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DATE

• Thursday, July 24, 2025, at 9 a.m. EDT

CALL PARTICIPANTS

• Chief Executive Officer — Nitin Mhatre
• President — Sean Gray
• Chief Financial Officer — Brett Brbovic
• Chief Credit Officer — Gregory Zingone

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TAKEAWAYS

• Operating Net Income: $31.6 million for Q2 2025, up 14% from the first quarter and up 36% year over year.
• Operating Earnings Per Share: $0.69, up 15% from the first quarter and up 25% year over year.
• Operating Expenses: $67 million, down 2% from the first quarter and down 7% year over year, reflecting ongoing cost control.
• Operating Leverage: Positive operating leverage of 5% from the first quarter to the second quarter and 11% year over year.
• Operating ROTCE: 10.76%, up approximately 110 basis points from the first quarter and year over year.
• Net Charge-Offs and Nonperforming Loans: Net charge-offs were 14 basis points of loans; nonperforming loans totaled 27 basis points of loans for Q2 2025.
• Digital Deposit Program: Over $100 million in new deposits added since inception earlier in 2025.
• Merger with Brookline Bancorp: Estimated 23% earnings accretion to 2026 consensus (GAAP and cash basis).
• Annualized Net Income: Net income for 2025 annualizes to more than $118 million, surpassing the prior consensus of $101 million for 2025 as referenced in merger materials.
• Merger Cost Synergies: Pro forma cost save target set at 12.6%; technology stack integration progress described as "very pleased with the favorable outcome."
• Net Interest Margin: Net interest margin was 3.27% in the second quarter; June spot margin was 3.22%, up three basis points from the first quarter.
• Average Loans: Average loans increased $95 million (1% annualized) from the first quarter and $327 million (4%) year over year, with growth led by commercial and industrial lending.
• Average Deposits: Average deposits (excluding payroll and broker deposits) increased 1% from the first quarter and 6% year over year; average noninterest-bearing deposits as a percentage of total deposits remained steady at 23% in the second quarter.
• Net Interest Income: Net interest income rose $2.2 million (2%) from the first quarter and increased 4% year over year.
• Non-Interest Income: Operating non-interest income grew $1.1 million (5%) from the first quarter and $1.6 million (8%) year over year; loan-related fees increased in Q2 2025 due to loan servicing and BOLI gains, offset by reduced SBA gains.
• Efficiency Ratio: Efficiency ratio was 56.7% in the second quarter.
• Nonoperating Expenses: $1.5 million in nonoperating expenses primarily related to the merger for Q2 2025.
• Loan Loss Allowance: Reserve coverage to nonperforming loans reached 462% for Q2 2025; coverage ratio remained flat at 124 basis points.
• Firestone C&I Portfolio: Outstanding balance was $28 million as of the second quarter, down 15% from the first quarter; nonperforming loans in the Firestone C&I portfolio were $1.3 million; net charge-offs in the Firestone C&I portfolio were $900,000 in the second quarter.
• BOLI Gains: BOLI gains were about $800,000 above normal and nonrecurring.
• Tax Rate Guidance: Expected to normalize to "about 24, 25%."
• Tangible Book Value Dilution—Merger Impact: Prior guidance of 17% tangible book dilution and 40% earnings pickup at deal announcement may revise pending final FASB (CECL) rule adoption, which management cannot yet quantify.
• Multifamily Loan Portfolio: $700 million multifamily loan portfolio, confirmed to have no rent-controlled exposure in company footprint or in New York City.
• Merger Closing Timing: Targeted for September, per management, dependent on regulatory approval.

SUMMARY

Berkshire Hills Bancorp (NYSE:BHLB) reported operating earnings growth of 14% from the first to the second quarter of 2025 and 36% year over year in the second quarter. This was driven by stronger net interest income and a sequential rise in net interest margin, attributed to deposit growth and lower reliance on FHLB borrowing. Management highlighted that expense reduction was broad-based. The bank's new digital deposit initiative drove notable deposit growth, contributing to reduced borrowing costs and reinforcing balance sheet strength. Asset quality remained resilient, with confirmed absence of rent-controlled loan exposure in the lending book.

• CEO Mhatre said, "The merger with Brookline Bancorp is expected to deliver meaningful profitability."
• President Gray said, "Cost synergy realization is progressing favorably, especially in technology," positioning the bank to achieve its 12.6% pro forma cost save goal.
• Management noted annualized net income projections for 2025 currently exceed merger deck consensus by more than $17 million (GAAP), indicating potential outperformance relative to earlier 2025 consensus net income forecasts.
• Chief Financial Officer Brbovic said, "Our spot NIM for June 2025 was approximately 3.22," clarifying the sequential margin dynamics as deposits replaced higher-cost funding.
• On guidance, Brbovic gave a tax rate expectation of "about 24, 25%" going forward, normalizing from the merger-driven elevated level this quarter.
• Future tangible book value dilution and earnings accretion from the merger remain partially unquantified pending FASB CECL guidance, which management continues to monitor but cannot finalize at this time.
• Integration planning and regulatory approval are both on schedule for a September merger closing, pursuant to management's public guidance.

INDUSTRY GLOSSARY

• BOLI (Bank-Owned Life Insurance): Insurance policies owned by the bank on executives' or employees' lives, generating non-interest income for the bank.
• FHLB (Federal Home Loan Bank) Borrowing: Funding banks obtain from the FHLB system to manage liquidity needs.
• CECL (Current Expected Credit Loss): FASB accounting standard requiring banks to recognize expected lifetime losses on loans up front.
• NPL (Nonperforming Loan): Loan for which the borrower is not making interest payments or repaying principal as scheduled.
• NCO (Net Charge-Off): The amount of loan principal written off as uncollectible, net of recoveries.
• ROTCE (Return on Tangible Common Equity): A measure of profitability based on income returned on shareholders' tangible equity, excluding intangible assets.

Full Conference Call Transcript

Nitin Mhatre: Thank you, Kevin. Good morning, everyone, and thank you all for joining us today. I'll begin my comments on Slide three, where you can see highlights for the second quarter. Overall, this was a very strong quarter and the best quarter yet since we began our transformational journey in early 2021. We had operating net income of $31.6 million, up 14% linked quarter and up 36% year over year. Operating earnings per share of $0.69 was up 15% from the first quarter and up 25% year over year. We continue to drive expenses lower with operating expenses of $67 million, down 2% linked quarter and down 7% year over year.

We had positive operating leverage of 5% linked quarter and 11% year over year driven by both improved revenues and lower expenses. Operating ROTCE was 10.76%, up about 110 basis points linked quarter and year over year. Asset quality and balance sheet metrics remain strong. Net charge-offs and nonperforming loans remained low at 14 basis points and 27 basis points of loans respectively. We continue to make steady progress on our strategic initiatives. Our focus on the new digital deposit program has gained momentum and has delivered over $100 million of new deposits since inception earlier this year.

Our bankers' commitment to delivering relationship-focused personalized solutions to our clients has been at the core of our improved financial performance and has earned us yet another recognition this quarter. This time, from Time Magazine that recognized us again amongst the top-performing midsized US companies in 2025. As you know, in December, we announced a merger of equals with Brookline Bancorp. The transaction improved scale and meaningfully improves profitability as reflected in the estimated 23% accretion to Berkshire's 2026 consensus estimate on GAAP and cash basis, respectively. Berkshire's net income in 2025 annualizes to over $118 million and it's tracking well ahead of the 2025 consensus net income of $101 million shared in our MOE investor deck in December.

Our team continues to work proactively on requisite integration planning for a seamless transition. And on that note, I'll turn the call over to Sean Gray to provide an overview of the merger integration planning process. Sean?

Sean Gray: Thanks, Nitin. You know, as we await regulatory approval, there's only so much in detail we can share. But I can say this, the combined organization's leadership team has made really good progress and continues to work towards our pro forma cost save goal of 12.6%. I can speak to where our tech stack expenses are coming as most of that work is complete. And where that is coming in versus plan. So I'm very pleased with the favorable outcome of where our tech stack expense is showing up and that will bid favorably for the overall goal of the 12.6%. Thanks, Nitin. Thanks, Sean. I'll begin going over the financial details for the quarter.

I'll begin on Slide five, which shows an overview of the second quarter metrics. As Nitin mentioned, our operating earnings were $31.6 million or $0.69 per share. Our net interest margin was 3.27, up three basis points linked quarter. Operating expenses were down $1.3 million or 2% linked quarter and our efficiency ratio was 56.7%. Slide six shows our average loan balances. Average loans were up $95 million or 1% linked quarter on annualized and up $327 million or 4% year over year. Linked quarter, we had solid broad-based growth led by C&I. Slide seven shows average quarter and up 6% year over year.

Excluding payroll and broker deposits, average deposits were up 1% linked quarter and up 6% year over year. Average noninterest-bearing deposits as a percentage of total deposits remained steady at 23%.

Brett Brbovic: Turning to Slide eight. Net interest income was up $2.2 million or 2% linked quarter, and up 4% year over year. Net interest margin was up three basis points linked quarter to 3.27. Slide nine shows operating non-interest income up $1.1 million or 5% linked quarter and up $1.6 million or 8% year over year. Loan-related fees were up linked quarter driven by higher loan servicing fees and BOLI gains offsetting lower SBA gains in the quarter. Slide 10 shows expenses. Operating expenses were down $1.3 million or down 2% linked quarter to $67 million and down $4.7 million or 7% year over year. Linked quarter and year over year expense declines were broad-based.

Nonoperating expenses of $1.5 million were primarily related to the merger. Slide 11 shows a summary of asset quality metrics. Nonperforming loans as a percentage of total loans was 27 basis points and loan reserves to NPLs 462%. Net charge-offs of $3.3 million were down $200,000 linked quarter. And our coverage ratio remained flat at 124 basis points. And with that, I'll turn it back to Nitin for further comments. Nitin?

Nitin Mhatre: Thank you, Greg. As Brett outlined, we had a very strong second quarter. That has continued the EPS growth momentum over multiple quarters. This quarter was in fact the best quarter since we launched our transformation program in early 2021. Over the last four and a half years, our turnaround has been a journey of efficient growth and profitability while creating a positive impact for all stakeholders. We made significant strategic decisions, embraced innovation to invest in technology, reignited organic growth, and remained committed to our communities. We've not only improved our financial performance, despite the macroeconomic headwinds that have impacted the industry over the last few years, but have also positioned ourselves for continued strength in the long term.

Our progress is a testament to the unwavering dedication and hard work of our employees, the trust and loyalty of our clients, and the confidence and support of our shareholders. As I reflect on our progress since we began our transformation program in early 2021, I want to express my deepest gratitude to every member of the Berkshire team, our clients, and our board of directors. Our bankers' dedication, resilience, and commitment to our clients has been the driving force behind our improved operating and financial performance. Together, we've navigated challenges, embraced change, and delivered strong results for our clients, shareholders, and communities.

It has truly been an honor and a privilege to lead such an outstanding team of purpose-driven, values-guided, talented bankers. I'm incredibly proud of what we've accomplished together and excited to see what the combined company will achieve next. With that, I'll turn it over to the operator for questions. Carly?

Operator: Your first question comes from Laurie Hunsicker with Seaport Research Partners. Hi. Good morning.

Laurie Hunsicker: Hello, Laurie. I just wondered if we could just start with margin. You guys had that $100 million drop in FHLB. Just remind us when in the quarter that fell and then also your spot margin for June and just how you're thinking about it?

Brett Brbovic: Thanks. Hey, Laurie. This is Brett. Our spot NIM for June was about $3.22. The FHLB drop...

Laurie Hunsicker: Sorry, Laurie. Sorry. I think there was a dead spot there. Can you start over? Thanks.

Brett Brbovic: Sure. The spot NIM for June was $3.22. And the FHLB decline coincided with an increase in our deposits throughout the quarter, so it was just based on what we needed to borrow or what we didn't need to borrow based on the deposit growth that we saw this quarter.

Laurie Hunsicker: Gotcha. Okay. Gotcha. And do you have any sort of near-term large maturities coming due in CDs or for borrowings that we think about here in the next quarter?

Brett Brbovic: No. Nothing. I wouldn't say anything significant.

Laurie Hunsicker: Okay. Great. And then just jumping over to credit, obviously, your credit is looking great. But just wondered if you can help us think about that jump in the C&I nonperformers to $11 million from $9 million. And then also Firestone. I know it's small, but if you could just give us what is the Firestone C&I balance and how much are nonperformers and charge-offs?

Greg Lindenmuth: Greg, you want to give some color on it?

Gregory Zingone: Sure. Hi, Laurie. How are you? The jump in NPLs, it's a handful of just smaller credits. Probably just a half dozen of smaller credits with just individual problems related to each business. As far as Firestone, the balance is down 15% quarter over quarter to $28 million. And NPLs have historically ranged in the $1.5 million range. They're at $1.3 million right now. And for NCOs, there's a net $900,000 for the quarter.

Laurie Hunsicker: $900,000. Okay. And then again, you had outsized charge-offs just in the C&I bucket. Was there anything specific there that's worth calling out?

Gregory Zingone: No. Very similar to the NPL. Nothing noteworthy. Just a handful of individual credits on the smaller side.

Laurie Hunsicker: Gotcha. Okay. And then I think I know the answer to this, but I just want to triple-check. Your $700 million multifamily book, anything rent-controlled in that book?

Gregory Zingone: No. We have no rent control in our footprint. Even though New York City is technically within our footprint, we do not have any loans there.

Laurie Hunsicker: Okay. And then I know Mondami has expressed a desire to target other markets too, i.e., Albany. Do you have any rent-controlled anywhere?

Gregory Zingone: We do not. Not in our footprint. No. And not in the company.

Laurie Hunsicker: Okay. That's great. And then non-interest income, the loan-related fees that were really strong. What were the BOLI gains in this quarter?

Brett Brbovic: They were about $800,000 above normal. Just nonrecurring.

Laurie Hunsicker: Benefit. Death benefit? Or Correct. Okay. And then how do we think about the drop in the SBA loan? Gain on sale of SBA loans? How should we be thinking about that?

Sean Gray: So I think we can take that large, Barry. Hey. It's Sean. You know, we and Brett's probably gonna say the same thing. We're coming off a really good Q4 and Q1. We pulled some of that value forward. So a little bit of a move back to the mean. But when we look at the core business, we look at pipeline and volume, it looks very healthy.

Laurie Hunsicker: Okay. So this current run rate Q2 is probably a better run rate?

Sean Gray: I would say it's in between the Q1, Q2.

Laurie Hunsicker: Okay. Great. And then how should we be thinking about the tax rate going forward?

Brett Brbovic: So our tax rate is a bit elevated right now due to timing and merger-related aspects. I would expect it to normalize going forward.

Laurie Hunsicker: Okay. And so what would be a good, you know, like, 23, 24%?

Brett Brbovic: I would say about 24, 25%.

Laurie Hunsicker: Okay. And then just last sort of more high-level question. Here. Can you help us think about your deal tangible solution at announcement tangible book dilution was 17% and then a 40% earnings pickup. Can you just help us think about what the new FASB impact on CECL updates, the double count sort of means for your tangible book dilution? You help quantify that? And, also, you know, presumably, your tangible book dilution is something less, but your earnings pickup is also something less. Just how should we think about that? And then also deal-related, can you help us think about the timing?

Brett Brbovic: Sure. So obviously, the ASU hasn't been finalized yet. You know, it's expected to be adopted at the third or fourth quarter of this year. It will have an impact on the combined entity as we move forward. I don't think at this time, you know, we can quantify that right now on this call. But it definitely will have an impact, and it's something we're continuing to analyze as we get more information on the ASU. What it's gonna look like in its final state.

Laurie Hunsicker: Okay. And then what about deal closing? We've seen things really ramp up on the M&A side on deal closings just happen really, really a lot faster. Any color on that?

Nitin Mhatre: Yeah. Laurie, I think we in the investor materials, we did say we expect the closing to be September. Everything's on track so far, so we're just awaiting the regulatory approval. And the teams are already working on the integration planning, as Sean outlined.

Laurie Hunsicker: Okay. Great. Thanks, Nitin, for taking my question.

Nitin Mhatre: Thank you, Laurie. Thanks, Laurie.

Operator: There are no further questions at this time. I will now turn the conference back over to Nitin Mhatre for closing remarks.

Nitin Mhatre: Thank you all for joining us today for our call and for your continued interest in Berkshire Hills Bancorp. Have a great day, and be well.

Operator: This concludes today's conference. You may now disconnect.

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Key Points

• Alphabet and GitLab are misunderstood stocks that are poised to be AI winners.

• Salesforce and ServiceNow are software companies with big AI opportunities in front of them.

• SentinelOne has a big potential catalyst in the second half as its deal with Lenovo rolls out.

• 10 stocks we like better than GitLab ›

The first half of 2025 wasn't kind to a number of promising artificial intelligence (AI) stocks, particularly in the software space. However, the second half could be very different.

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Alphabet

Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) continues to be one of the most misunderstood stocks in the market. Investors keep worrying about AI disrupting its core search business, but that misses the bigger picture. Google isn't a search company -- it's a content discovery platform with a huge distribution advantage and decades of behavioral data behind it.

Alphabet's browser and mobile operating system give it an enormous edge. Chrome commands more than 65% of global browser share, while Android runs on over 70% of smartphones. Meanwhile, Google has revenue-sharing deals to be the default search engine across Apple devices and other browsers. As search and AI evolve, that distribution becomes increasingly important.

At the same time, Google has stepped up its game with its new AI-powered Search Mode. In a recent Oppenheimer survey, 82% of users found it more helpful than traditional search, and 75% preferred it to ChatGPT. Importantly, Google doesn't need to change user behavior and have people switch over to its apps. Its billions of users just need to click AI Mode to get this experience.

Its cloud computing business is also gaining traction. Google Cloud revenue rose 28% last quarter, and the company is investing heavily to build capacity to keep up with demand. Add in under-appreciated assets like its Waymo robotaxi business and its Willow quantum chip, and Alphabet looks ready to rebound in the back half.

GitLab

Another company that is misunderstood is GitLab (NASDAQ: GTLB). Investors are worried that with AI, organizations are going to need fewer coders. However, thus far AI has led to more software development, while GitLab has quietly been transforming itself into a software development lifecycle platform.

The company took a big step forward in this direction with the release of GitLab 18. It added over 30 new features, including its Duo Agent Platform, which allows users to deploy AI agents across the entire development cycle from code generation to testing to compliance. This is important, as according to William Blair, developers only spend about 20% of their time actually writing code.

The company has already been growing revenue at a strong clip, including 27% last quarter. The growth is being driven by new customers as well as existing customers buying more seats and upgrading tiers. GitLab has also been expanding key partnerships, including with Amazon.

As a company that is helping drive end-to-end development workflow efficiency, GitLab has a strong future ahead and looks like a solid rebound candidate.

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Salesforce

Salesforce (NYSE: CRM) has spent the last year refocusing its platform around AI. Its new Agentforce platform has over 4,000 paying customers already, and it's at the center of what could become a much bigger digital labor platform.

The company's strategy is to unify apps, data, automation, and metadata to a single framework called ADAM. It will then use this as a foundation to build and scale AI agents, helping create a digital workforce. It also recently rolled out a more flexible pricing model tied to outcomes to help increase adoption.

Salesforce is already the leader in customer relationship management (CRM) software, and its push into AI agents could be a huge growth driver. With the stock lagging in the first half, it could rebound if Agentforce starts to gain more traction.

ServiceNow

ServiceNow (NYSE: NOW) may not be an obvious AI name, but it's also using AI to help transform its business. The company's roots are in IT management, but it has since expanded into human resources, finance, and customer service.

The company's strength has always been connecting siloed departments and helping organizations streamline their operations. It has embedded AI into its Now Platform, helping take these efforts to the next level. It's been seeing strong traction, with AI-driven Pro Plus deals quadrupling year over year last quarter. As organizations increasingly focus on efficiency and automation to help reduce costs, ServiceNow is well-positioned.

While some investors worry about enterprise software budgets, ServiceNow is a cost-saving platform that should continue to perform well in the current environment. That should help set the stock up to rebound later this year.

SentinelOne

SentinelOne's (NYSE: S) stock was under pressure in the first half of the year, but there's a good reason to believe that it will perform much better in the second half. The big reason is that its new partnership with Lenovo is about to ramp up.

Lenovo is the world's largest enterprise PC vendor, and starting in the second half, it will pre-install SentinelOne's Singularity Platform on all new computers it sells. Existing Lenovo users will also be able to upgrade to SentinelOne's AI-powered security platform. That's a huge opportunity for the cybersecurity company.

SentinelOne has already been seeing solid revenue growth, including 23% last quarter. While it's not the leader in the endpoint security space -- that would be CrowdStrike -- its platform receives high marks from Gartner. Meanwhile, its Purple AI solution, which helps analysts hunt complex security threats through the use of natural language prompts, has been the fastest-growing solution in its history.

All in all, SentinelOne is a solid company whose stock trades at a big discount to some of its bigger peers. Meanwhile, the Lenovo deal should be a catalyst in the second half.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet, GitLab, Salesforce, and SentinelOne. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, CrowdStrike, GitLab, Salesforce, SentinelOne, and ServiceNow. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

Key Points

• Rocket Lab is a leading launch services provider.

• Bank of America has upwardly revised its price target due, in part, to the potential of the company's Neutron rocket.

• Because it's an unprofitable company, investors should only consider Rocket Lab if they're comfortable with a higher-risk investment.

• 10 stocks we like better than Rocket Lab ›

Each day this week, shares of Rocket Lab (NASDAQ: RKLB) have closed higher than where they ended the previous day's trading session. The trend doesn't show signs of stopping today. With an analyst's positive outlook for Rocket Lab stock, investors are continuing to click the buy button on the launch services provider.

As of 2:06 p.m. ET, shares of Rocket Lab are up 10.6%.

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Development of a new rocket has this analyst optimistic

Maintaining its buy rating, Bank of America hiked its price target on Rocket Lab stock to $50 from $30. According to The Fly, the more auspicious view of the space stock is predicated on the favorable outlook for the Neutron rocket as well as the company's strength in satellite development position will provide more diverse offerings to customers.

Unlike its current rocket, Electron, the Neutron rocket is capable of larger payloads, and management is looking to its development as a major engine of growth for the company.

In March, Rocket Lab announced that the United States Space Force has chosen the Neutron rocket to compete for contracts from the National Security Space Launch program, which has a five-year ordering period that extends through June 2029 and has a maximum value of $5.6 billion.

Rocket Lab expects the first launch of Neutron to occur in the second half of 2025.

What's a potential Rocket Lab investor to do now?

It's important for those weighing an investment in Rocket Lab to remember that analysts often have shorter investing horizons than the long-term holding periods many investors favor. News of the higher price target, therefore, should be of little consequence. Instead, the company's robust backlog and progress with the Neutron program provide more concrete factors that can support an investment.

Of course, since the company is still unprofitable, only investors comfortable with a more speculative investment will want to consider Rocket Lab at this point. Fortunately, there are other space stocks to consider if Rocket Lab is deemed too speculative.

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Key Points

• Anticipated deregulation and advancements in artificial intelligence have pushed valuations sky-high, but select opportunities remain.

• Nebius Group's 385% year-over-year revenue growth and path to $1 billion in annual recurring revenue make today's premium valuation tomorrow's bargain.

• Rocket Lab's evolution from launch provider to full-stack space company justifies its premium valuation.

• These 10 stocks could mint the next wave of millionaires ›

Growth stocks have made a strong comeback after a rocky start to the year, driven by anticipated deregulation and significant breakthroughs in artificial intelligence (AI). Valuations have surged, and at first glance, bargains seem extinct.

Look closer. Two high-powered growth stocks buck this trend, offering compelling opportunities despite price tags that would terrify traditional investors.

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When 70 times sales is cheap

Nebius Group (NASDAQ: NBIS) trades at over 70 times trailing sales, an astronomical valuation by any measure. Why is this valuation deceptive in light of its AI tailwinds? Because the company is growing so fast that backward-looking metrics become meaningless.

The company posted 385% year-over-year revenue growth in Q1 2025. Annual recurring revenue hit $310 million in April, and management guides to $750 million to $1 billion by year's end. When revenue triples in 12 months, that multiple of 70 times trailing sales effectively collapses to under 25 times on forward estimates -- before factoring in the next wave of AI infrastructure demand. The window to act closes fast.

Nebius builds physical clusters of graphics processing units (GPUs) for enterprises desperate for AI compute power. Its Kansas City facility will house 35,000 Nvidia GPUs when complete, one of the largest deployments outside Amazon or Microsoft.

Nebius's enterprise customers span from autonomous vehicle developers to large language model startups, all battling for scarce GPU access as AI adoption accelerates. Nebius's compute clusters power everything from next-generation autonomous driving algorithms to cutting-edge generative AI platforms, making it indispensable to industries chasing exponential AI growth. With $1.44 billion in cash and manageable debt from recent convertible notes, the company can fund this massive expansion.

Nvidia's direct investment speaks volumes. When the world's dominant AI chip maker backs your infrastructure buildout, it validates the technology and strategy. Early access to Blackwell chips gives Nebius pricing advantages that competitors can't match. Jeff Bezos doubled down through Bezos Expeditions' investment in Nebius's Toloka AI subsidiary.

With first-mover scale, privileged access to Blackwell chips, and $2.4 billion in total funding, including recent convertible notes, Nebius has carved out a widening moat in the AI compute arms race, one that's hard for new entrants to replicate without billions in upfront capital.

A space race winner

Humanity is going to the stars. That much is certain. Rocket Lab (NASDAQ: RKLB) trades at 41 times trailing sales, but this valuation misses the transformation under way.

Q1 2025 revenue hit $123 million, up 32% year over year, with more coming from spacecraft components than launches. Today, over 50% of Rocket Lab's revenue comes from spacecraft systems, not launches, a diversification that boosts margins and stabilizes growth.

This shift to higher-margin, recurring revenue from spacecraft components fundamentally changes the investment thesis from a pure-play launch company to a diversified space infrastructure provider.

At the start of the year, Rocket Lab was selected as one of five providers for the U.S. Space Force's $5.6 billion National Security Space Launch Phase 3 Lane 1 program, positioning the company to compete for high-priority defense missions. The company also participates in multiple billion-dollar defense frameworks, including the Department of Defense's MACH-TB hypersonic testing program.

These selections validate Rocket Lab's technology while providing multiyear revenue opportunities. With satellite demand far outstripping global launch capacity, Rocket Lab's position as a trusted provider -- and one of the few with access to major defense frameworks -- gives it pricing power, resilience, and a clear runway for growth.

Why premium prices make sense here

These valuations look expensive because the market applies traditional metrics to revolutionary businesses. AI infrastructure and space commercialization represent generational shifts with economics that break conventional models.

Nebius benefits from AI compute demand doubling every six months. Rocket Lab rides satellite launches projected to increase fivefold by 2030. Both companies execute against opportunities larger than their current valuations suggest.

The real risk isn't paying premium prices for companies growing at triple-digit rates. It's watching from the sidelines as others capture the upside of tomorrow's giants. For investors willing to think beyond outdated valuation fears, Nebius Group and Rocket Lab offer rare asymmetric opportunities in industries poised for exponential growth.

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Key Points

• AMD and GitLab are two beaten-down tech stocks seeing strong AI-related growth.

• e.l.f. Beauty's acquisition of Rhode positions it for a rebound.

• While well off their highs, Dutch Bros and Cava are two of the best growth stories in the restaurant space.

While the market has returned to new highs, not every growth stock has rebounded at the same pace. Five stocks still down 20% or more from all-time highs that look attractive are Advanced Micro Devices (NASDAQ: AMD), GitLab (NASDAQ: GTLB), e.l.f. Beauty (NYSE: ELF), Dutch Bros (NYSE: BROS), and Cava Group (NYSE: CAVA).

Let's look at what each of these five discounted growth stocks brings to the table.

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1. Advanced Micro Devices (down 35% from high)

While AMD remains a distant second to market leader Nvidia in graphics processing units (GPUs), it's starting to carve out a meaningful niche in artificial intelligence (AI) inference. That's important because the inference market is expected to become larger than AI training over time, and AMD's cost-effective chips are starting to gain traction.

On its latest earnings call, management said one of the largest AI-model companies is now using its GPUs for a large share of its daily inference workload. Major cloud providers are also turning to AMD chips for AI tasks like search and recommendation engines.

The company already has a leadership position in data central processing units, and its overall data center revenue has been growing strongly. Last quarter, its data center segment soared 57%, helping total revenue climb 36%. AMD doesn't need to unseat Nvidia in the GPU space, it just needs to gain a modest share to drive outsized growth from its smaller base. Given the pullback in the stock, the setup here looks attractive.

2. GitLab (down 65% from high)

GitLab has become one of the most important players in secure software development. Its DevSecOps platform is helping developers build, test, and deploy applications more efficiently in a secure environment, and its recent GitLab 18 launch only strengthens that position. The release includes over 30 new enhancements, including the GitLab Duo Agent Platform, which deploys AI agents across the entire software development life cycle, not just for code but also for documentation, testing, and compliance.

The company is seeing solid growth both from existing customers and new ones. Last quarter, its revenue climbed 27% year over year, while its dollar-based net retention rate was a robust 122%. Much of this growth is coming from existing customers expanding seats and upgrading to higher-tier plans.

While some investors fear that AI will lead to fewer coders over time, thus far, AI has led to an increase in both software development and the number of coders. GitLab stock has fallen too much on this fear, and it looks well-positioned moving forward.

3. e.l.f. Beauty (down 40% from high)

After a red-hot run, e.l.f. shares cooled off after the company's revenue growth slowed significantly to just 4% in its fiscal Q4. However, its recent $1 billion acquisition of Hailey Bieber's Rhode brand has the potential to reaccelerate growth in a big way.

Rhode has already hit $212 million in annual sales with just a handful of products on its website and minimal marketing. With e.l.f.'s strong relationships at Ulta Beauty and Target and Rhode's recent Sephora rollout, e.l.f. has the opportunity to put the brand in front of a lot more consumers. Bieber staying on as chief creative officer ensures brand continuity, and Rhode brings with it premium price points and a strong skincare lineup, which is an ideal complement to e.l.f.'s core mass-market cosmetics strength.

e.l.f. has already proven it can take a lot of market share in mass-market cosmetics, and Rhode adds a big potential growth driver. The company also continues to have opportunities with skincare, international expansion, and potentially moving into other adjacent categories like fragrance over time.

4. Dutch Bros (down 21% from high)

Dutch Bros is still in the early innings of what looks like a multi-year growth story. The drive-thru coffee chain now has over 1,000 locations but sees room for 7,000 over the long term. It's targeting 2,029 shops by 2029, which would still leave it with a long growth runway next decade as well.

Expansion is not the only story with Dutch Bros, though. It's also had strong same-store sales growth, and has an opportunity to continue to ramp it up. Last quarter, its same-store sales rose 4.7%, while company-owned comps climbed 6.9%. However, mobile ordering has just recently been rolled out, and the company has just begun piloting food items. Dutch Bros has admitted that a lack of breakfast offerings has likely cost it sales, and rival Starbucks has shown just how important food items can be, with food representing 19% of its sales last quarter.

Between an opportunity to grow same-store sales and expand its store base, Dutch Bros has a lot of long-term growth ahead of it.

5. Cava Group (down 43% from high)

Another strong growth story in the restaurant space is Cava. The Mediterranean restaurant operator has posted four straight quarters of double-digit same-store sales growth, including 10.8% last quarter. More impressively, traffic was up 7.5%, showing that customers are coming in more frequently despite price increases.

Higher-priced add-ons like pita chips and fresh juice are boosting ticket sizes, and the company is experimenting with new menu items and a tiered loyalty program to keep customers coming back. However, like Dutch Bros, Cava is very much an expansion story.

The company added 15 new restaurants last quarter and plans to open 64 to 68 new locations this year. With just 382 total restaurants as of the end of last quarter and a target of 1,000 by 2032, there's a long runway ahead. Its expansion strategy, dubbed the "coastal smile," has worked well, and a recent push into the Midwest with markets like Detroit and Chicago should accelerate growth even further.

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Rocket Lab (NASDAQ: RKLB) stock soared this week thanks to a combination of bullish catalysts. The space-tech company's share price climbed 17.8% from the previous Friday's market close in a stretch that saw the S&P 500 index rise 3.4% and set a new record high.

Strong bullish momentum shaped the broader market this week as the new ceasefire between Israel and Iran lessened geopolitical volatility and investors bet that the Federal Reserve is poised to take a more dovish stance on interest rates. Rocket Lab stock also got a boost from new rocket launches and rising excitement surrounding defense applications within the space industry.

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Rocket Lab stock surges on European Space Agency deal

In addition to the bullish backdrop for the broader market, some major business-specific news pushed Rocket Lab's valuation higher this week. As with the S&P 500, the company's stock hit a new record in this week's trading.

Rocket Lab announced on Wednesday that it won a new contract with the European Space Agency (ESA) for two satellite launches. The first of the launches could take place as early as December, and the ESA said that it had selected Rocket Lab for the missions because rapid turnaround time for the initiatives was a key priority.

Rocket Lab hits new Electron rocket milestones

Rocket Lab published a press release on Thursday announcing that it had successfully completed the launch of its 67th Electron rocket, which carried four satellites into low-Earth orbit for HawkEye 360 -- a provider of geospatial analytics. The company followed it up with the 68th successful Electron launch on Saturday, marking its fastest-ever turnaround between launches.

The space-tech specialist now has a market capitalization of roughly $16.3 billion and is valued at approximately 28.5 times this year's expected sales. While the company's growth-dependent valuation creates potential for downside volatility, the business does appear to be scoring some big wins and is scaling rapidly.

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Wall Street loves a good David versus Goliath story. But what happens when two Davids are battling entirely different giants?

That's the compelling dynamic between Rocket Lab USA (NASDAQ: RKLB) and Datadog (NASDAQ: DDOG) -- two disruptive innovators, each aiming for a trillion-dollar opportunity from opposite ends of the tech frontier. Datadog is entrenched in the red-hot world of artificial intelligence (AI) infrastructure and observability. Rocket Lab is scaling up in the fast-emerging space economy, building the tools -- and rockets -- for a multiplanet future.

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AI may be grabbing headlines, but investors might be missing a more explosive opportunity just over the horizon. Which of these high-growth stocks is the better buy?

Tale of two trajectories

Rocket Lab reported $123 million in first-quarter 2025 revenue, reflecting 32% year-over-year growth. The company has rapidly evolved from a launch provider into a vertically integrated space systems manufacturer. Its product portfolio now includes satellite buses, solar power systems, separation stages, and flight software.

In 2023, Rocket Lab components were present on approximately 38% of all orbital missions, a testament to its growing influence in the commercial space supply chain. The upcoming Neutron rocket, designed for medium-lift launches and human-rated capability, could further position Rocket Lab as a key player in the next phase of orbital access.

Datadog posted $762 million in first-quarter revenue, representing 25% year-over-year growth and beating analyst expectations. The observability platform now serves 3,770 customers generating more than $100,000 in annual recurring revenue.

More importantly, the company's strategic push into AI observability is gaining traction. AI-native companies now account for 8.5% of total annual recurring revenue, up from just 3.5% a year ago. This surge highlights Datadog's growing relevance as AI workloads become central to enterprise infrastructure.

Racing for different finish lines

This is where conventional wisdom starts to break down. Datadog operates in the observability market, which is projected to grow at a steady 12.2% annually through 2030. That's impressive, but Rocket Lab is targeting a much more explosive opportunity -- the deployment of over 10,000 satellites requiring launch services by decade's end. This will support a total addressable market expected to exceed $10 billion.

SpaceX currently holds a dominant position, accounting for approximately 87% of global launch mass. However, Rocket Lab's upcoming Neutron rocket could shift the dynamics.

With a target launch price between $50 million and $55 million, Neutron undercuts SpaceX's $67 million Falcon 9 and is purpose-built for medium-lift missions, a segment where meaningful competition is limited. If Rocket Lab delivers on schedule and performance, it could inject long-awaited price pressure into the market and capture a significant share of future demand.

Customer proof points tell the story

Rocket Lab's recent contract wins underscore growing customer confidence and repeat business. The company completed its tenth mission for BlackSky, deploying next-generation imaging satellites. It's also executing an eight-launch agreement with iQPS, supporting the buildout of a radar satellite constellation.

On the defense front, Rocket Lab is conducting hypersonic test missions for the U.S. Department of Defense under the HASTE program. These contracts reflect sustained demand and a growing role in national and commercial space infrastructure.

Datadog also demonstrates strong customer traction. Companies like AppFolio, Asana, and Twilio rely on its observability platform. Its recent acquisition of AI-focused start-up Metaplane positions the company to meet rising demand for data quality monitoring as enterprises expand their use of AI. With 83% of customers using two or more Datadog products, the company continues to execute its land-and-expand strategy with precision.

The valuation paradox

Datadog faces intensifying competition from Amazon's AWS, Microsoft's Azure, and Alphabet's Google Cloud, each of which bundles observability tools directly into its platform. These hyperscalers can undercut Datadog on pricing while investing heavily in research and development, backed by massive cash flow.

Rocket Lab's higher valuation reflects its scarcity value. There are only two viable Western commercial launch providers, and only Rocket Lab is publicly traded. As the Department of Defense prioritizes launch diversity and commercial satellite constellations continue to expand, Rocket Lab's position as the sole investable alternative to SpaceX becomes more strategically important.

The surprising verdict

While both stocks deserve spots on growth investors' watch lists, Rocket Lab emerges as the superior growth investment. The company's 32% revenue growth outpaces Datadog's 25%, and its Neutron catalyst could transform it from a small-sat specialist into a genuine SpaceX competitor. Most importantly, Rocket Lab operates in a market with insurmountable barriers to entry.

Datadog remains a solid growth story, but its path involves navigating an increasingly crowded field where every major cloud provider wants market share. In the battle between monitoring software and launching rockets, physics wins. Rocket Lab's combination of proven execution, massive market opportunity, and the upcoming Neutron launch make it the more compelling growth story -- even if Wall Street hasn't fully realized it yet.

Should you invest $1,000 in Rocket Lab right now?

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As of Friday morning before market open, for the most part stocks weren't having a bad week. As always there were exceptions, however, and one of the unfortunate outliers was software development solutions provider GitLab (NASDAQ: GTLB).

On the back of a quarterly earnings report that disappointed the market, plus subsequent analyst price target cuts and even a recommendation downgrade, the company's share price sagged. As of early Friday morning, the stock had declined by more than 10% week to date, according to data compiled by S&P Global Market Intelligence.

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A forgettable first quarter?

This, despite the fact that GitLab actually posted healthy growth rates in its first quarter. Total revenue rose by almost 27% year over year to $214.5 million, while non-GAAP (adjusted) net income increased more than sixfold to $29.4 million. Both figures topped the average analyst estimates, although not spectacularly.

Image source: Getty Images.

Investors like to concentrate on their view of the road ahead, rather than the numbers behind, so it was GitLab's guidance that had a more profound effect on sentiment.

The company's outlook for its current (second) quarter is for $226 million to $227 million in revenue, filtering down into per-share earnings of $0.16 to $0.17. While the analyst earnings estimate falls within the company's range, that for revenue is just above management expectations.

Goldman gets more bearish

And what was discouraging to investors was also dismaying to quite a few analysts tracking GitLab. A clutch of them reduced their price targets on the stock with one -- white-shoe investment bank Goldman Sachs -- even pulling the lever on a recommendation downgrade. Goldman's Kash Rangan now feels the stock is only a neutral, down from his previous buy, at a price target of $50 per share.

I feel investors and pundits alike are overreacting to the quarterly results. While GitLab's revenue growth is declining, it's still turning in very profitable results and it operates a useful service. I think GitLab is therefore worth a look as something of a bargain play in its niche.

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Software development facilitator GitLab (NASDAQ: GTLB) was facilitating some handsome returns for shareholders on Thursday, thanks in no small part to an optimistic new analyst note. In late-session trading the company's share price was up by almost 4%, and doing much better than the slumping S&P 500 index with its 0.2% decline.

Bullish pundit take reiterated

That note was published in anticipation of the release of GitLab's earnings for the fiscal first quarter of 2026, which is scheduled for next Tuesday, June 10. Its author, KeyBanc's Jason Celino, reiterated his overweight (buy, in other words) recommendation on the specialty tech stock, and his price target of $60 per share. That implies potential upside of nearly 22% on the stock's current level.

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According to reports, Celino believes GitLab could very well post a year-over-year revenue growth figure higher than the lofty 25.9% analyst consensus. In his view this will be driven by continued take-up of the company's Duo and Dedicated solutions, the former of which is powered by artificial intelligence (AI) functionalities.

That growth should have a positive knock-on effect with GitLab's full-year guidance; the analyst implied that the company's projections for the period will be raised. He did sound a note of caution about the spending of public-sector clients, given recent federal government budget-tightening efforts.

Rolling along

GitLab is indisputably a success story in the tech world, and has solid momentum behind it that looks set to continue. Those public sector clients are something of a worry; however, I feel the company is resilient enough to survive a notable downturn in the segment.

Should you invest $1,000 in GitLab right now?

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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and GitLab wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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Explore the exciting world of LandBridge Company (NYSE: LB) with our expert analysts in this Motley Fool Scoreboard episode. Check out the video below to gain valuable insights into market trends and potential investment opportunities!

*Stock prices used were the prices of April 2, 2025. The video was published on May 8, 2025.

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April showers may have generally doused the spirits of investors, as the S&P 500 (SNPINDEX: ^GSPC)
nudged about 0.7% lower last month, but not all stocks suffered. Launch services provider Rocket Lab USA (NASDAQ: RKLB), for example, blasted 21.9% higher, according to data provided by S&P Global Market Intelligence.

Besides both the United States Department of Defense and the U.S. Air Force selecting Rocket Lab for participation in two noteworthy programs, the United Kingdom's Ministry of Defense awarded Rocket Lab a contract that motivated investors to bid Rocket Lab stock higher.

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Catalysts fueling Rocket Lab stock's rise

Investors received a double dip of positive news in mid-April, when Rocket Lab announced that both the U.S. Air Force and the U.K. Ministry of Defense had selected the company as a contender for contracts in multibillion-dollar programs.

Rocket Lab may bid on contracts available through the U.S. Air Force's Enterprise-Wide Agile Acquisition Contract, a $46 billion program that has several goals, including the rapid development of innovative technologies. Similarly, through its Hypersonic Technologies & Capability Development Framework, the U.K. Ministry of Defense may award Rocket Lab contracts to develop hypersonic capabilities.

Of interest for both programs is Rocket Lab's Hypersonic Accelerator Suborbital Test Electron (HASTE) launch vehicle, a variation of the small orbital rocket Electron.

Addressing the HASTE vehicle, Rocket Lab's CEO Peter Beck said:

The ability to contribute toward the collective security of the United States and the United Kingdom across both of these important programs is a proud moment for the HASTE team, and a demonstration of Rocket Lab's commitment to lead from the front when it comes to innovative and unique solutions for hypersonic technology development.

Later in the month, investors learned that defense contractor Kratos had chosen Rocket Lab to provide its HASTE launch vehicle for a test flight in support of the Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2.0 program, a five-year, $1.45 billion contract to develop hypersonic technologies.

Rocket Lab stock closed nearly 8% higher the day after the company reported the partnership with Kratos.

Is now the time to hitch a ride with Rocket Lab?

While the selections Rocket Lab received regarding its HASTE vehicle may not immediately translate to growth on its income statement, they certainly have the potential to do so in the future. The development of hypersonic capabilities is a top concern for governments looking to retain military advantages over adversaries.

Rocket Lab has distinguished itself as a leader in launch services, as its Electron rocket is the second-most frequently launched vehicle annually, and it'd be unsurprising if it further asserts its prowess as a leader in the hypersonic capabilities that the U.S. and U.K. governments are exploring in the aforementioned programs.

With shares of Rocket Lab down about 10% year to date as of this writing, growth investors looking for space stock exposure would be smart to take a closer look at Rocket Lab stock.

Should you invest $1,000 in Rocket Lab USA right now?

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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rocket Lab USA 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 $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

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Shares of Rocket Lab (NASDAQ: RKLB) are trading higher this week. The company's stock had gained 17.3% as of 11:20 p.m. ET on Friday and was up as much as 21.4% earlier in the week. The rise comes as the S&P 500 and the Nasdaq Composite had one of the most volatile weeks in market history.

The launch service provider announced a new family of customizable satellite solar arrays at a major industry conference this week, boosting investor optimism.

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A new product line is coming

Rocket Lab announced its new Standardized Array (STARRAY) product line at the 40th Space Symposium in Colorado Springs. The company described STARRAY as a family of customizable, next-generation solar arrays designed to meet the power needs of satellites of all types.

STARRAY solar arrays can be customized to fit each system, capable of providing a satellite with 100 watts of power to more than 2,000 watts. Brad Clevenger, vice president of space systems at Rocket Lab, spoke to the importance of this customization and emphasized Rocket Lab's efficiency, saying, "Our objective is to offer the industry mission-specific customization with short lead times and lower costs."

The STARRAY line is another step in Rocket Lab's push to diversify its product offerings beyond its core launch capabilities, which tend to be much more expensive and offer tighter margins.

Rocket Lab has won some key contracts

Rocket Lab was recently awarded a contract as part of the National Security Space Launch (NSSL) program, with a ceiling of $5.6 billion. This could prove to be a key development for Rocket Lab, positioning it as a potential leader in national security missions. Still, Rocket Lab has a long way to go. The NSSL contract is contingent on Rocket Lab building a larger launch system -- its current one, though highly successful, is too small to compete for contracts like those from the NSSL program.

The company is currently operating at a loss, though this isn't unusual for a company developing advanced technologies -- at least for a time. If it can successfully build the larger launch system, it can compete with the likes of SpaceX, winning contracts that would see its top line increase substantially and move closer to positive earnings.

The company plans to have a system capable of this by 2026, but these timelines are certainly never guaranteed. Given the uncertainty involved, Rocket Lab is for investors with a particularly high risk tolerance and a well diversified portfolio.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.