Earnings Rewind: The Consumer Pulse, Cyber Guardians, and the Future of Music

Welcome back to Earnings Rewind, your weekly deep dive into the financial confessionals of the corporate world. If you’re new here, this is where I peel back the layers of press releases and earnings calls to tell you what’s really happening with the companies we didn’t cover in another article during the week.

This week was a study in contrasts. We had a retail giant tapping the brakes, a cybersecurity titan accelerating through the AI storm, a music major hitting the high notes, and a fintech disruptor making its public debut with a whole slew of growth ideas. It’s a week that tells us the consumer is cautious but still spending, while the enterprise world is racing to secure a future defined by AI and Quantum computing.

Target: A Certain Consumer tightens the Belt or Target Just Sucks

Caution lights are flashing in the retail aisles but maybe it’s just a Target issues. After all, Walmart just had earnings and they were actually quite good while Target continues to struggle. The retailer narrowed its guidance to the lower end, signaling a tougher holiday season ahead which maybe why the stock was down ~2% for the week and down almost 30% in the last year.

Target (TGT) has long been the bellwether for the chic but budget-conscious shopper. In Q3 2025, that shopper became a lot more budget-conscious and a little less chic. Target reported net sales of $25.3 billion, a 1.5% decline from the prior year. Comparable sales dipped 2.7%, driven largely by a pullback in discretionary categories like Home and Apparel.

The Good

It wasn’t all doom and gloom. Target’s digital sales continued to grow. Digital comparable sales grew 2.4%, fueled by a massive 35%+ jump in same-day delivery services powered by Target Circle 360. If you need it now, Target is there for you.

• Frequency Categories: Essentials are holding up. Food & Beverage and Beauty delivered growth. Specifically, beverages were up nearly 7% (is it the 73 new prebiotic soda brands), and candy had a sweet quarter.
• Fun 101: This is Target’s rebranding of their Hardlines business(toys, electronics, sporting goods) and it seems to be working. Toys saw a nearly 10% comp, and categories like music and video games saw double-digit growth.
• Margins: Despite the sales dip, gross margins held steady at roughly 28.2%, helped significantly by a 70 basis point reduction in shrink (theft).

The Bad

• Discretionary Slump: The core Target run for a new outfit or home decor is stalling. Apparel comps were down 5%.
• Volatility: The quarter was a roller coaster. Sales were flat in August and October but dropped 4% in September. That inconsistency is scary for investors.
• Guidance: The kicker. Target lowered the boom by narrowing its full-year Adjusted EPS range to $7.00 – $8.00, effectively moving expectations to the bottom half of their previous outlook($7 to $9).

The Macro Takeaway

CEO Brian Cornell and team used the word choiceful to describe the consumer. Shoppers are resilient but are strictly prioritizing needs (food, essentials) over wants. Sentiment is reportedly at a 3-year low due to fears about jobs and tariffs.

The strategy for Holiday 2025? Value. Target is banking on affordability, cutting prices on 3,000 items and offering a Thanksgiving meal for four under $20. If the economy is slowing, Target is positioning itself as the safe harbor for the budget-strained family. That seems like the right strategy and with target stock trading at 2019 prices, the value here could be interesting if they can get growth to tick up again and free cash flow margins up to at least 3%.

Palo Alto Networks: The AI Security Fortress

PANW is ready and willing to spend. Management seems to think it’s full speed ahead when it comes to the security sector. While the quarter was good on paper, some worries around valuation sent the stock down around 11% or the week sending the stock down ~5% in the last year.

Palo Alto Networks (PANW) kicked off Fiscal Year 2026 with a solid quarter. Revenue grew 16% to $2.5 billion, but the real star was Next-Generation Security (NGS) ARR, which surged 29% to $5.85 billion.

The Good

• Platformization: This is the buzzword of the year(integrating multiple services onto one platform instead of having multiple separate services). Customers are dumping point products and consolidating onto Palo Alto’s platform. They signed 60 net new platformizations in the quarter.
• Profitability: Who says growth can’t be profitable? Operating margins hit 30.2%, and Adjusted Free Cash Flow grew 17% to $1.7 billion.
• AI & Quantum: They aren’t just securing AI; they are using it. Their Prisma AIRS (AI Runtime Security) platform is seeing early traction to secure AI models and agents. Plus, they launched Quantum-ready firewalls, preparing for the day quantum computers break current encryption.
• SASE: Their Secure Access Service Edge business is a rocket ship, growing ARR 34% to over $1.3 billion.

The Bad

• Hardware Mix: As the world moves to software firewalls (which now make up 44% of product revenue), the traditional hardware business is becoming a smaller piece of the pie. It’s a healthy transition, but one that can create noise in top-line product revenue numbers.

The Macro Takeaway

The Q&A chatter was all about acquisitions. Palo Alto Networks is in the process of buying CyberArk (Identity) and Chronosphere (Observability). CEO Nikesh Arora defended the Chronosphere deal vigorously, arguing that in the AI era, observability (knowing if your system is down) is a security issue. He believes these acquisitions will help them reach a massive $20 billion ARR goal by FY30. The message? The future of security is a unified data platform that sees everything. Still, the cost of some of these acquisitions is a big question mark. CyberArk which maybe $1.3B in revenue cost PANW $25B which is certainly a rich multiple.

Right now, PANW trades at a 46x forward earnings multiple so they have to keep hitting high growth figures for a while to warrant that.

Warner Music Group: Hitting the High Notes

The music industry is evolving, and WMG is trying to make sure they’re still around in decades as that happens. The stock was up 1% for the week as the earnings looked solid and the company’s comments around AI put investors at ease.

Warner Music Group (WMG) posted its highest quarterly revenue ever in Q4 2025, with total revenue up 15%. The company is successfully navigating the shift from pure volume growth to a model driven by price increases and superfandom. Still, the stock hasn’t done much lately with the stock only being up around 5% in the past 5 years and has cycled in the 25-35 range for the last few years.

The Good

• Streaming Strength: Subscription streaming revenue grew 8.4%. People aren’t cancelling their Spotify or Apple Music subs. That’s just the new way to listen to music and it seems like those companies have pricing power which benefits companies like WMG who get a certain cut of those sub fees.
• Chart Toppers: A killer lineup of releases from Cardi B, Twenty One Pilots, and Ed Sheeran drove market share gains.
• Efficiency: CFO Armin Zerza’s cost-saving program is on track to deliver $200 million in savings for 2026.
• AI Strategy: Instead of fighting AI, WMG is licensing it. They’ve signed deals with AI music startups (Udio, Stability AI) to ensure artists get paid when AI models train on their tracks. That’s good for the short term but the question is what happens in the long term when those AI songs sounds just as good as the real thing. That’s likely one of the reasons stocks like WMG and UMG are so range bound and have been so flat in the past few years.

The Bad

• Margin Mix: Adjusted OIBDA margins dipped slightly (down 0.1%). Why? Artist Services (merch, touring) grew a massive 67%. While that brings in cash, selling t-shirts has lower margins than streaming royalties. It’s a good problem to have, but a drag on margin percentages nonetheless. It is also more variable based on successful tours and releases so part of that top line growth might not be something that’s consistent.

The Macro Takeaway

CEO Robert Kyncl outlined a 3 L strategy for AI: Legislate, Litigate, License. The industry has learned from the Napster era. They aren’t waiting to be disrupted; they are building the guardrails for the AI music revolution. If AI generates new songs, WMG wants a cut. That’s nice but I’m not sure taking 3 Ls is a good way to define a strategy in this day and age.

Klarna: The Public Debut of a Neobank

Klarna no longer wants to be seen as  just a Buy Now, Pay Later app. They are starting to see themselves as a banking powerhouse. In its first earnings report as a public company, Klarna showed investors it can grow fast and cut costs but investors don’t seem too impressed by any of it. Despite beating revenue expectations and guiding above expectations. the stock was down 15% for the week(part of that was just a market correction on higher risk names) and is also down 32% since it opened after IPO. The stock trades $11 below its IPO price so not a good deal for early investors just yet. I think part of the issue is that the stock continues to show negative net income and the market is less willing to buy growth at any price than it was when this IPO’d.

Overall, Klarna had a solid Q3. Revenue grew 28% globally, but the U.S. market was the showstopper, growing 51%. They seem to be starting the pivot from a simple checkout option to a financial assistant for 114 million consumers.

The Good

• US Dominance: The U.S. is now a growth engine, with GMV up 43% with plenty of runway ahead given US market penetration is a small chunk of more mature markets.
• The Klarna Card: This is the bridge from BNPL to everyday banking. The card has 4 million signups, driving higher frequency usage.
• AI Efficiency: This is the wildest stat of the week—revenue grew 28% while operating expenses remained flat. How? AI agents are doing the work of hundreds of people, driving massive leverage. Due to the big cuts in employment, Klarna announced, perhaps the market expected even greater improvements that would actually drive positive net income.
• Credit Quality: Despite growing fast, realized losses dropped to 0.44% of GMV. They are underwriting better than the banks so far which has always been a concern with these BPNL companies. The nice thing is that most of their loans are relatively small although their move into larger loans with their fair financing product does change that dynamic a bit.
• The Accounting Optical Illusion: Klarna reported a profitability lag in Transaction Margin Dollars. Because their fair financing (longer-term loans) grew so fast (+139%), accounting rules force them to book all the potential credit losses upfront, while the revenue comes in over months. It makes the quarter look less profitable than it actually is and could mean future profitability looks good unless those loans have a higher percentage of write offs.

The Bad

• Net Loss: They still posted a net loss of $95 million, though adjusted operating loss narrowed significantly to just $14 million.

The Macro Takeaway

CEO Sebastian Siemiatkowski is targeting the self-Aware avoider—consumers who hate credit card debt and interest fees. By positioning Klarna as the fair alternative to traditional credit cards (offering debit-first options with credit-like perks), they are stealing share from Visa and Amex. The future of finance isn’t a plastic card; it’s an AI app that helps you shop and that’s what Klarna is trying to develop. Their goal is to get you in the door with a BNPL offer on some website, get you onto their app to track your loans, offer you various services there and keep you hooked with more customer friendly offerings than credit cards. It’s true that these types of offerings are generally better on paper for consumers as the majority of the cost is passed on to the merchant but end of day, the merchant just passes back those costs to the consumer in the form of higher prices.

Plus, the BNPL world is competitive so it’s hard to tell whether those merchant fees will remain as high as they are for long and whether Klarna can keep growing this way until they can actually start making money.

The Final Word

This week painted a picture of a bifurcated economy. Target shows us a consumer who is counting pennies, waiting for deals, and prioritizing dinner over decor or simply a company that is losing market share to cheaper and better players like Walmart or Costco. Meanwhile, Klarna shows that same consumer is willing to spend if you give them flexible, transparent payment options or one that has to actually pay for must haves using BNPL options. It’s hard to tell but certainly neither company is getting much love from the market as worries about the economy persist but ones that could spring back up quickly if those worries turn out to be unwarranted.

On the enterprise side, Palo Alto Networks proves that data is king and protecting corporate data from AI hackers or anyone is a big part of that, but it’s also a field that’s constantly changing which is why companies like PANW have to keep spending money to keep offering services that companies need. On the content side, AI is a game changer as well and WMG and its music business faces the big question mark as to what music looks like 10-15 years from now. Companies like Spotify are already putting AI artists into various playlists and most people don’t even realize that’s the case and that could be a problem long term for WMG.

As we head into the holiday season, keep an eye on the promotional environment. If Target’s under $20 Thanksgiving is any indication, it’s going to be a holiday season defined by the battle for value.

Have a good thanksgiving break. There might not be a rewind next week because the stock market will be slow during the holiday week but be sure to be here the week after that for more coverage.

Disclosure: This is not financial advice. Please talk to a qualified financial advisor before making any investment decisions.