under long-term agreements through calendar 2027, with laser chip volumes doubled year over year — supply, not demand, is the binding constraint.

The month was two sessions

The 29% average gain of the past month is not a broad advance. On 30 July every one of the seven rose between 8.7% and 20.0%, after Alphabet raised 2026 capital spending to as much as $190bn and Meta lifted its own range to $125–145bn. On 4 August all seven rose again, by 7.1% to 24.6%, on reports that the administration is drafting a ban on imports of new Chinese optical transceiver models for US data centers. That is a market-share story rather than a demand story: China's Innolight and Eoptolink together control more than 60% of the high-bandwidth 800G-and-above module segment, and Western replacements are estimated to need one to two years to scale.

Remove each company's two best sessions and the group's month goes from +29% to roughly -2%, with four of the seven negative and Astera Labs at -22%. Every one of the seven also remains below its three-month high, from Credo at -6.5% to POET at -39.3%. The month was a rebound off July's selloff in optics stocks.

What got re-rated, and what didn't

Credo sells retimer chips and active electrical cables — copper links that undercut optics inside a rack on power — and it is the group's clear winner, up 64% in three months. The business justifies enthusiasm: fiscal fourth-quarter revenue rose 157% to $437m at a 68.2% gross margin, and consensus has revenue up another 83% this fiscal year. But the price rose faster than the earnings. Its trailing price-to-gross-profit has expanded to 58x from 46x in May, and forward earnings multiple sits at 46x. Credo has not reported since March; the whole month has been sympathy trading, including an 8% jump on 17 August after a broker note on NVIDIA's next-generation rack ramp.

Astera Labs, which sells connectivity chips and cable modules that link accelerators within a rack, guided the September quarter to $540–560m, 40% sequential growth, and said its Scorpio X switch family reached volume production a quarter early. The stock fell 12% the next day. At 81x forward earnings it carries the most expensive multiple here.

Against that, MACOM's trailing price-to-gross-profit has contracted to 38x from 40x in May — gross profit grew faster than the share price — and Coherent's 19x forward gross profit is roughly half Credo's 32x and less than half Astera's 39x. The two companies with the most visible order books wear the lowest multiples.

Two that are not the same business

Applied Optoelectronics is the trap in the group. Revenue grew 86% to $192m last quarter, but gross margin compressed to 27.7% from 30.3%, the company lost $23m, and the diluted share count rose 44% in a year. Its largest customer is a cable-television account at 42% of revenue, not a hyperscaler, and its top ten customers are 99% of sales.

POET Technologies, which licenses an optical-interposer packaging platform, booked $570k of revenue last quarter at a negative gross profit against a $1.24bn market value. No earnings or gross-profit multiple can be computed for it, and its 2027 revenue consensus rests on one analyst.

The underlying market is real — LightCounting puts AI cluster optics at $26bn in 2026, about 60% growth. The question is which of these companies is being paid for it.

The setup

Where it stands — Order books accelerated across the group, yet only Credo and Astera Labs are higher over three months. Would confirm — Coherent's next quarter landing at or above its $2.2–2.4bn guide with datacom growth held above 50%. Would invalidate — MACOM's book-to-bill slipping back below 1.3, or Lumentum reporting laser capacity no longer sold out. Watch next — Credo's fiscal first-quarter report, its first earnings event since 2 March. Valuation — Coherent 42x forward earnings and 19x forward gross profit, against Credo's 46x and 32x, Astera's 81x and 39x.

Applied Materials, whose deposition, etch and ion-implant machines build a chip's circuitry layer by layer, told investors this month that its October quarter should come in around $10.25bn — the largest in the company's history, and roughly 51% above a year earlier. The shares fell more than 5% the next morning.

That reaction is a fair summary of where the toolmakers sit. These companies are paid per machine out of somebody else's capital budget — the fab operators' — and the budgets are visibly rising. Applied has now lifted its forecast for calendar-2026 industry semiconductor systems growth twice, to above 30% from above 20% in February. ASML, the Dutch company that is the world's only supplier of extreme-ultraviolet (EUV) lithography scanners, raised full-year sales guidance to €43-45bn and said its planned 2027 EUV output — about 85 tools, a 30% step up — is nearly fully ordered already. KLA, whose inspection and metrology systems hunt for defects mid-fabrication, guided the September quarter to $4.0bn, up about 26%, and lifted its advanced-packaging process-control revenue outlook to roughly $1.1bn for the calendar year, more than 70% growth.

The numbers behind the guidance

Revenue growth at the large front-end names is accelerating in almost straight lines. ASML has gone from 0.7% year-on-year growth three quarters ago to 4.9%, then 13.2%, then 21.3% last quarter, to €9.33bn. Applied went from -2.1% to 11.4% to 24.8%. KLA moved 7.2%, 11.5%, 15.2%, to a record $3.658bn at a 42.5% operating margin, the best profitability in the group.

Margins are widening with the volume. ASML's gross margin went from 51.6% to 54.0% across those four quarters. Applied's operating margin reached 33.7%, up 330 basis points, its thirteenth consecutive quarter of year-on-year expansion. Both companies also carry a service annuity on the fleet already installed: ASML's installed-base business was €2.9bn of last quarter's total, about 31%, and is guided to grow more than 30% this year; Applied's services arm ran a 30.1% operating margin.

The industry backdrop supports them. SEMI, the equipment trade body, reported record first-quarter billings of $36.55bn, up 14%, and projects 300mm fab equipment spending of $133bn this year and $151bn next. TSMC has guided 2026 capital spending to $52-56bn, up from $40.9bn, and the three big memory makers have reportedly sold out their planned 2027 DRAM and high-bandwidth memory output.

The month was two days

The last thirty days are not the same story. Remove each company's two best sessions and only three of fourteen are still up: Aehr, Teradyne and Kulicke and Soffa. Applied drops to -8.3%, ACM Research to -12.1%, Lam Research to -6.2%. Seven of the nine largest members recorded their single best day on 30 July, the session after Teradyne — which sells the automated test equipment that screens finished chips — reported revenue up 103.9% and said artificial-intelligence work is now more than 60% of its business. Five had their second-best day on 21 July, a memory-led rally on Korean export data in which Micron rose 12%.

Sorted by function, the back-end test and packaging names averaged 36.1% over the month against 3.8% for the front-end wafer-processing group. Over ninety days that gap narrows to 38.4% against 21.9% — the front-end is participating on a quarter view. One caution on the charts: KLA split its stock ten-for-one on 11 June, and unadjusted price series show an apparent 88% collapse that never happened. Adjusted, KLA is up 17.1% over three months and 133.6% over twelve.

Where the business and the price disagree

Aehr Test Systems, a 138-person maker of wafer-level burn-in systems that stress chips before packaging, is the extreme. Fiscal-2026 revenue fell 15.2%, to $50.0m, with a -28.3% operating margin and a $7.1m loss. The shares are up 651% over twelve months. The case rests entirely on the final quarter and after: revenue of $19.75m, up 40.2%, record bookings of $60.7m, a $22m follow-on order from its lead artificial-intelligence processor customer, and fiscal-2027 guidance of $130-150m. At 37.7x forward sales and 231x forward earnings, none of that is unpriced.

Kulicke and Soffa, the Singapore-based maker of the bonders that attach chips to their packages, is the mirror image. Revenue grew 122.6% to $330.4m, September is guided to $375m, and its fluxless thermo-compression bonding line — the tool advanced memory stacking needs — is guided to $150-200m next fiscal year from above $100m this one. The stock is down 0.3% over three months and trades at 29.8x forward earnings against 46.0x trailing, the cheapest forward multiple and widest gap in the group.

Axcelis, which makes ion implanters for mature-node, silicon-carbide and memory production, is the laggard: revenue up 10.6% but operating income down 30%, margin compressed to 9.4%, backlog $452m at a book-to-bill of about 1.0, and China now 46% of sales. ACM Research, selling wet-clean and plating tools mostly into Chinese domestic fabs, grew 36% and raised full-year guidance to $1.125-1.175bn, but gross margin slipped to 46.0% and its forward price/earnings ratio of 42.9x sits above trailing — consensus expects earnings to dip first. Cohu, which makes test handlers and contactors, grew 38.4% with computing orders up 150%, yet its operating margin was 0.2% and automotive is down 24%.

What the prices already assume

ASML trades at 49.4x forward earnings against 56.9x trailing — essentially the ~49x recorded here in May, despite a 27.9% price gain since, because estimates rose in step. Teradyne is at 48.1x forward, also flat against May after a 38% quarter. Applied is 43.6x on this fiscal year and 31.4x on next. KLA's 37.5x forward against 55.9x trailing prices in the 47.8% earnings growth consensus expects. Expensive, but not re-rated: the advance so far has been paid for by revisions rather than enthusiasm.

The setup

Where it stands — Front-end and back-end toolmakers are guiding to accelerating growth, but the past month's gain came from two shared sessions. Would confirm — Applied's October quarter landing near $10.25bn, with its services arm growing above 20%. Would invalidate — Aehr missing its $130-150m fiscal-2027 guide, or Kulicke's September quarter printing below $375m. Watch next — Aehr's August-quarter results, due around early October, the first check on that guide. Valuation — ASML 49.4x forward against 56.9x trailing and ~49x in May; Kulicke 29.8x forward against 46.0x trailing.

On 6 August, Atlassian — the Sydney company that licenses Jira project tracking and Confluence documents by the user seat — closed the best year in its history and told investors the next one would be roughly half as good. Revenue for the year to June was $6.572bn, up 26%. Operating income came to $10.4m, a rounding error on that revenue but the first positive full year the company has ever reported. Cloud revenue in the final quarter rose 31% to $1.213bn, and remaining performance obligations were up 44%.

Then came the guide. Fiscal 2027 revenue growth of about 13%, as the self-managed Data Center line — whose end-of-life deadline pulled renewals forward — declines around 17%. Non-GAAP operating margin steps down to 25% from 36% in the June quarter, and roughly four points of that fiscal-2026 margin was Data Center timing. The shares rose 35.8% the following session.

One session, half a month

That single day is close to a quarter of the whole eight-company average for the past 30 sessions. Atlassian's +69.7% is about half of it. Remove each name's two best sessions and only Atlassian, at +6.8%, and GitLab, at +6.7%, are still positive; Figma is -13.7%, Adobe -11.2%, Cadence -8.3%, Autodesk -8.2%. The equal-weight average goes from +17.3% to -3.6%. A large part of what remains dates to 28 July, when money rotated out of semiconductors and into beaten-down software names — the best day of the window for Autodesk, Adobe and PTC alike.

The two that grew fastest are the two that fell

Cadence Design Systems sells the software chip engineers use to lay out silicon, plus emulation hardware and pre-verified circuit blocks. Second-quarter revenue rose 24.2% to $1.584bn at a 28.4% operating margin. Backlog hit a record $8.1bn, intellectual-property revenue grew over 40%, and management raised full-year guidance by the largest single-quarter increment it has ever made. Cadence is the only one of the eight down over 30 days, and down 6.5% over 90.

The reason has a date. On 17 July, Chinese lab Moonshot released a model that completed a chip design in about 48 hours using open-source tools and no proprietary electronic design automation (EDA) software. Cadence fell 9.5% that day and Synopsys 7.9%. Cadence's own answer, given ten days later, is that AI agents call the underlying tools more often, not less — its agent product is in 20-plus customer engagements and validates circuit logic more than 40 times faster.

Figma, the browser-based design tool with 1,886 employees, grew 48.2% to $370.1m — a third straight quarter of acceleration — with net dollar retention of 136% and a $40m raise to full-year guidance. It fell 14.9% the next day as operating expenses nearly doubled to $426.9m, turning a small profit into a $117.3m operating loss, and 77.7m shares came off lock-up days later.

Does the seat survive?

This is the group whose revenue unit is a job AI is meant to automate, and the disclosures point one way. Figma said one large technology customer added more than 25,000 seats, with more engineers on them than designers. Atlassian says core Jira and Confluence seat expansion is strong and that AI raises the need for coordination — though it disclosed its first enterprise seat decline earlier this year. PTC, which sells Creo design and Windchill product-lifecycle software to manufacturers, grew annual recurring revenue 9.1% in constant currency to $2.448bn, above its own guidance, and bought back $525m of stock in one quarter, citing the compressed share price. Autodesk, which sells AutoCAD and Revit into construction and manufacturing, expanded operating margin to 28.0% from 20.7% and agreed to buy maintenance-software firm MaintainX for about $3.6bn, its largest deal ever.

Two names contradict the recovery. Synopsys, Cadence's rival, grew 41.9% on the Ansys acquisition but watched operating margin collapse to 10.4% from 23.5%; it is the only one of the eight whose 50-day average sits well below its 200-day. GitLab, the per-developer DevOps platform, has not reported since 2 June, has guided this year to 15-17% growth from 26%, and rose 23.8% anyway.

Adobe is the outlier in the other direction. Creative Cloud revenue accelerated to 12.7% growth, AI-first recurring revenue tripled past $500m, and the stock trades at 14.5x trailing and 10.4x forward earnings with a 10.5% free-cash-flow yield. Its price against gross profit is 4.50x — exactly where it stood on 3 May, despite gross profit growing since.

What the prices now assume

Measured against those early-May levels, only the two EDA names are cheaper: Cadence at 17.24x gross profit from 19.14x, Synopsys at 12.41x from 14.03x. Atlassian has gone from 3.80x to 7.46x, a 96% expansion into halving guided growth, and now carries a 26.0x forward multiple on consensus earnings of $6.08. GitLab has gone from 4.57x to 7.85x with no new numbers in the interim.

One footnote worth correcting: the parallel decline in creative-software shares over the same month is not Adobe or Figma, both of which rose. It is Getty Images, down 46.9% after a going-concern disclosure, and Shutterstock, down 28.8% — balance sheets, not lost seats.

The setup

Where it stands — A month's gain in developer and design software is mostly one Atlassian earnings session, against businesses moving in opposite directions. Would confirm — Atlassian's fiscal 2027 first quarter showing cloud growth at or above the guided 25.5%. Would invalidate — Cadence trimming its raised $6.26-6.34bn full-year range, or backlog falling from $8.1bn. Watch next — GitLab's next quarterly report, its first since 2 June, and Adobe's fiscal third quarter in September. Valuation — Atlassian 7.46x trailing gross profit against 3.80x on 3 May; Adobe 4.50x, unchanged, at 10.4x forward earnings.