PERSHING SQUARE INC. Q3 FY2026 earnings call

• Market Mispricing of Hyperscalers: Management argues the market is undervaluing major holdings like Amazon, Microsoft, and Meta. Despite phenomenal earnings and high cloud growth guidance (e.g., Amazon’s 40%+ revenue growth outlook through 2028, Microsoft’s Azure growth >50%), stock prices have remained flat or declined, reflecting a disconnect between business progress and market recognition.
• Engaged Shareholder Approach: Pershing Square describes itself as an engaged shareholder, regularly interacting with portfolio companies like Uber and Netflix. They do not shy away from sharing advice or criticism but believe current management teams are exceptionally well-run.
• Howard Hughes Transformation: The strategy involves shifting capital from the real estate subsidiary to the insurance operation. This includes selling 80-90% stakes in real estate assets to bring in long-term investors (pension funds, family offices) to transform the real estate side into an asset management model similar to Blackstone, thereby improving return on equity (ROE).
• Uber Thesis vs. Autonomous Vehicles (AVs): Management views AVs as a net positive for Uber due to supply aggregation. Uber provides the necessary logistical infrastructure (cleaning, storage, item recovery) and high utilization rates that standalone AV fleets cannot match. Uber’s network effects and partnerships with multiple AV providers position it to benefit from increased ride supply and lower prices.
• Netflix Value Proposition: Netflix is seen as offering superior value per hour of content compared to competitors. Churn has improved industry-leadingly, indicating strong retention despite price hikes and ad-tier introduction. The ad experience is described as decent and non-intrusive, preserving user satisfaction.
• Alcon Opportunity: Alcon is viewed as a high-quality compounder trading at a compressed multiple (17x earnings) due to sector-wide sentiment issues, despite strong execution. Potential blockbuster drugs in eye care offer additional upside options not fully priced in.
• Brookfield Execution: Brookfield is praised for its transparency and consistent outperformance of ambitious multi-year targets. Management expects 20-25% EPS growth over the next 3-5 years, likely exceeding internal estimates given their historical track record.
• AI Infrastructure Returns: Management expects attractive returns (15-25% pre-tax ROIC) on AI CapEx, driven by accelerated revenue growth and margin expansion. They criticize analysts for modeling CapEx certainty without crediting potential revenue upside.

N/A - Pershing Square Inc. is an investment management firm; the transcript does not provide traditional product segment financials (revenue/absolute performance) for distinct business units. The firm reports growth in fee-paying Assets Under Management (AUM), which increased by approximately $1 billion during the quarter to $24 billion, driven primarily by portfolio performance rather than new capital inflows.

• Fee-Paying AUM Growth: No specific numerical guidance provided, but highlighted organic growth of ~$1 billion in Q3 solely from performance, demonstrating the power of compounding permanent capital.
• Howard Hughes Capital Allocation: Focus on injecting capital into insurance to achieve 20%+ ROE, rather than buybacks. Buybacks are deemed inferior to reinvestment because insurance capital compounds at high rates and trades at higher multiples.
• Fannie Mae/Freddie Mac Resolution: Optimistic resolution expected within the 2027-2028 timeframe to align with political cycles, potentially unlocking hundreds of billions in value for taxpayers and shareholders.
• Pershing Square Ventures Launch: Launching PSV to identify future public company candidates and mitigate disruption risks. No change in team size or operational structure anticipated.
• Dividend Policy: Considering examining dividend payments for PSUS to attract a broader investor base and address the current discount to NAV.

• Political Risk (Fannie/Freddie): Delay in releasing Fannie Mae and Freddie Mac from conservatorship poses a risk to value realization. Political uncertainty regarding control of Congress and the Presidency could impact the timing and nature of resolution.
• Regulatory Constraints (PSUS): Pershing Square USA (PSUS) faces regulatory limits on concentration (5% threshold for non-passive investors) and Hart-Scott-Rodino filing requirements, necessitating the use of derivatives (forwards) to manage positions without triggering regulatory thresholds prematurely.
• Derivative Usage Complexity: Use of forward contracts is strictly for regulatory compliance and economic exposure timing, not leverage. However, this adds complexity to reporting and understanding true ownership status until conversions occur.
• Investment Style Perception: Critics question whether the shift toward higher-multiple stocks (Meta, Netflix) reduces margin of safety. Management counters that quality moats and pricing power provide sufficient safety, though persistent inflation remains a macro threat requiring robust pricing power.
• IPO Market Volatility: Uncertainty in the IPO market (e.g., pulled listings like Oura Ring) affects the timeline for Pershing Square Spark Holdings (SPAC-like vehicle) to complete a business combination, though management views current volatility as an opportunity for execution certainty.

Q: How does Pershing Square justify investing in high-multiple stocks like Meta and Netflix, and where is the margin of safety?

A: Bill Ackman stated that margin of safety derives from business quality, moats, and pricing power, not just low multiples. He emphasized that Meta and Visa possess immense competitive advantages and stickiness that protect against inflation and competition. Ryan Israel added that these companies trade at discounts relative to their historical averages despite better prospects, making them attractive opportunities. The focus is on the present value of future cash flows generated by durable competitive advantages.

Q: What is the thesis on Uber regarding autonomous vehicles (AVs), and does competition from Tesla/Waymo threaten conviction?

A: Ryan Israel argued that AVs are a net positive for Uber because they increase supply, lowering prices and wait times. Uber’s logistical advantage (handling items, cleaning, utilization) makes it an essential partner for AV providers who lack scale. With over a dozen AV partnerships, Uber aggregates supply from multiple providers, ensuring high utilization and network effects that standalone AV fleets cannot replicate. Thus, AV competition strengthens, rather than threatens, Uber’s position.

Q: Why is Howard Hughes prioritizing capital allocation to insurance over share buybacks, and how will the real estate transformation work?

A: Bill Ackman explained that buying back stock at ~80x NAV yields less value than deploying capital into insurance, which can achieve 20%+ ROE and trade at higher multiples. The plan involves selling 80-90% stakes in real estate assets to institutional investors, transforming the real estate side into an asset management firm (like Blackstone) to generate fees and improve returns. This shifts risk off the balance sheet while freeing capital for the higher-returning insurance operation.

Q: How does Pershing Square evaluate the returns on massive AI infrastructure CapEx spending by hyperscalers?

A: Ryan Israel outlined that returns will be validated by accelerating revenue growth and expanding profit margins post-installation. Management conservatively expects 15-25% pre-tax ROIC for compute rental, with higher returns for hyperscalers adding software layers. Bill Ackman criticized analysts for assuming CapEx certainty without crediting potential revenue upside, arguing that either returns will be attractive (driving growth) or CapEx budgets will cut if they aren’t.

Q: Will Pershing Square expand internationally or invest in non-US tech hubs like Hong Kong?

A: Bill Ackman confirmed openness to international investments, particularly in English-speaking countries or regions close to the US (e.g., Canada, European HQs with US ties). However, the bias remains heavily US-focused due to the concentration of best businesses there, ease of engagement with management, and ability to build large positions quickly. International investments would only occur if a business met strict standards and was sufficiently compelling.