Profits Show Up Beyond AI, Even When Deal Premiums Don’t

Dear readers,

Last week’s rotation argument gets fresh evidence on Monday, and it comes from the second tier. Stocks were recovering in premarket trading after a rough stretch. The Nasdaq lost just over 5 percent in October, its worst month since March 2025, and Friday’s Intel slump added to the damage.

Yet S&P 500 earnings are growing by around 30 percent in the third quarter. The reports from IDEXX, Marriott and GE Vernova show where profits are being made while the AI euphoria takes a break.

Marvell and Lumentum: The Market Isn’t Paying the Premium

Marvell is acquiring Lumentum in an all-stock deal that values the company at an enterprise value of $115 billion. Lumentum shareholders will receive 4.5 Marvell shares per Lumentum share.

That implies about $1,132 per share, a premium of about 23.9 percent to the October 28 close. Marvell holders will own about 67 percent of the combined company. Closing is not expected until the first half of 2028.

On Monday both stocks are lower. Lumentum trades at around $808, well below the stated offer value of about $1,132. Its 52-week high of $1,143 dates from October 9. The reason is the deal structure. Because it is a pure share exchange, the value depends on Marvell’s share price, and the long wait leaves plenty of room for price swings.

Strategically, the deal makes sense. It targets optical interconnects in AI data centers, where the combined company would compete with Broadcom, and the companies expect more than $1 billion in annual run-rate cost savings.

Lumentum itself recently guided next-quarter revenue to $1.575–1.625 billion, well above the consensus of $1.48 billion. The business is running well, but the price is not a sure thing. Anyone holding Lumentum is, in effect, betting on Marvell.

GE Vernova and Siemens Energy: The Backlog Is the Stock

GE Vernova delivered last Wednesday. Third-quarter revenue rose 26.8 percent to $12.64 billion, and backlog reached $197 billion. The group raised its 2026 revenue guidance to $46.5–47.5 billion.

The stock still trades at around $869, far below its July high of $1,195.94. Analysts are divided too. Guggenheim sees $1,450, JPMorgan cut its target to $1,035 with an Overweight rating, and GLJ Research advises selling with a $540 target. The market is not arguing about the business but about the valuation.

Siemens Energy benefits from this, and its shares are rising on Monday to around €130. In the third quarter of the fiscal year, order intake rose to €17.9 billion, driven by gas turbines with almost €10 billion. Full-year results and the 2030 targets follow on November 11.

Should investors sell immediately? Or is it worth buying Lumentum?

The orders show that data-center power demand is supporting power-plant and grid technology. Even so, the shares have fallen around 10 percent over the past 30 days. For Siemens Energy, November 11 remains the next hard test.

IDEXX: Quality the Market Is Starting to Value Again

IDEXX reported third-quarter comparable earnings per share of $3.96, against expectations of $3.72. Revenue grew 10 percent to $1.214 billion. The company raised its 2026 outlook, and its EPS range is now $14.96 to $15.16 on a reported basis. The stock is up around 6 percent in premarket trading to roughly $585, after closing at $551.21 on Friday.

IDEXX is trimming its full-year operating margin slightly because of the CoVet acquisition. That is a price paid for growth, not a warning sign. More important is the recurring revenue from veterinary diagnostics, which rose 11 percent.

At Friday’s close the stock was still down about 18 percent year to date. Last week UBS maintained its Neutral rating while lowering its price target from $670 to $627. Solid numbers are meeting a stock that was sold off for months, and that could leave room for a recovery.

Marriott: Travel Demand Holds Up Even in Uncertain Times

Marriott raised its full-year 2026 worldwide RevPAR growth outlook to 4.5 to 5 percent, from 3 to 3.5 percent before. Third-quarter adjusted earnings were $3.02 a share, up from $2.47 a year earlier and above the roughly $2.85 expected. For the full year, the company expects adjusted earnings of $12.07 to $12.14 a share.

The stock trades at around $417, above its previous 2026 high of $410.98. Capital returns are strong as well, with Marriott planning to return at least $4.8 billion to shareholders in 2026.

The Middle East is weaker, with revenue per room down 5.3 percent. Management said conditions there have improved since the second quarter. Marriott shows that luxury and business travel spending is holding up, even as oil and conflicts dominate the headlines.

Okta: Index Inclusion as a Short-Term Story

Okta joins the S&P 500 before the open on Wednesday, November 4, replacing Kenvue, which is leaving because Kimberly-Clark is acquiring it. Index funds will have to buy the stock by then. The premarket gain has faded in regular trading, however, and the stock is at just over $207, roughly where it closed on Friday. It has already more than doubled since the start of the year. Index demand is probably largely priced in.

The Takeaway

The week’s calendar is crowded. Apple and Palantir report this evening. Tomorrow, Pfizer reports before the open, followed by AMD and Supermicro after the close. On Wednesday, McDonald’s, Uber and CVS Health report in the morning, with Qualcomm in the evening. The US midterm elections are on Tuesday, and the jobs report is due on Friday.

If broad earnings strength holds, the market no longer needs the AI leaders as its only driver. Falling oil prices help, as long as the talks between the US and Iran hold.

Best regards,
The StocksToday.com Editorial