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Stock prices continue to grow to the sky, and the S&P 500 index has set 28 record highs this year through the end of September.

Moreover, valuations continue to stretch. At 39.7, the Shiller Cyclically Adjusted (CAPE) Ratio is at its second highest level of the past century (higher than the eve of the Great Crash of 1929, though still a bit lower than the eve of the Internet bubble burst in 1999).

What should a prudent investor do in such a frothy market?

Investing in defensive stocks that are less vulnerable to market pullbacks, drawdowns, and corrections is one great idea. And here’s an even better idea: Buying reliable, stable defensive stocks that pay high dividends and reward investors with passive income.

Stability and income

So, what’s the best exchange-traded fund (ETF) to buy right now if you want exposure to defensive stocks that provide stable earnings and dividends? I like the Vanguard High Dividend Yield ETF (VYM) because it gives you a stake in a broad swath of high-yielding, stable, large-cap value stocks. Thus, you get safety and reliable passive income, and at a rock-bottom price.

The Vanguard High Dividend Yield ETF tracks the performance of the FTSE High Dividend Yield Index, which measures the return of a set of stocks characterized by high dividend yields. With total assets of $81.3 billion, the fund currently holds 579 stocks. Its top five holdings are:

• Broadcom, which accounts for 6.7% of the fund
• JPMorgan Chase, 4.1%
• ExxonMobil, 2.4%
• Johnson & Johnson, 2.1%
• Walmart, 2.1%

Such big, safe companies — ones that we would expect to be around for the long haul — are typical of the fund’s holdings. And it avoids risky and distressed firms.

Other than chipmaker Broadcom, no one stock currently accounts for more than 5% of the ETF, which makes it highly diversified. It’s also diversified among sectors. Its biggest holding by sector is financials, with about 22% of its assets in that industry. It also has large positions in consumer discretionary, healthcare, industrials, and technology, among a few other sectors.

The fund’s current yield is a very respectable 2.49%, about 1.3 percentage points above that of the S&P 500. The annual fee is a minuscule 0.06%, which is far lower than the 0.87% average for similar funds. The ETF is up about 10.4% year to date, which is solid given the income it produces.

Not so boring

Investors who think dividends are boring should think again. From 1940 to 2024, dividend income contributed 34% of the total return of the S&P 500, according to Hartford Funds.

Source: Getty Images.

That contribution varies a lot by decade. Dividends contribute a larger share of the total market return when the stock market is rising slowly, and a smaller share when it’s soaring. That makes sense. Companies with higher-yielding stocks tend to be large and slower-growing, just what you want to own in a challenging market environment.

Yes, there are stocks with much higher yields than those in the Vanguard High Dividend Yield ETF. But that’s by design, too. The fund avoids stocks with deteriorating fundamentals and declining prices, limiting its exposure to risky companies.

Best of all — considering the bubbly nature of the current stock market — this dividend ETF outperforms in difficult markets. It beat similar funds during the COVID-19 sell-off of early 2020 and outperformed other funds in its category by 7 percentage points in 2022, when the S&P 500 fell more than 19%.

The Vanguard High Dividend Yield ETF provides a steady, safer approach to higher-yielding stocks, and reliable passive income. Such an approach is beginning to look very attractive to many investors.

After it dipped nearly 4% lower last week, shares of fuel cell specialist Bloom Energy (BE -1.16%) reversed their downward trajectory and shot into the stratosphere this week. In addition to news that the company would help support the artificial intelligence (AI) industry, two analysts’ increasingly bullish outlook on Bloom Energy stock provided Main Street investors with more reasons to bid Bloom stock higher.

According to data provided by S&P Global Market Intelligence, shares of Bloom Energy had soared 32.5% from the end of trading last Friday through the close of Thursday’s trading session.

Image source: Getty Images.

The details of the recent deal

On Monday, Bloom Energy announced Brookfield Asset Management (BAM -3.63%) will make an investment of up to $5 billion to deploy Bloom’s fuel cell technology to support AI infrastructure. Exploring the development of AI factories located around the world, the two companies expect to announce a European site that will demonstrate this capability before the end of 2025.

It didn’t take long before analysts started to wax bullish on Bloom stock after it announced the deal with Brookfield. The next day UBS analyst Manav Gupta hiked the price target on Bloom stock to $115 from $105 based on the potential of the Brookfield partnership, and BMO Capital lifted its price target to $97 from $33.

Has the time to buy Bloom Energy stock passed you by?

The market’s seemingly insatiable appetite for AI exposure touched on Bloom Energy this week, and shares are now trading at a lofty 131 times forward earnings. While the fuel cell specialist is arguably the most promising opportunity among its fuel cell peers, the stock’s steep valuation suggests that it may be better to watch it from the sidelines for the time being and wait for a pullback before clicking the buy button.

And with respect to the analysts’ price targets — take them with a grain of salt. Analysts often have shorter investing horizons than the multiyear holding periods serious investors tend to favor; therefore, they shouldn’t be a priority when investors form investing theses.

Nvidia (NVDA 1.04%) has hit it out of the park quarter after quarter when reporting earnings, but that hasn’t made investors blasé about the artificial intelligence (AI) giant’s next update. Instead, investors wait with just as much anticipation each time around — and even wonder if, this time, they’ll see a slowdown in what’s been a whirlwind growth story.

As investors count the days until the next report — and in this case, it’s set for Nov. 19 — they look for clues about Nvidia’s AI business, one that’s generated record revenue in recent years. Nvidia, as the world’s biggest AI chip designer, delivered $130 billion in revenue in the latest fiscal year — that’s compared to $27 billion just two years earlier.

Now, one particular clue — and one investors truly can count on — comes from Taiwan Semiconductor Manufacturing (TSM -1.68%), a key Nvidia partner. TSMC, the world’s largest chip manufacturer, just announced big news for Nvidia stockholders. 

Image source: Getty Images.

How Nvidia and TSMC work together

Before we get to this fantastic news, though, we’ll take a quick look at Nvidia’s business and how the company works with TSMC. Nvidia for many years built its business around designing chips for the gaming market, but as AI surfaced as a growth opportunity, the company turned its attention there. And, as they say, the rest is history.

Today, Nvidia dominates this market with its high-powered chips as well as related products and services from enterprise software to networking systems. This has helped earnings and the stock price soar — Nvidia shares have climbed more than 1,100% over the past five years.

It’s important to note that though Nvidia is a chip designer, it’s not a chipmaker. Nvidia doesn’t actually manufacture its AI chips, known as graphics processing units (GPUs), and instead turns to TSMC for that job. TSMC has more than 500 customers across segments of the market, including the world’s chip leaders — from Nvidia to Broadcom and Advanced Micro Devices.

A deep look at the industry

On top of this, since the actual production of advanced chips becomes more and more complex with each chip innovation, TSMC starts work with customers two to three years prior to a new project. “Therefore, we probably get the deepest and widest look possible in the industry,” CEO C.C. Wei said during the company’s earnings call this week.

All of this means TSMC has a very clear picture of what’s happening in today’s AI market and what lies ahead. And this brings me to the news the company delivered this week — news that’s a big deal for Nvidia stockholders.

TSMC reported a 39% increase in profit and a 30% increase in revenue in the recent quarter, beating analysts’ estimates. Importantly, Wei said TSMC continues to see a “strong outlook” from customers and “received very strong signals from our customers’ customers. … Our conviction in the AI megatrend is strengthening.” Wei added that semiconductor demand “will continue to be very fundamental.”

Confirming the trend

All of this is incredible news for Nvidia’s shareholders as it confirms the trends the chip designer has spoken of in recent quarters and its prediction for growth in demand. In Nvidia’s most recent earnings report, back in August, CEO Jensen Huang predicted that AI infrastructure spending may jump to $4 trillion by 2030. TSMC’s report this past week offers us reason to be optimistic about that possibility and suggests that Nvidia is already starting to reap the rewards.

As customers seek GPUs, chip designers must turn to TSMC for production — and it’s likely that TSMC’s revenue gains reflect demand for Nvidia’s chips since Nvidia is the market leader.

All of this means there’s reason for investors to be optimistic about Nvidia’s upcoming earnings report and the messages it will deliver regarding future demand for its GPUs. That’s incredible news for Nvidia stockholders — and makes the stock a great one to buy and hold today.

One of the first investors to buy Nvidia (NVDA 1.04%) for the artificial intelligence (AI) boom was Stanley Druckenmiller at his Duquesne Family Office investment fund. At the end of 2023, it was one of his largest positions, a year where the stock more than tripled for investors, putting it on the path to become the largest company in the world by market capitalization.

Then, in 2024, Druckenmiller began to sell down his stake in Nvidia. By the end of last year, he had completely exited his position. What has he been buying instead? Last quarter, Duquesne bought two other trillion-dollar AI stocks: Taiwan Semiconductor Manufacturing (TSM -1.68%) and Microsoft (MSFT -0.43%).

Let’s see whether you should follow Druckenmiller and buy these two stocks for your portfolio today.

Image source: Nvidia.

Nvidia’s semiconductor supplier

Some readers may already know this, but Nvidia does not manufacture its advanced computer chips itself. It only designs them. The key manufacturing supplier of Nvidia chips is Taiwan Semiconductor Manufacturing, or TSMC for short. TSMC only makes computer chips for third parties and is known as a semiconductor foundry. These include Nvidia, but also the likes of Apple, Broadcom, and other technology giants.

With the insatiable demand for computer chips from the growing AI market, TSMC has been doing quite well in recent quarters. Last quarter, revenue grew 44.4% year over year to $30 billion. Not only is TSMC one of the largest businesses in the world, but one of the fastest growing.

As one of the only companies that can manufacture advanced semiconductors at scale, TSMC has been able to sell its computer chips to customers like Nvidia with fat profit margins. Last quarter, operating margin was close to 50%, which is unheard of for a manufacturing business.

At today’s stock price, TSMC trades at a price-to-earnings ratio (P/E) of 34. While this is slightly expensive, it is much better than Nvidia’s P/E ratio of 51. When you consider that both stocks will benefit from the growing demand for AI computer chips, it is no surprise that Duquesne sold its stake in Nvidia and owns TSMC today instead.

Microsoft’s opportunity in AI

Microsoft is a large customer of Nvidia as the company accelerates its buildout of cloud computing data center infrastructure to power the AI revolution. It has a relationship with OpenAI, the leading private AI company that is spending hundreds of billions of dollars on infrastructure. In 2025 alone, Microsoft is planning to spend $80 billion on capital expenditures to help catch up with AI demand.

Its cloud revenue is benefiting massively from the growth in AI. Its Azure cloud computing division grew revenue 34% year over year last quarter to $75 billion, making it the second-largest cloud business in the world apart from Amazon Web Services (AWS). Overall revenue is growing well due to Microsoft’s diversified assets in personal computing, Office 365 subscriptions, and other services such as LinkedIn. Revenue was up 17% year over year last quarter, with operating income up 22% (both in constant currency). Expanding operating margins to 45% makes Microsoft one of the most profitable businesses in the world.

Like TSMC, Microsoft trades at a much cheaper P/E ratio than Nvidia, at 37.5 as of this writing. With steady growth, margin expansion, and a clear line of new demand for Azure for AI solutions, Microsoft looks like a solid buy-and-hold stock for investors over the next decade and beyond.

At the end of the second quarter, TSMC was 4.3% of the Duquesne stock portfolio, according to its 13F filing, increasing its position by 27% more shares in the period. Microsoft was a completely new buy for the fund, but it is already a 2.5% position. Both stocks have done well throughout the second and third quarters, but can still be good long-term buys for investors looking for inspiration from super investors like Druckenmiller.

A lot of people start collecting Social Security specifically because they’ve stopped working, or when they’re ready to stop. But you should know that if you wish to work while collecting Social Security, that option exists.

However, there are rules you should know in the context of working while on Social Security. Here’s a rundown.

Image source: Getty Images.

Working while on Social Security has its advantages

You may find that your Social Security benefits aren’t enough to cover your retirement expenses in full. If you don’t have an IRA or 401(k) to supplement with, then you may be inclined to work in some capacity to make up the difference.

Once you reach full retirement age, which is 67 for people born in 1960 or later, you don’t have to worry about having Social Security benefits withheld for working, regardless of what you earn. But if you’re collecting Social Security before having reached full retirement age, you’ll be subject to an earnings test whose limits change annually.

This year, for example, you can earn up to $23,400 without having any Social Security withheld if you’re under full retirement age. Beyond that point, you’ll have $1 in Social Security withheld per $2 of income.

The earnings-test limit is much higher if you’re reaching full retirement age at some point in 2025. In that case, it’s $62,160. And beyond that point, you’ll have $1 in Social Security withheld per $3 of income.

If you’re under full retirement age but also earn less than the earnings-test limit, you can enjoy a nice supplement to your income without any negative impact. And even if you have benefits withheld for exceeding the earnings-test limit, you’ll get that money back eventually.

Once you reach full retirement age, your monthly benefits will be recalculated and boosted to make up for withheld Social Security earlier on. That could be a good thing, because if you get used to living on less and your monthly benefits go up substantially, it could feel like a bonus of sorts.

You may get larger monthly benefits for another reason

In addition to putting more money in your pocket, working while on Social Security could set you up for larger benefits down the line. The formula used to calculate your benefits accounts for your 35 highest-paid years of earnings while adjusting earlier wages for inflation.

If you earn a lot while collecting Social Security, you might replace a year of lower income with a higher income. That could, in turn, lead to larger benefit payments.

Let’s say you worked for 35 years, but for three of those years, you only worked part-time and earned very little. If you work part-time while on Social Security and bring in $22,000 over the course of the year, you’ll be below the earnings-test limit.

But $22,000 may also be a lot more than what you earned during one of your years of part-time work, even with those earlier wages adjusted for inflation. So you may find that working leads to a more generous monthly payday for life once the Social Security Administration is able to factor your most recent wages into your benefit formula.

Know the rules

You may have heard that working while on Social Security is not a good idea because of the earnings-test limit. Or, you may be under the impression that if you’re getting monthly benefits, you’re barred from working, period.

It’s important to understand the rules of working while collecting Social Security so you’re able to supplement your income as you please. And you may find that holding down a job while receiving benefits gives you more money not just from those wages, but in the form of larger monthly Social Security checks later on.

Over the next few weeks, many of America’s largest technology companies will report their operating results for the quarter ended Sept. 30. They will provide investors with a valuable update on their progress in the artificial intelligence (AI) race, which is driving an enormous amount of value right now.

Sept. 30 marked the end of Microsoft‘s (MSFT -0.43%) fiscal 2026 first quarter, and it is scheduled to report those results on Oct. 29. The company’s Azure cloud computing platform and its Copilot virtual assistant will be key points of focus for Wall Street because they are at the center of the company’s AI strategy.

Microsoft stock has already climbed 25% year to date. Is it still a buy ahead of the Oct. 29 earnings report?

Keep an eye on Copilot adoption

Microsoft launched its Copilot virtual assistant in early 2023. It was created using a combination of the company’s own AI models and those developed by its longtime partner OpenAI. The chatbot can be used for free in some of Microsoft’s flagship software products like Windows, Edge, and Bing, but it’s also available as a paid add-on for enterprise products like the 365 productivity suite.

Copilot can rapidly generate content in applications like Word and PowerPoint, autonomously transcribe meetings in Teams, and help users craft email replies in Outlook, so it has the potential to significantly increase productivity for enterprises. Microsoft says organizations around the world pay for over 400 million licenses for 365, all of which are candidates for the paid Copilot add-on, so the AI assistant could generate billions of dollars in recurring revenue for the company over the long term.

During the fiscal 2025 fourth quarter (ended June 30), Microsoft said several large customers expanded their Copilot adoption through 365. Barclays, for example, bought 100,000 licenses for its employees after running an initial test with 15,000, which implies a high degree of satisfaction with the assistant’s capabilities. This is the kind of information investors should look out for on Oct. 29, because it could be a predictor of future revenue.

But 365 isn’t Microsoft’s only enterprise opportunity when it comes to Copilot. There is Copilot Dragon, an innovative healthcare solution that autonomously documents millions of doctor-patient interactions, saving clinicians valuable time. Then there is Copilot Studio, a platform that allows businesses to create custom AI agents to automate workflows in any application, even those outside Microsoft’s ecosystem.

The most important segment to watch on Oct. 29

Microsoft’s Azure cloud platform operates hundreds of data centers spread across dozens of different regions around the world. They are fitted with the most advanced chips from suppliers like Nvidia and Advanced Micro Devices, and businesses rent the computing capacity from Azure to power their AI training and AI inference workloads.

Microsoft also launched Azure AI Foundry earlier this year, which ties many of the cloud platform’s AI services together to form a holistic solution for enterprises. It can be used to turn raw data into documents, build AI chat applications, deploy AI software, perform multimodal content processing, and more. It also offers access to the latest large language models (LLMs) from third parties like OpenAI to accelerate AI development.

Azure is regularly the fastest-growing part of Microsoft’s entire business, but it surprised even the most bullish analysts during the fiscal 2025 fourth quarter when its revenue soared by a whopping 39% year over year. It was the fastest growth rate in three years, and it marked a significant acceleration from the 33% growth Azure generated in the third quarter just three months earlier.

Demand for data center capacity and Foundry were the key drivers of the incredible result, so this is where investors should focus most of their attention on Oct. 29.

Should you buy Microsoft stock before Oct. 29?

Microsoft stock isn’t cheap right now. It’s trading at a price-to-earnings (P/E) ratio of 38.3, which is a 14% premium to its five-year average of 33.5. It’s also notably more expensive than the 33.3 P/E of the Nasdaq-100 index, which is home to many of Microsoft’s big-tech peers.

MSFT PE Ratio data by YCharts

As a result, investors who are looking for short-term gains over the next few months might be left disappointed. That doesn’t mean the stock is a bad buy ahead of Oct. 29, but investors who pull the trigger must be willing to hold it for the long term — preferably for three to five years — to maximize their chances of earning a positive return.

One single quarter is unlikely to shift Microsoft’s momentum in either direction, but as long as Copilot adoption continues to expand and Azure’s revenue growth maintains its recent momentum, investors will probably be glad this stock is in their portfolio.

You probably think of the money in your retirement accounts as yours, but if you have traditional IRAs or 401(k)s, it’s not that straightforward. You owe the IRS a cut of your savings, and at a certain point, it forces you to start taking required minimum distributions (RMDs). These are mandatory annual withdrawals that you must pay taxes on.

If you’re new to RMDs, they can seem a little intimidating. Failing to withdraw the required amount results in a steep 25% tax penalty on the amount you should’ve withdrawn, so it’s important to know how to calculate yours correctly. Let’s look at the example of a retirement account with a $500,000 balance.

Image source: Getty Images.

Three situations where you don’t have to take an RMD

You won’t have to take an RMD from your retirement account if any of the following are true:

• You’re under age 73: RMDs begin in the year you turn 73. If you turn 73 in 2025, you technically have until April 1, 2026 to take your first RMD. In all subsequent years, you must take RMDs no later than Dec. 31 of that year.
• It’s a Roth account: You fund Roth accounts with after-tax dollars, so you can enjoy tax-free withdrawals in retirement. Because of this, the government has no incentive to force you to take money out each year.
• The account is associated with your current employer: If you’re still working, you can delay RMDs from your current employer’s retirement plan until the year after the year you retire. However, you still have to take RMDs from old 401(k)s and traditional IRAs,if you have any.

If none of these things apply to you, then you will need to take an RMD. Fortunately, they’re not too difficult to calculate.

How to calculate your RMD on a $500,000 account

You calculate your RMD using the balance as of Dec. 31 of the previous year — Dec. 31, 2024 for your 2025 RMD. If you don’t know what your balance was at that time, you may need to look it up or speak to your plan administrator.

Once you know the amount, all you need to do is divide that by the distribution period next to your age in the IRS’ Uniform Lifetime Table. The result is your RMD.

So, for example, if you had $500,000 in your 401(k) as of Dec. 31, 2024 and you turned 73 in 2025, your RMD would be $500,000 divided by 27.4 — the distribution period for 73-year-olds. That comes out to about $18,248.

You’re free to take out more than this if you’d like. But this is the minimum amount you must withdraw in order to avoid the 25% penalty.

What if you don’t want to take your RMD?

Avoiding mandatory withdrawals generally isn’t worth it. The 25% penalty will likely cost you more than what you would’ve paid in income taxes if you’d just taken the RMD as scheduled.

That said, sometimes you may not want to deal with the extra taxes an RMD can bring. In that case, consider making a qualifying charitable distribution (QCD). This is where you ask your plan administrator to send an amount equal to your RMD or a portion of it to a qualifying tax-exempt organization.

The money must go directly to the charity. If the plan administrator distributes it to you first, it does not count, even if you give it all away to charitable causes. Done properly, the IRS won’t tax you on this retirement account withdrawal, and it’ll consider your RMD satisfied for the year.

The maximum QCD you can make in 2025 is $108,000. This should be more than enough for most people.

You may have already spent an amount equal to your RMD on living expenses this year. In that case, you’re in the clear until next year. Check with your plan administrator if you’re unsure how much you’ve already withdrawn from your accounts in 2025. If you come up a little short, be sure to make some more withdrawals in the next few weeks.

I love to collect dividend income. It provides me with more cash to invest each month and a growing level of financial freedom. My goal is to eventually generate enough passive income from dividends and other sources to cover my basic living expenses.

To support my income strategy, I focus on buying high-yielding dividend stocks. Two companies in particular, Brookfield Infrastructure (BIPC -2.38%) (BIP -1.62%) and W.P. Carey (WPC), have consistently stood out. Here’s why I can’t stop buying these income stocks.

Image source: Getty Images.

A high-octane dividend growth stock

Brookfield Infrastructure currently yields nearly 4%, more than triple the S&P 500’s dividend yield (1.2%). The global infrastructure operator supports its high-yielding payout with very stable cash flows. Long-term contracts and government-regulated rate structures account for around 85% of its annual funds from operations (FFO). Most of those frameworks have no volume or price exposure (75%), while another large portion of its cash flow (20%) comes from rate-regulated structures that only have volume exposure tied to changes in the global economy. The bulk of these arrangements also either index its FFO to inflation (70%) or protect it from the impact of inflation (15%).

The company pays out 60% to 70% of its very resilient cash flow in dividends. That gives it a comfortable cushion while allowing it to retain a meaningful amount of cash to invest in expansion projects. Brookfield also has a strong investment-grade balance sheet. Additionally, the company routinely recycles capital by selling mature assets to invest in higher-returning opportunities.

Brookfield has grown its FFO per share at a 14% annual rate since its inception in 2008, supporting a 9% compound annual dividend growth rate. While its growth has slowed in recent years due to headwinds from interest rates and foreign exchange fluctuations, a reacceleration appears to be ahead. The company believes that a combination of organic growth driven by inflationary rate increases, volume growth as the economy expands, and expansion projects will drive robust FFO per share growth in the coming years. Additionally, it expects to get a boost from its value-enhancing capital recycling strategy. These catalysts should combine to drive more than 10% annual FFO per share growth.

The company’s strong financial profile and robust growth prospects easily support its plan to increase its high-yielding payout at a 5% to 9% annual rate. Brookfield has increased its payout in all 16 years since it went public.

Rebuilt on an even stronger foundation

W.P. Carey has a 5.4% dividend yield. The real estate investment trust (REIT) owns a well-diversified portfolio of operationally critical real estate across North America and Europe. It focuses on investing in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases featuring built-in rental escalation clauses. Those leases provide it with very stable and steadily rising rental income.

The REIT has spent the past few years reshaping its portfolio. It accelerated its exit from the office sector in late 2023 by spinning off and selling its remaining properties. W.P. Carey has also been selling off some of its self-storage properties, particularly those not secured by net leases. It has been recycling that capital into properties with better long-term demand drivers, such as industrial real estate.

W.P. Carey’s strategy should enable it to grow its adjusted FFO at a higher rate in the future. Its portfolio is delivering healthy same-store rent growth (2.3% year-over-year in the second quarter). Meanwhile, its investments to expand its portfolio are driving incremental FFO per share growth. W.P. Carey is on track to grow its adjusted FFO per share by 4.5% at the mid-point of its guidance range this year.

That growing income is allowing the REIT to increase its dividend. It has raised its payment every quarter since resetting the payout level in late 2023 when it exited the office sector, including a 4% increase over the past 12 months. With a strong portfolio and balance sheet, W.P. Carey has the financial flexibility to continue growing its portfolio, FFO, and dividend in the coming years.

High-quality, high-yielding dividend stocks

Brookfield Infrastructure and W.P. Carey stand out for their stable and growing cash flows, as well as high-yield dividends. Brookfield offers inflation-protected cash flows that minimize risk, while W.P. Carey generates reliable rental income from long-term leases. With lots of income and growth ahead, I just can’t stop buying these high-quality, high-yielding dividend stocks.

According to data compiled by S&P Global Market Intelligence, Wells Fargo (WFC -2.93%) stock was up by more than 8% week to date as of Thursday night. That was hardly a surprise, as the company delivered quarterly results that beat analyst estimates and pleased investors.

A satisfying third quarter

On Tuesday, Wells Fargo — one of the so-called big four U.S. banks — took the wraps off its third quarter. For the period, total revenue came in at over $21.4 billion, representing an improvement of 5% over the same quarter of 2024.

Image source: Getty Images.

The company’s generally accepted accounting principles (GAAP) net income saw a healthier rise, growing by 9% year over year to almost $5.6 billion. On a per-share basis, that profitability stood at $1.66.

As for traditional banking metrics, average loans crept up by 2% to just under $929 billion. Average deposits, however, declined marginally to almost $1.34 trillion.

The two headline numbers comfortably exceeded the consensus analyst estimates. Prognosticators tracking Wells Fargo stock were collectively anticipating slightly more than $21.1 for total revenue and $1.55 per share for profitability.

Multiple revenue streams

In its earnings release, Wells Fargo attributed its improvements mainly to a rise in fee-based income from both commercial and consumer operations. The bank also benefited from higher vehicle loan originations and an increase in total client assets for its wealth and investment management business.

A potential legal headache for consumer healthcare giant Kenvue (KVUE -13.50%) was causing pain for investors on Thursday. Such troubles tend to spook the market; hence the more than 13% sell-off of Kenvue across that trading session. The S&P 500 (^GSPC -0.63%), by comparison, did much better on the day with “only” a 0.6% decrease.

New lawsuit with old allegations

Until it was spun off into a separate company, Kenvue was part of sprawling pharmaceutical company Johnson & Johnson (JNJ 0.50%). The company has faced tens of thousands of lawsuits over its Johnson’s Baby Powder, a once talc-based product that is widely alleged to have caused various types of cancer.

Image source: Getty Images.

The first such lawsuit in the U.K. has been filed by a group of roughly 3,000 claimants, according to reporting from various media. It was submitted to the English High Court against both Kenvue and Johnson & Johnson.

The former company basically inherited Johnson & Johnson’s numerous consumer healthcare products, a portfolio that included Johnson’s Baby Powder. In 2020, the main ingredient in the now-controversial product was switched from talc to cornstarch.

Kenvue responds

Reporting on this development, Reuters wrote that Kenvue’s response was that it did not believe the court would find that the talc-based powder causes cancer, as the claimants allege.

Aerospace and defense company RTX (RTX -0.10%) didn’t really have a banner day on the market Thursday, but in a trading session when the S&P 500 index fell by 0.6%, the stock’s flat performance made it a winner. Investors were reacting to good news from one of RTX’s three core business divisions.

Up in the air

That division is aircraft engine specialist Pratt & Whitney, which this morning reported it had earned an important certification abroad.

Image source: Getty Images.

Specifically, Pratt Whitney’s GTF Advantage engine got the nod from the European Union Aviation Safety Agency (EASA). This follows similar certification from EASA’s American equivalent, the Federal Aviation Agency (FAA), and the company said it clears a path for the product to enter service next year.

The GTF Advantage is a next-generation engine for airliners that, according to its maker, delivers more thrust and boasts higher fuel efficiency than competing products currently on the market.

Big promises

In its press release divulging the happy news, Pratt & Whitney quoted its president of commercial engines, Rick Deurloo, as saying that the company’s new engine “will be a game-changer for operators.”

Despite the confidence, however, Pratt & Whitney did not provide any estimates as to how sales of the GTF Advantage will impact its fundamentals, or those of its parent RTX.

In this podcast, Motley Fool analyst Jason Moser and contributors Travis Hoium and Jon Quast discuss:

• How 2025 compares to 1999 and 2007.
• What they wish they had known in the past.
• Energy’s role in AI.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. When you’re ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on Oct. 10, 2025.

Travis Hoium: How does the market in 2025 fit into the history of the stock market? Motley Fool Money starts now.

Welcome to Motley Fool Money. I’m Travis Hoium joined today by Jon Quast and Jason Moser, and I think this is an important time in the market. Take a step back and look at a little bit of context in history. There are these decade long trends that we typically go through, and it seems like we’re either at the beginning or end of one of those with artificial intelligence and all of the companies that are going crazy right now. I want to get your guys’ thoughts on where we are. We all see the potential of artificial intelligence, but the Internet was a massive opportunity in 1999. Mobile was a huge opportunity in 2007. That didn’t stop the crashes that ensued. What historic parallels, Jason do you see in the market today that investors can learn from?

Jason Moser: Yeah well, I love this idea. I think there are a lot of parallels we can draw here. There are some similarities and I think there are some differences as well. You go back to for example, the buildout of the Internet back in 1999, the .com crash that ensued. I mean, there’s a lot of similarities from then to what’s going on today. There’s massive infrastructure buildout. It’s the foundation for what looks to be a new era of technology. It’s also accompanied by a lot of speculation in the markets. We’re seeing that in the form of a lot of nosebleed valuations. I mean, I’m not saying they’re all nosebleed valuations, but there is some data that shows that AI first companies today that are coming to market, are getting 20-40% premium valuations over their non AI driven types of companies. Then you’re also seeing some of the most speculative names are garnering valuations in the neighborhood of 200 times sales.

Travis Hoium: Some of them have gone parabolic just in the past few.

Jason Moser: Yeah, absolutely. I understand the enthusiasm, but there was an interesting interview with Orlando Bravo the other day on TV. He heads up the firm Toma Bravo which they specialize in SAS software and stuff like that. The question that was posed as it’s been posed to most of us is, are we in a bubble? He answered simply yes. I mean, you can’t have companies that are working on $50 million in annualized recurring revenue value to $10 billion, that just doesn’t work. It’s not sustainable. At some point, we will see that shift. But I do think there are some differences too. I mean, primarily, you look at the physical restraints of what was being built out back in 1999, that was laying all that optic cable. Physically difficult to do, but a little bit different than really the restraint today. Now we’re talking about power. We’re trying to figure out how to get the electricity, the power to really make all of this stuff run. I think funding is a little bit more realistic this time around just because so much of it is coming from the hyperscalers. Let’s put OpenAI aside here and look at the other companies, your Amazons, your Alphabets, your NVIDIAs of the world that are helping to fund a lot of this. When you have businesses that are that big with more reliable cash flows, I think the funding side of it seems to be a little bit less speculative than it was back then.

Travis Hoium: Do you think that has changed over the past, even the past few weeks with things like guaranteeing revenue? I think, you know, India did that with CR weave. You’re seeing more variable interest entities or they’re going by different names now, but it’s basically doing some of these financings off balance sheet. That’s what ultimately got Enron in trouble. That isn’t necessarily a parallel that we want to go down, but it’s one of those things where there are these small red flags that you can look throughout history and go, Okay, when you start to see this happen, you should perk up a little bit.

Jason Moser: I think you need to be asking the questions. I think it’s no accident that this week we really saw a lot of those maps circulating around that were showing the intertwinenss of all of these. It’s just a handful of companies that are really dictating the space and you want to put some numbers around it. I mean, this is what really makes me nervous. I think you look at Morgan Stanley research. They say that OpenAI itself, they make up more than $300 billion of this something like $880 billion total future contract value that’s tied to the spending with Microsoft, Oracle, and CR weave, among others. You think about that in the context of the fact that OpenAI, I mean, they just generated basically $13 billion annualized at the midpoint of 2025, and they’re losing money still hand over fist. Where that capital ultimately comes from I think, is a question that investors really need to be focused in on. It’s not to say that OpenAI won’t continue to grow, but that is a big Delta that they’re going to have to figure out a way to shore up.

Travis Hoium: Jon, how do you think about this in a more historical context? What things are you trying to learn from history that could maybe apply today?

Jon Quast: Well, I think historically, whenever you see something new and exciting, investors are wanting in on that and they’re not wanting to miss out. I’d say that applies to both retail investors and private equity investors. You can see that in a couple of fronts here that there are some companies, I think, that are preying on that, taking advantage of that, knowing that investors are willing to pay up for the excitement, the admission to the theme park. You look at the public markets, for example, look at special purpose acquisition companies.

Travis Hoium: These are SPACs. This is what was really popular in 2020 and 2021.

Jon Quast: Yeah, right before we had major, major pullback in so many of the companies out there. These are companies that don’t even have a business. They’re saying, give us money so we can go buy a business. Many of them came forward in 2020, 2021. There’s been a couple of years of a lull but now this year, we have 161 that have gone and filed so far this year, and the years not even over yet. That’s as much as basically the last three years combined. I’m not saying that they’re all bad opportunities. I’m not even saying that most, but I’m saying somewhere in there, the data is saying, yeah, somebody is taking advantage of a situation where investors are very excited and they’re willing to pay for a lottery ticket, essentially. The same thing in the private equity space, you look at the AI private companies out there starting to do perhaps some questionable things, maybe counting some one time deals as part of the calculation in their annual recurring revenue and doing that so that they can boost their valuations, and that increases the amount of funding that they’re able to get from these private investors. We would think that private investors are a little bit smarter than that. But again, I mean, we all have human psychology, and we don’t want to miss out on something that is truly transformative in artificial intelligence.

Travis Hoium: Jason, you brought up those images that are going around. There’s one from the FT, there’s one from Bloomberg, just show this web around OpenAI. One of the things that I think I learned in the 2008, 2009, downfall of the market and the recession that ensued was things just got really, really complicated when a lot of things didn’t need to be complicated. We started with mortgages, mortgage is a fairly straightforward financial instrument, but then you start turning it into 48 different products that you’re cutting into different pieces, and nobody knows where the risk is or who’s holding the risk. That’s what I get concerned about right now is, if AI is such a no brainer and it’s such a high return on investment, then why do we need all this complicated these complicated financial structures? Again, it’s just raising red flags to me. Let me put it this way because I think what we’re trying to do today is take a little bit of our knowledge and pass it on to everybody who’s listening. If you are going to go back, Jason, I’ll start with you, if you were going to go back and talk to yourself in 1999 or 2007, what would you tell yourself that you could maybe implement as an investor?

Jason Moser: Wow, yeah. I like that question a lot. I think if I look back to 1999, while I was investing at the time, I wasn’t a member of the Motley Fools. I think, first and foremost, and I’m being dead serious here, I would have told myself to get a subscription to the Motley Fool because from an educational perspective alone, I think that style of thinking, that style of investing and taking that longer term view is just invaluable. I’d also say, wow, it’s tempting. Steer clear of speculation. I think you’re right. One of the big problems back in 2007/8 was just how ununderstandable that web of financial instruments ultimately became. I think that was a result of greed primarily. But I also look at today and you’re talking about these special interest entities and whatnot. Money isn’t limitless and so I think they start to make it a little bit more complicated when they need to figure out ways to raise more money. That becomes a little bit more concerning as well. I’d say, for me, I’d steer clear speculation. These were stretches of time when some of the great businesses of our time went on sale. Stay focused on owning those high quality businesses, leave the speculating to those who think they probably know what they’re doing and maybe don’t necessarily actually know.

Travis Hoium: Jon, what do you think?

Jon Quast: So 1999, I wasn’t an investor yet, and so it didn’t really start for me until around the great recession.

Travis Hoium: You weren’t investing, but do you remember feeling the.com bubble and crash? Because I think that is an interesting until you actually have money in the market, it is kind of ah, this thing happens, but it doesn’t really affect me.

Jon Quast: Well, I would say absolutely not. I mean, just where we were in our little corner of North Carolina back in those days, I mean, man, we had dial up Internet. I mean, we weren’t even all that aware of what was going on. For me, the great recession was where I really began to take investing seriously. What I tell myself, besides what Jason already said was, I wish that I had just held on to my original vintage of stocks that I invested in. I know it’s 20 years later now, but I look at some of the ones that I had at the time. Buffalo Wild Wings, which is no longer publicly traded, but if I’d just held onto Buffalo Wild Wings from the time I invested until the time that it went private, it was a 10 bagger or more, and I sold after it doubled. I owned Marvel back before Disney acquired it and sold around the time of the announcement. I wish I had just held onto Disney all that time. McDonald’s was one of the first stocks I ever bought. Yeah, maybe that’s not the flashiest thing, but it’s up over 1,000% with dividends. I know some of the listeners are saying, hey, well, that’s 20 years ago, but let me tell you something. For me, it’s 20 minutes. I just started investing. Time goes by so fast. At the time you say, invest for three years, invest for five years. How could you ever? Twenty years is a heartbeat. Man, I wish I could just go back and say, hang on. Don’t try to get cute. Don’t try to buy and sell, trade, all this. Just buy and hold.

Travis Hoium: Yeah, Jon, the lessons that I have learned more than anything is not selling to give you an idea of what I owned in those days that I sold Chipotle, Apple, these are Las Vegas Sands. I remember buying for $2 a share. I think that was a 20 bagger over the next couple of years that I sold too early. Yeah, owning those companies that aren’t going anywhere that can survive any downturn, I would also say start paying attention to balance sheets. Because if companies are going to not survive, it’s not going to be the revenue drops a little bit. It’s going to be because there’s more risk on the balance sheet than they can handle. Something to keep in mind. When we come back, we are going to talk more about this buildout and where there could be opportunities you’re listening to Motley Fool money.

Come back to Motley Fool Money. One of the big topics of the AI buildout has been energy, and this has gotten a lot more attention over the past couple of months. Every hyperscalar, every Neo Cloud is looking for basically as much energy as they can get. Some of them have made deals with Bitcoin miners. I think that’s an interesting play here. Bitcoin Miners spent a lot of time building out the energy they need to run their mining equipment. Now we’re moving that to AI. Jon, where are the opportunities for investors in energy or at least what should we be keeping an eye at?

Jon Quast: Well, I think that nuclear power is big trend and I know that people have been hearing about it. I just think it’s going to be a lot of emphasis put there and even the emphasis that we put there isn’t going to be enough. You look at what OpenAI is reportedly wanting. They’re reportedly wanting 250 gigawatts of electricity by 2033, just for running their AI data centers. That’s just one company. President Trump earlier this year, signed an executive order to quadruple the country’s nuclear power. It will add basically 300 gigawatts of nuclear power. You look at that,250 is what OpenAI wants. We’re saying, we’ll add 300 gigawatts of nuclear power. Basically, they’ll take all of that.

Jason Moser: Doesn’t seem like a lot of wiggle room there, Jon.

Jon Quast: Exactly. Here’s the thing. The order is by 2050 to have that much extra power. President Trump is saying, we’re going to add 300 gigawatts. Give us 25 years. OpenAI is like, we need it now and so does every other company that’s doing what OpenAI is doing. I just think we’re going to have a heyday for nuclear, but even if we do, it’s still not going to be enough.

Travis Hoium: I want to put some numbers to this. The EIA, Energy Information Administration, which is a phenomenal source for energy information because they pull all the prices, all the capacity production, all that stuff. Between 2024 and 2028 in the US, there is a planned about 200 gigawatts of additions. About half of that, over half of that is solar, so an intermittent energy source. You have to consider that the capacity factor of solar, meaning the amount of time that it produces energy on an average day is about 20, 25% of the time. We’re not anywhere near hitting those numbers in what is planned, and power plants don’t go up. Even a solar plant, which can be built relatively quickly, you’re still talking many months, in some cases, years. All that said, Jason, where are you looking for opportunities today?

Jason Moser: It definitely feels like we’re going to need all we can get. It’s all hands on deck. I think the key is going to be focusing on every resource available. I think in regard to AI specifically and the capabilities that it’s driving, I think the overwhelming demand is going to be on those reliable or firm energy sources. The stuff that’s on 24/7 that’s easily distributable. Renewables are one thing. But I think for AI specific stuff, we’re going to be looking at nuclear, natural gas and hydro electric primarily. We saw Google earlier in the year made a deal to provide some early stage capital for elemental power to prepare some nuclear sites here in the US. I think those were those small modular reactors. The other thing to think about longer term and I’m talking about longer term, Travis, but think a decade out. There was an interview with Jeff Bezos this week that I was pretty, I was fascinated by because I actually could totally see this happening. He was talking about data centers in space. Essentially.

Travis Hoium: It sounds crazy.

Jason Moser: It sounds crazy. It does. It sounds like. But if you think about it, they’re already trying. They’re already in the process of trying to figure out how to make this work. Now, that solves two key problems. You get the limitless resource of solar up in space and you’ve solved your.

Travis Hoium: Suddenly, that becomes a base source of energy as opposed to variable.

Jason Moser: You solve your cooling problems as well. It knocks out you kill two birds with one stone, so to speak. I think that’s pretty interesting to think about just further out. Just keep an eye on that. I don’t think that’s high in the sky stuff. I think that’s actually pretty legit. Beyond that, I looked to other companies in the value chain that enable SMRT usage and monitoring. The company I’ve talked about before called Itron that does that. They help their customers safely and securely monitor that critical infrastructure and power and water. You can look beyond the providers and look to those value chain adders as well.

Travis Hoium: Do you think that the rise in electricity prices which again, is getting more attention this year, I’ve noticed it with my electricity bill Jason, is that a pending problem in the US because if AI is what’s raising the costs for the average person, seems like an issue.

Jason Moser: Consumers will not like it. I can guarantee you that. I mean, I noticed the power bill difference when the winter hits here in Northern Virginia, and it basically doubles. If we see things going beyond just your typical seasonality, I think that’s going to be a real problem.

Travis Hoium: Yeah, that’s something to keep an eye on because regulators do play a pretty big role in this, who’s gonna get the electricity? What are people paying? That’s not just an economics process, although the economics could help with justifying some of these investments too, something else to keep in mind is that, you know, energy costs are important, and if prices are going up, people are gonna put more money into the ground. When we come back, we’re going to see how well Jason and Jon know their history of investing you’re listening to Motley Fool money.

Welcome back to Motley Fool Money. I want to know how well Jason and Jon know their market history. I’m going to ask you guys a few questions and see who knows the answer. Jon, I’ll have you go first here. What was the date of the 1987 crash? As a bonus, how much did the Dow Jones Industrial average drop on that day?

Jon Quast: Oh, and I assume that you’re wanting more than the year 1987, yeah?

Travis Hoium: Yeah, I would like you can give me the day of the week. Any information is.

Jon Quast: Well, it was on a Monday.

Travis Hoium: What color was this Monday, Jon.

Jon Quast: Well, there we go. A very black Monday. I would think it’s in October, but I don’t remember.

Travis Hoium: Jason, do you know the date?

Jason Moser: I actually do know this one. It’s October 19th.

Travis Hoium: 1987 and how much did the Dow drop?

Jason Moser: Do we have a little wiggle room here? I know it was 20%. It was a little bit more than 20%, but I don’t think it was 25%. It was somewhere in the middle between 20 and 25%.

Travis Hoium: Oh, that’s good. Jon. Do you have an answer.

Jon Quast: I was going to say 12.

Travis Hoium: Okay, 22.6% drop for the Dow Jones Industrial average. But the other thing that’s interesting with that historically is the Dow was what really got all the attention back then. It was not the S&P 500. We don’t talk much about the Dow anymore, but it was those 30 stocks. That’s what was reported on the nightly news. That’s the numbers that everybody knew is, what was the Dow doing?

Jason Moser: Yeah, and it’s interesting to think about the difference between the Dow and the S&P. We talk about, they definitely tried to modernize the Dow to a degree. It’s a little bit more up to speed now. But there’s also that difference between the stock price weighted index, the Dow Jones.

Travis Hoium: Do you want to explain that? Because that is a really weird thing about the Dow.

Jason Moser: Yeah, essentially, I mean, you’re just looking at one index and the Dow where it’s basically measured by the value of the stock price itself.

Travis Hoium: The number, so if you have $100 stock, it has a 10X weighting of a stock that has a $10 stock.

Jason Moser: Whereas the S&P, it’s market capitalization weighted. You’re actually talking about how heavy the whole company is. Stock price can be a function of anything. I mean, stock splits and whatnot can change it. It is just interesting to see that difference there and how that ultimately plays out in the way those indices perform.

Travis Hoium: Yeah, and back then that was a big reason that a lot of stocks typically were kept with stock splits and things like that, between somewhere around $30 and $100 per share. We get 100, you would expect a stock split to come. We don’t really think about that anymore because we have fractional shares and all that kind. That stuff didn’t exist.

Jason Moser: Yeah, I think didn’t memory serves, I think when Apple joined the Dow and didn’t it actually split its stock in order to be able to facilitate that membership? I feel like that might have happened.

Travis Hoium: That is a historical question I do not have the answer to. Speaking of big tech though, and maybe I’m giving things away here, what was the most valuable company in the world on January 1st, 2000? Jason, I’ll have you go first here. This is .com bubo. Lots of options.

Jason Moser: There are a lot of options. Was it global crossing? I don’t know. Honestly, just I feel like that’s a Jon.

Jon Quast: I would guess Cisco.

Travis Hoium: That would have been my guess. Cisco was the most valuable company in the world for a short period of time, but that was in March of 2000 at the turn of the century to the millennium, it was Microsoft. That was really most valuable company in the world. Interesting, parallel to where we are today, Microsoft was the most valuable company in the world. That is still one of the most valuable companies in the world. But if you would have invested in Microsoft at the beginning of 2000 and held it for the next 15 years, you would have basically the same amount of money.

Jason Moser: I was going to say the Balmer years didn’t treat shareholders very well.

Travis Hoium: Yeah, and so there’s a couple of things. I mean, their business actually did fine during the 2000, but the end of the ’90s, early 2000s, the price that you were paying was extremely high, and so multiple compression, meaning the price to earnings multiple or the price to sales multiple was going down over that period of time. Instead of multiples being a tailwind, like they’ve been for a lot of stocks over the past couple of years, it was a headwind for Microsoft. Again, just something to think about as we think about the market today. Pets.com gets a lot of attention in the .com bubble. Do you know when pets.com IPOed, and what its highest market cap was before falling apart. Jon, I will have you go first. When was the IPO, and what’s the highest market cap?

Jon Quast: Oh, how should I know? I mean, you want more than the year.

Travis Hoium: Actually, you might not get the year.

Jon Quast: I know. I mean, I feel like this is a high bar. I’m gonna go with June 12th, 1995, and I’ll say peak valuation was 50 billion.

Travis Hoium: See, Jason, I’ll give you a guess here, but these numbers surprise me.

Jason Moser: Yeah, the IPO, I don’t know, so I’m just going to guess March 1997, valuation wise, I know given the valuations that we see today, you would want to say something like 50 billion or I get that. But I think actually it was really especially at that time. This was even big at that time. I think it was something like 450 million, $500 million.

Travis Hoium: Wow. You guys are both way off for the timing. Their IPO was February of 2000. Way later than I would have guessed. But, Jason, you’re almost exactly right. $400 million was their top market what I think is interesting about that is, that is the name that we all remember from the .com bubble. But it wasn’t all that big of a company.

Jason Moser: No. Well, I mean, at the time it was. I mean, consider.

Travis Hoium: But you’re looking at I think today’s prices, that would be still less than billion dollar.

Jon Quast: I literally 100 times more than that.

Jason Moser: They had obviously a very short lived campaign as a publicly traded company. But yeah, I mean, that was like the quintessential Internet stock. I mean, just advertising at the Yin Yang, found a clever brand with that little sock puppet puppy, and they were just selling stuff on the Internet, like, this is the way we do it and just making no money in the process. But it’s interesting how we gave Amazon so much leeway to build out that concept, and yet your pets.coms of the world just never really stood a chance.

Travis Hoium: The lesson that I take from that one because you’re right. Amazon has become, obviously a household name everywhere. But if you would have just waited. If you would have just said, I’m not going to invest. The Internet, I think, is a huge thing. But 1999 I’m just going to say, you know what? I’m going to let things play out a little bit and you just waited even till 2002, 2003, 2004, 2008, when you knew who the winners were, that was actually a great time to invest in even a company like Amazon.

Jason Moser: That’s a really good lesson.

Travis Hoium: This one’s fun. OpenAI has 800 million weekly active users. How many users did AOL have at its peak? Then I have a follow up, Jason. Users. How many subscribers? That’s the, basically households. We were sending disks around, in those days.

Jason Moser: That’s the thing, OpenAI, 800 million weekly some odd user, 20 million paying subscribers. They got to figure out a way to short that up. AOL, I have no idea. Households,125 million.

Travis Hoium: John?[laughs]

Jon Quast: Well, I want to change my answer now. I was going to go with eight million. Here’s why. You had other companies. You had Juno, you had NetZero. You had all those. The trend started, but then eventually we switched off of those things. I was going to say eight million.

Jason Moser: John, I could be spectacularly off.

Travis Hoium: John, you’re actually pretty close, 25 million was their peak. But here’s the follow up. When did AOL shut down its dial up service?

Jon Quast: I think I know this one. It was earlier this year.

Travis Hoium: Jason do you want to?

Jason Moser: I was going to say, you would think they did this 15 years ago. It just happened, like John said, very recently. I think sometime within the last year, they actually stopped the whole thing.

Travis Hoium: It was last week.

Jon Quast: I would love to know the guy who was still using it two weeks ago.

Travis Hoium: Who was shocked that their Internet was shut down.

Jason Moser: Not one person.

Travis Hoium: I got a couple of quick ones here. At its peak, how much was invested annually in the USTelecom buildout? The thing that I wanted to bring in here is we talk about the .com bubble bursting. But in the late ’90s, there was really two bubbles. There was the Internet bubble, so the companies that was a valuation bubble, and there was basically an investment bubble where telecoms were investing a lot of money in building out the fiber that Jason mentioned earlier. But what was the actual number that they were putting in the ground? This is just in the US. What is your guess, Jason? Annual number, annual peak.

Jason Moser: One hundred billion dollars.

Travis Hoium: John.

Jon Quast: Did you say million or billion?

Jason Moser: Billion.

Jon Quast: Man, I was going with 10 billion.

Jason Moser: Again, it could be spectacularly off.

Travis Hoium: Jason, you’re about right, 118 billion in 2000. I believe we’ve only passed that number in two years since then. Interesting that the telecom buildout was basically hockey stick growth rate, and then it just plateaued. The other one that we’re not going to get to that is a similar is Apple in 2007, sold 1.4 million iPhones. 2015, that got up to 231 million, and then essentially plateaued. The question, for all these businesses is, when do you hit that plateau? Because that’s when you could potentially run into problems. Here’s the one I wanted to end on quickly. From January 1st, 2000 to March 2000, how much did the QQQ NASDAQ-100 rise? Then my follow up is, how much did it fall over the next six months, John? How much did it go up in those first three months? How much did it go down in the next six?

Jon Quast: I’m going to guess for going up, I’m going to guess it went up 15% during those three months. Then I believe there was a 50% drawdown from there.

Travis Hoium: Jason?

Jason Moser: I was going to say 20% for the first one. Then for the next six months, from that point, I think it fell.

Travis Hoium: From March to September.

Jason Moser: March to September, I would say it fell probably a good 60%.

Travis Hoium: Up 18% in those first, a little less than three months. Then over the next six months, fell 71%. Up an escalator out of window is the way that we quit this. Well, hopefully that was good context for people because I think we can always learn from history whether things repeat or not, they typically rhyme. I think that’s how the saying goes. When we come back, we will get to the stocks that are on our radar. You’re listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. One company I want to bring into the discussion, we’ve high level, talked about history and AI. But Google had some interesting announcements. OpenAI is obviously getting all the attention, but Google Gemini Enterprise was announced this week. Jason, what did you take away from that?

Jason Moser: A few things, I think. I use both Gemini and ChatGPT interchangeably. Probably use Gemini a little bit more. I wasn’t terribly surprised to see the announcement because this is an arms race. I think it speaks to Google’s ability to respond to market forces and competition. I think, also the real advantage that it has, and it’s already massive user base and the powerful business model, not to mention just customer mind share. I think ChatGPT absolutely is doing a great job on customer mind share, but going back to earlier in the show, when we were talking about 800 million some odd weekly users, only 20 million really of those are subscribers. I think that is just a big hurdle for a company like ChatGPT to overcome. The reason why Google doesn’t have to worry about it so much is because they’ve got a business that’s funded by this powerful advertising model, not to mention it’s growing Cloud business, as well. Now, when you look at Google in this space, they’re a total package. What’s that? They call it a full stack player?

Travis Hoium: A few of the things they announced, it pulls Gemini into applications. This goes into GCP, Google Cloud Platform. That is actually a profitable business. I think that’s something, as investors, we should highlight. OpenAI is losing money. They’re not public yet, but this is a huge growth business for Google and for Alphabet, and it is now profitable, as well. I think the idea here is, this is going to be an enterprise play along with, hey, you know what? If Gemini as a consumer app wins great.

Jason Moser: Well, I think this shows a couple of things. This technology at its core is totally replicable. Basically, all they need is the resources and the time to be able to do it. I think the thing that’s not necessarily replicable is the power under the hood, so to speak, with what Google has built through the decades. ChatGPT is just not there yet. It’s not to say they can’t get there. Don’t get me wrong, but I’m just saying that it’s a much younger company that still has a lot to prove. From that perspective, again, I look at something like a Google today, and I think, wow, they’re doing a lot of really neat stuff. I think ChatGPT is doing a lot of really neat stuff, too. I think we’re going to see at some point, OpenAI is going to have to resort to some sort of an ad supported model in order to be able to continue generating that revenue, or they’re just going to have to come up with a way to grow that subscriber number, which is just so small today compared to what Google has just on an ongoing basis.

Travis Hoium: The 800 pound gorilla in the room that we always continue to overlook. Let’s get to this accident on our radar. John, I’m going to have you go first. What is on your radar this week?

Jon Quast: On my radar right now is a company called Rubrik that is ticker symbol RBRK. This is a small cybersecurity company. But what I like about this is that it’s not trying to prevent attacks. Its business model is assuming an attack has already taken place, and it’s going to get your business back up and running in a fraction of the time. You think about that. That’s really an interesting counter positioning, when it comes to maybe what your CrowdStrikes of the world are trying to do. That’s really interesting. It trades at about 15 times its sales. You look at its annual recurring revenue. It’s up 36%. That’s a good growth. Gross margin has jumped to about 80%. Those two things right there signal to me that I don’t think it looks terribly overvalued. It does generate positive free cash flow, despite being a young business. It has a net cash position. It’s adding new customers at a good pace. But with only 2,500 spending 100,000 a year, I think there’s plenty of room to grow that. Net dollar retention is over 120%, so its existing customers are spending more over time. I really like its co-founder and CEO, Bipul Sinha. He really values this mentality of basically innovate or cease to be a business. That could make things a little bit volatile, but I think it’s going to also potentially make it a key innovator here in the cybersecurity space. It’s definitely on my radar and one I’m watching.

Travis Hoium: Dan, what do you think about Rubrik?

Dan Caplinger: I do like the company, John, but I have a question about what they call themselves. They call themselves a zero trust data security and zero trust doesn’t exactly make me feel good.[laughs].

Jon Quast: That’s an unfortunate way to talk about it in the trade.

Travis Hoium: Jason, what is on your radar?

Jason Moser: Something we’ve been doing here on the website recently with the analyst team, it’s something we’re calling the Analyst Stream, and a couple of days a week, we’re taking a topic of the day and all just offering our spin on it. Today, Friday, we’ve got safety stock pitches for folks. A stock that I recently purchased from my own portfolio with safety in mind is Waste Management. Ticker is WM. As the old saying goes, your trash is my treasure, and we certainly produce a lot of trash here, but weights management, they own or operate the largest network of landfills in the US and Canada with 262 sites, making it the top dog. They also benefit from a growing recycling segment, renewable energy segment, and healthcare solutions business, too. Because you remember they just acquired Stericycle last year, I think, given the nature of the market there, trash is pretty reliable. I think holding onto this one for a decade or longer makes a lot of sense for investors.

Travis Hoium: Dan, what do you think about investing in garbage?

Dan Caplinger: Garbage isn’t going anywhere, gang. We’re not going to stop making it. It’s going to be something that we’re going to have to deal with forever.

Jason Moser: As the kids say, Dan, it true.

Travis Hoium: Dan, Rubrik or Waste Management, which one is going on your watches?

Dan Caplinger: Like I said, garbage ain’t going anywhere. We’re going to go Waste Management. I like that dividend, too.

Travis Hoium: We are out of time this week. Thank you for listening to Motley Fool Money. We’ll see you here tomorrow.

NuScale Power (SMR -8.95%) stock has had a breakout year. Shares are up more than 170% since the start of 2025. It hasn’t been a smooth ride for shareholders, though. NuScale stock has plunged about 40% twice just since January.

This week was another turbulent period for the stock. As of late Thursday, NuScale Power shares are 15% off this week’s highs, yet still up by 24.2% since last Friday’s close, according to data provided by S&P Global Market Intelligence.

Image source: Getty Images.

NuScale Power’s Trump tailwind

NuScale has been a big beneficiary of what it calls “multi-billion dollar federal support.” Several executive orders signed by President Trump earlier this year have boosted the nuclear power sector. Even prior to the current Trump administration, bipartisan passage of the ADVANCE (Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy) Act of 2024 has helped streamline approvals by the National Regulatory Commission for faster deployment of nuclear power projects.

This week another federal department spurred investors to jump into NuScale Power stock. The U.S. Army announced the launch of the Janus Program. The initiative is meant to fast-track the installation of commercially owned and operated small nuclear reactors to provide energy to domestic military installations.

Investors should be wary of jumping into NuScale stock after this week’s surge, though. While it has just begun generating revenue from a Romanian power project, investors have pushed its enterprise value to over $6.5 billion. Consider that revenue for the second quarter was just $8.1 million. Investors who believe in the future of modular nuclear reactors should still consider it a speculative investment.

On October 16, 2025, Collar Capital Management, LLC disclosed a new position in Salesforce (CRM 3.83%), acquiring 14,161 shares in a trade estimated at $3.36 million as of September 30, 2025.

What happened

According to a filing with the U.S. Securities and Exchange Commission (SEC) dated October 16, 2025, Collar Capital Management, LLC initiated a new position in Salesforce, purchasing approximately 14,161 shares. The estimated value of the acquisition was $3.36 million as of September 30, 2025. This transaction brought the fund’s total number of reportable positions to 71.

What else to know

This new $3.36 million position accounts for 2.36% of the fund’s $142.14 million in reportable U.S. equity holdings as of September 30, 2025.

Top holdings after the filing:

NASDAQ:MSTR: $7.33 million (5.2% of AUM) as of September 30, 2025

NASDAQ:TSLA: $7.19 million (5.1% of AUM) as of September 30, 2025

NASDAQ:MU: $5.15 million (3.6% of AUM) as of September 30, 2025

NASDAQ:COIN: $4.96 million (3.5% of AUM) as of September 30, 2025

NASDAQ:AAPL: $4.85 million (3.4% of AUM) as of September 30, 2025

As of October 15, 2025, Salesforce shares were priced at $236.58, down 17.95% over the past year and underperforming the S&P 500 by 32.23 percentage points (source: FMP, 1-year price change: -17.95%, 1-year alpha vs S&P 500: -32.23%).

Company overview

Company snapshot

Salesforce offers a comprehensive suite of cloud-based solutions, including its Customer 360 platform, Sales, Service, Marketing, Commerce, Tableau analytics, MuleSoft integration, and Slack collaboration tools.

It serves a global customer base across industries including financial services, healthcare, and manufacturing.

The company generates revenue primarily through subscription-based software and professional services.

Salesforce is a leading provider of enterprise cloud software, enabling organizations to manage customer relationships and business processes at scale. Its platform-centric strategy and broad product ecosystem position it as a key player in digital transformation initiatives.

Foolish take

Collar Capital appears to be making a contrarian move with the customer relationship management (CRM) specialist. The stock has tumbled about  26% in 2025.

Salesforce wasn’t a holding for Collar Capital in the second quarter. After buying 14,161 shares in the third quarter, it’s the fund’s 13th largest holding.

Salesforce was the second largest new acquisition Collar Capital completed in the third quarter. It also acquired 12,590 shares of UnitedHealth Group worth about $4.3 million. UnitedHealth Group is now the fund’s sixth largest holding.

Salesforce’s investments in artificial intelligence are starting to pay off for investors. In its fiscal second quarter that ended July 31, 2025, Data Cloud and AI annual recurring revenue climbed over 120% year over year to $1.2 billion.

Success with its new AI tools encouraged management to raise expectations. Now, it expects operating cash flow in fiscal 2026 to rise by 12% to 13% year over year.

Glossary

AUM: Assets under management – The total market value of investments managed by a fund or investment firm.

Position: The amount of a particular security or asset held in a portfolio.

Reportable positions: Holdings that must be disclosed to regulators, typically due to size or regulatory requirements.

Stake: The ownership interest or share in a company or asset.

Filing: An official document submitted to a regulatory authority, often detailing financial or ownership information.

Alpha: A measure of an investment’s performance relative to a benchmark, indicating value added or lost.

TTM: The 12-month period ending with the most recent quarterly report.

Dividend yield: A financial ratio showing how much a company pays in dividends each year relative to its stock price.

Cloud-based solutions: Software and services delivered over the internet rather than installed locally on computers.

Platform-centric strategy: A business approach focused on building and expanding a central technology platform for multiple products or services.

Shares of Standard Lithium (SLI 12.79%) jumped sharply today, surging 25% in early-morning trading and still holding up about 15% through 11:30 a.m. ET Thursday. And, it isn’t about tariffs or trade wars or even lithium prices today.

Standard Lithium is yet to start commercial production, but it has just hit a major milestone that moves it closer to the goal.

Image source: Getty Images.

Standard Lithium inches closer to first production

Standard Lithium is still in the pre-production stage. Its flagship projects are located in the lithium-brine-rich resource, the Smackover Formation, which extends from central Texas to the Florida panhandle. Standard Lithium is focused on projects in South-West Arkansas (SWA) and East Texas within the Smackover Formation.

While the company is still exploring East Texas and has only filed an initial resource estimate for the deposit, the SWA project is in the advanced stages now.

Standard Lithium is jointly developing SWA with Equinor (EQNR -0.61%), with Standard Lithium owning a 55% stake. On Oct. 14, it filed a definitive feasibility study (DFS) for the project, outlining an annual production capacity of 22,500 tonnes of battery-grade lithium carbonate over a 20-year lifespan.

A DFS is the cornerstone for a mine, as it confirms its commercial viability.

In other words, it is now proven that Standard Lithium can economically mine lithium from SWA and, therefore, move on to the nest stage of raising funds to start the production process. So it’s a major milestone for the company and explains why the lithium stock is flying higher.

Time to buy Standard Lithium stock hand over fist?

Though the DFS sets the stage for commercial extraction of lithium from SWA, it’s still a time-consuming process.

Standard Lithium is estimating a 34-month timeline, from construction to the start of commercial operations. So if construction begins in early 2026, the earliest expected date for first commercial production is around the end of 2028, provided Standard Lithium can secure capital, finalize the technical plans, and start and complete construction at the project on time.

Keep in mind that Standard Lithium stock has already doubled within just one month and has surged over 300% so far in 2025, as of this writing. However, that rally was largely fueled by speculation of a possible U.S. government stake.

Retirement can be incredibly expensive, and with many Americans’ finances stretched thin right now, it can be tough to save anything at all for the future.

Investing in the stock market is one of the most effective ways to grow your savings, and you don’t need a lot of cash to get started. In fact, it’s possible to retire with $1 million or more with just $10 per day. Here’s how.

Building long-term wealth in the stock market

Investing doesn’t have to mean spending countless hours researching and building a portfolio full of individual stocks. Contributing to your 401(k) or IRA can be a more approachable way to invest, and you can earn far more with this strategy than stashing your spare cash in a savings account.

Image source: Getty Images.

While investing can seem daunting and risky, it’s safer than you might think. Mutual funds and index funds can carry less risk than many other types of investments, and depending on where you buy, they can also be more protected against market volatility.

Whether you’re investing in a 401(k), IRA, or other type of retirement account, consistency is key. These types of investments thrive over decades thanks to compound earnings, as you earn gains on your entire account balance rather than just the amount you’ve invested.

Over time, compound earnings can have a snowball effect on your savings. The more you earn on your investments, the greater your account balance will grow, and you’ll earn even more. By giving your money as much time as possible to build, you can accumulate $1 million or more while barely lifting a finger.

Turning $10 per day into $1 million or more

Exactly how much you can earn in the stock market will depend on where you invest, but historically, the market itself has earned an average rate of return of around 10% per year over the last 50 years.

That’s not to say you’ll necessarily earn 10% returns every single year. Some years, you’ll earn much higher-than-average returns — like in 2024, for example, when the S&P 500 earned total returns of more than 23%. Other years, though, you’ll earn lower or even negative returns. Over decades, those ups and downs have historically averaged out to roughly 10% per year.

Let’s say your investments are in line with the market’s long-term performance, earning returns of 10% per year, on average. If you were to invest $10 per day — or around $300 per month — here’s approximately how much you could accumulate over time.

Data source: Author’s calculations via investor.gov.

In this scenario, it would take just over 35 years to reach the $1 million mark. But if you have even a few extra years to invest or can afford to contribute more than $10 per day, you can earn exponentially more in total.

For example, say that you can afford to invest $15 per day, or roughly $450 per month. If you’re still earning an average annual return of 10%, those contributions would add up to more than $2.3 million after 40 years.

No matter how much you can contribute each day or month, getting started investing as early as possible is key. The more consistently you invest, the easier it will be to retire a millionaire.

Image source: The Motley Fool.

Date

Thursday, Oct. 16, 2025 at 9:00 a.m. ET

Call participants

Chairman and Chief Executive Officer — Alan Schnitzer

Chief Financial Officer — Dan Frey

President, Business Insurance — Greg Toczydlowski

President, Bond & Specialty Insurance — Jeffrey Klenk

President, Personal Insurance — Michael Klein

Senior Vice President, Investor Relations — Abbe Goldstein

Need a quote from a Motley Fool analyst? Email [email protected]

Takeaways

Core Income — $1.9 billion in core income, or $8.14 per diluted share, driven by underwriting gains and increased investment income.

Return on Equity — Core return on equity was 22.6% for the quarter; trailing twelve-month core return on equity at 18.7%.

Underwriting Income — $1.4 billion pretax, doubling compared to the prior-year quarter, aided by reduced catastrophe losses and a 1.7-point improvement in the underlying combined ratio to 83.9%.

Net Investment Income (After Tax) — $850 million, a 15% year-over-year increase, driven by fixed income portfolio growth and higher yields.

Net Written Premiums — $11.5 billion in net written premiums, with Business Insurance at $5.7 billion (up 3%), Bond & Specialty at $1.1 billion, and Personal Insurance at $4.7 billion.

Segment Combined Ratios — Business Insurance: 92.9% (88.3% underlying); Bond & Specialty: 81.6% (85.8% underlying); Personal Insurance: 81.3% (77.7% underlying).

Shareholder Capital Return — $878 million returned, with $628 million in share repurchases and $250 million in dividends.

Adjusted Book Value Per Share — Adjusted book value per share was $150.55 at quarter end, up 15% from a year earlier.

Expense Ratio — 28.6% (year-to-date 28.5%), with management maintaining a 28% target for both 2025 and 2026.

Catastrophe Losses — $42 million pretax, described as “benign,” driven largely by tornado and hail events in the Central U.S.

Net Favorable Prior Year Reserve Development (PYD) — $22 million pretax (includes $277 million asbestos charge in Business Insurance, offset by favorable PYD in other lines).

Operating Cash Flow — Record $4.2 billion, with holding company liquidity of $2.8 billion at quarter end.

Share Repurchase Outlook — Management expects Q4 repurchases to reach about $1.3 billion, with a total of approximately $3.5 billion projected over Q3 2025 through Q1 2026, equating to a 5% reduction in share count.

Business Insurance Pricing Metrics — Renewal premium change (RPC) of 7.1% segment-wide, increasing to 9% ex-property; renewal rate change of 6.7%; retention at 85%.

Bond & Specialty Insurance — Segment retention of 87% in management liability, renewal premium change of 3.7% in domestic management liability, and a 40% increase in new lines of business sold to existing customers (private and nonprofit).

Personal Insurance Homeowners Metrics — Renewal premium change at 18%, expected to decrease to single digits in early 2026 as insured values align with replacement costs; retention at 84%.

Personal Insurance Auto Metrics — Combined ratio of 84.9%, underlying combined ratio of 88.3%, auto new business premium up year-over-year for the fourth consecutive quarter; retention at 82%.

Investment Portfolio Update — Portfolio grew by approximately $4 billion; more than 90% in fixed income with an average credit rating of AA; net unrealized investment loss narrowed from $3 billion to $2 billion after tax.

Debt Issuance — $1.25 billion issued (split between $500 million ten-year and $750 million thirty-year notes) for ordinary capital management.

Technology Investment — $13 billion invested since 2016 in technology, enabling a 300-basis-point reduction in expense ratio and access to over 65 billion clean data points to power AI and analytics initiatives, as disclosed by management.

Summary

Travelers (TRV -3.30%) reported substantial earnings growth, citing record profitability driven by improved underwriting and investment performance. Management highlighted excess capital and liquidity, with plans to accelerate share repurchases through Q1 2026 and indicated additional buybacks linked to the Canadian operations sale, specifically referencing a three-quarter period. The call outlined targeted underwriting strategies, with disciplined risk selection in property and actions to optimize exposure in high-catastrophe geographies. The company emphasized advancements in technology and AI, quantifying its scale, data advantage, and focus on sustainable cost improvements and operating leverage. Leadership reaffirmed a measured approach to capital deployment, prioritizing technology and potential M&A before returning excess to shareholders.

Chairman Schnitzer said, “we anticipate a higher level of share repurchase over the next couple of quarters,” underscoring shareholder return as a key use of surplus capital.

CFO Frey stated, “Our outlook for fixed income NII, including earnings from short-term securities, has increased from the outlook we provided a quarter ago,” signaling rising yield expectations for the investment portfolio.

President Klein provided forward guidance: We expect RPC to remain elevated and then drop into single digits beginning in early 2026.

President Toczydlowski disclosed middle market new business of $391 million—its highest third-quarter result—up 7% from the prior year, despite selective property underwriting and competitive market dynamics.

Industry glossary

Renewal Premium Change (RPC): The percentage change in premium for renewed policies, reflecting both pricing actions and changes in exposure or insured value.

Combined Ratio: A measure of underwriting profitability, calculated by summing incurred losses and expenses as a percentage of earned premiums; a ratio below 100% indicates underwriting profit.

PYC/PYD (Prior Year Reserve Development): The adjustment (favorable or unfavorable) to reserves set aside in prior periods for claims, as new information becomes available.

Retention: The proportion of policies or premium renewed with the company, stated as a percentage.

Middle Market: The business segment serving mid-sized commercial insurance customers, distinct from small businesses (“Select”) and large national accounts.

Travis: Travelers’ proprietary digital experience platform for distribution partners.

Full Conference Call Transcript

Alan Schnitzer chairman and CEO Dan Frey CFO and our three segment presidents. Greg Toczydlowski of Business Insurance, Jeff Klenk of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take questions before I turn the call over to Alan, I’d like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward looking statements. The company cautions investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance.

Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our earnings press release and in our most recent 10-Q and 10-Ks filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the Investors section on our website. And now I’d like to turn the call over to Alan Schnitzer.

Alan Schnitzer: Thank you, Abby. Good morning, everyone, and thank you for joining us today. We are pleased to report excellent third-quarter results. We earned core income of $1.9 billion or $8.14 per diluted share. Our return on equity for the quarter was 22.6%, bringing our core return on equity for the trailing twelve months to 18.7%. Very strong underwriting results and higher investment income drove the bottom line. Underwriting income of $1.4 billion pretax more than doubled compared to the prior year quarter, benefiting from both the lower level of catastrophe losses and higher underlying underwriting income. The underlying result was driven by higher net earned premiums and an underlying combined ratio that improved 1.7 points to an exceptional 83.9%.

Underwriting income was higher in all three segments. Our high-quality investment portfolio also continued to perform well, generating after-tax net investment income of $850 million for the quarter, up 15%, driven by strong and reliable returns from our growing fixed income portfolio. Our underwriting and investment results, together with our strong balance sheet, enabled us to return almost $900 million of capital to shareholders during the quarter, including $628 million of share repurchases. At the same time, we continue to make strategic investments in our business. Even after this deployment of capital, adjusted book value per share was up 15% compared to a year ago.

With strong results over the past year and a particularly light cat quarter, we have a higher than usual level of excess capital and liquidity. Consequently, we anticipate a higher level of share repurchase over the next couple of quarters. Dan will have more to say about that in a minute. Turning to the top line, we grew net written premiums to $11.5 billion in the quarter. In business insurance, we grew net written premiums by 3% to $5.7 billion, led by 4% growth in our domestic business. Excluding the property line, we grew domestic net written premiums in the segment by more than 6%. The declining premium volume in property continues to be a large account dynamic.

In fact, we grew property in both middle market and small commercial. We’ve seen this dynamic in the large property market before, and we won’t compromise our underwriting discipline. Over time, particularly as catastrophic events inevitably unfold, the value of that discipline and the cost to those who abandon it will become unmistakable. Renewal premium and change in business insurance was 7.1%, driven by continued historically high RPC in our middle market and select business businesses. Excluding the property line, renewal premium change in the segment was a very strong 9%, and renewal rate change was a very strong 6.7%. Greg will share additional detail by line. Retention in the segment was 85%.

Given the high quality of the book, we were very pleased with that result. In Bond and Specialty Insurance, we grew net written premiums to $1.1 billion with higher renewal premium change and continued strong retention of 87% in our high-quality management liability business. Net written premiums in our market-leading surety business remained strong. In personal insurance, written premiums were $4.7 billion with strong renewal premium change in our homeowners business. You’ll hear more shortly from Greg, Jeff, and Michael about our segment results. As we head toward the end of the year, our planning for 2026 is well underway. As always, that process involves assessing the environment ahead.

There are uncertainties out there: economic, political, geopolitical, not to mention the loss environment. We are very confident that we’re built and very well positioned for whatever lies ahead. We’re operating from a position of considerable strength. Profitability is strong, reflecting our leading underwriting expertise and the operating leverage we’ve built through a sustained focus on productivity and efficiency. Our competitive advantages have never been stronger or more relevant. Strong underwriting is the flywheel that sets everything in motion. Our premium growth at attractive margins has generated strong cash flow, which enables us to make strategic investments in our business, return excess capital to shareholders, and grow our investment portfolio.

Since 2016, we have successfully invested $13 billion in technology, returned more than $20 billion of excess capital to our shareholders, and grown our investment portfolio by nearly 50% to more than $100 billion. Scale matters, increasingly so. We have the scale to win in an environment where technology and AI will continue to segment the marketplace. We have a track record of identifying the right strategic priorities and driving value from them. You can see that in the 300 basis point reduction we’ve achieved in our expense ratio since 2016, even while we were significantly increasing our overall technology spend.

Importantly, our size gives us the data to power AI, creating a virtuous cycle: better insights, better decisions, better outcomes, more resources to invest. For example, our long-time focus on organizing and curating data has given us access to more than 65 billion clean data points from decades of history across multiple business lines. We leverage that to sharpen our underwriting and shape our claim strategies. With the vast majority of our business in North America, we hold a leading position in the largest and most stable insurance market in the world, an advantage that insulates us from much of the risk arising from the economic instability and geopolitical uncertainty around the globe.

Our fortress balance sheet and exceptional cash flow provide us with the financial strength to invest consistently in the business regardless of the external conditions. Our financial strength also enables us to manage comfortably through large loss events like the January California wildfires. When it comes to the loss environment, from weather volatility to the impact of social inflation on casualty lines, no one is better positioned. Diversification provides powerful protection. In fact, our business mix produces a consolidated loss ratio that’s actually less volatile than the loss ratio of our least volatile segment. That’s the power of a balanced and diversified portfolio. Equally important is our demonstrated ability to confront the loss environment head-on.

We have the data, the analytics, and the discipline to establish reserves and loss picks appropriately and generally ahead of the market. That matters because until you have an accurate view of the loss environment, your risk selection, underwriting, and claim strategies are all operating with the wrong inputs. Since our early identification of the acceleration of social inflation in 2019, we’ve grown the business and delivered significantly improved margins. Getting an accurate and timely view of the loss environment isn’t just about the balance sheet. It’s foundational to running the business effectively. Our internally managed investment portfolio was another source of strength.

Our disciplined focus on achieving appropriate risk-adjusted returns has served us exceptionally well through various markets, especially during periods of market turmoil. More than 90% of our portfolio is in fixed income with an average credit rating of AA. We’re highly selective. We don’t reach for yield. We hold the vast majority of our fixed income securities to maturity. And we carefully coordinate the duration of our assets and liabilities. The track record speaks for itself. Our default rates during the most challenging environments over the past two decades were a fraction of industry averages. This consistency comes from a world-class investment team, with extraordinary tenure and a shared long-term perspective.

In short, the franchise we’ve built, the capabilities we’ve developed, and our depth of expertise create advantages that are durable across operating environments. Before I wrap up, I’ll share that we’re just back from one of the industry’s premier conferences, where we had the opportunity to meet with dozens of our key agents and brokers, who collectively represent a substantial amount of our business. We left as convinced as ever that our position with the independent distribution channel is an unmatched strategic advantage. We heard clearly that our strategic investments are resonating and that looking ahead, we’re focused on the right priorities to extend that advantage. I want to acknowledge and thank all of our distribution partners.

I also want to reiterate our unwavering commitment to being an indispensable partner for them and the undeniable choice for their customers. To sum it up, we’re very well positioned and very optimistic about the road ahead. And with that, I’m pleased to turn the call over to Dan.

Dan Frey: Thank you, Alan. In the third quarter, we once again delivered excellent financial results on a consolidated basis and in each of our three segments. Core income for the quarter of $1.9 billion resulted in core return on equity of 22.6%, reflecting both excellent underwriting results and strong investment income. We generated higher levels of written premium and earned premium while delivering excellent combined ratios on both a reported and underlying basis. At 83.9%, the underlying combined ratio marked its fourth consecutive quarter below 85. The combination of higher premiums and the excellent underlying combined ratio led to an 18% increase in after-tax underlying underwriting income, which surpassed $1 billion for the fifth consecutive quarter.

The expense ratio for the third quarter was 28.6%, bringing the year-to-date expense ratio to 28.5%. We continue to expect an expense ratio of around 28% for the full year 2025 and expect to manage to that level again in 2026. Catastrophe losses in the quarter were fairly benign at $42 million pretax, consisting mainly of tornado hail events in the Central United States. Turning to prior year reserve development, we had total net favorable development of $22 million pretax. In Business Insurance, the annual asbestos review resulted in a charge of $277 million. Excluding asbestos, business insurance had net favorable PYD of $152 million driven by continued favorability in workers’ comp.

In Bond and Specialty, net favorable PYD was $43 million pretax with favorability in Fidelity and Surety. Personal insurance had net favorable PYD of $104 million pretax driven by favorability in auto. After-tax net investment income of $850 million increased by 15% from the prior year quarter. Fixed maturity NII was again the driver of the increase, reflecting both the benefit of higher invested assets and higher average yields. Returns in the non-fixed income portfolio were also up from the prior year quarter. During the quarter, we grew our investment portfolio by approximately $4 billion. Our outlook for fixed income NII, including earnings from short-term securities, has increased from the outlook we provided a quarter ago.

And we now expect approximately $810 million after tax in the fourth quarter. For 2026, we expect more than $3.3 billion, with quarterly figures starting at around $810 million in Q1 and growing to around $885 million in Q4. New money rates as of September 30 are roughly 70 to 75 basis points above the yield embedded in the portfolio. Turning to capital management. Operating cash flows for the quarter were a new record at $4.2 billion, and we ended the quarter with holding company liquidity of approximately $2.8 billion.

Interest rates decreased during the quarter, and as a result, our net unrealized investment loss decreased from $3 billion after tax at June 30 to $2 billion after tax at September 30. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $150.55 at quarter end, up 8% from year end and up 15% from a year ago. Also of note for Q3, we issued $1.25 billion of debt back in July, with $500 million of ten-year notes and $750 million of thirty-year notes. This was simply ordinary course capital management, maintaining a debt-to-capital ratio in our target range as we continue to grow the business.

Sticking with the theme of capital management, we returned $878 million of our capital to shareholders this quarter, comprising share repurchases of $628 million and dividends of $250 million. As Alan shared, our very strong earnings over the past year have provided us with an elevated level of capital and liquidity well in excess of what we had planned to use for investment and to support continued growth. As a result, we expect to increase the level of share repurchases in the fourth quarter to roughly $1.3 billion.

Also, keep in mind that we previously shared our plan to deploy about $700 million from the sale of our Canadian operations, expected to close in early 2026, for additional share repurchases as well. So if we look across the three-quarter period from Q3 2025 through Q1 2026, our repurchases in Q3 combined with our current outlook for the next two quarters has us repurchasing a total of somewhere around $3.5 billion worth of our stock. Using the average share price over the past thirty days for purchases during the next two quarters, that would result in a reduction of our outstanding share count of about 5% in the nine-month period.

Of course, the actual amount and timing of repurchases will depend on a number of factors, including the timing of the closing of the transaction in Canada, actual quarterly earnings, and other factors we disclose in our SEC filings. Recapping our results, Q3 was another quarter of excellent underwriting profitability on both an underlying and as-reported basis, and another quarter of rising net investment income. These strong fundamentals delivered core return on equity of 22.6% for the quarter and 18.7% on a trailing twelve-month basis, and position us very well to continue delivering strong results in the future. And now for a discussion of results in Business Insurance, I’ll turn the call over to Greg.

Greg Toczydlowski: Thanks, Dan. Business Insurance had a very strong quarter, delivering a record third-quarter segment income of $907 million and an all-in combined ratio of 92.9%. The quarter reflected relatively benign catastrophes and the continued strong contribution from our exceptional underlying underwriting results. This quarter’s underlying combined ratio of 88.3% marked the twelfth consecutive quarter where we’ve produced an underlying combined ratio below 90%. We’re pleased that our ongoing strategic investments have contributed to this sustained level of profitability. In particular, through meaningful advancements in data and analytics, we continue to advance our underwriting tools.

One specific highlight is the development and utilization of sophisticated models that derive risk characteristics, refine technical pricing, and summarize historical and modeled loss experience, all of which is provided to our underwriters at the point of sale. Moving to the top line, our net written premiums increased to an all-time third-quarter high of $5.7 billion. We grew our leading middle market and select businesses by 7% and 4%, respectively. These two markets make up 70% of the net written premiums in business insurance. We saw a decline in net written premiums in National Property and Other, which, as you heard from Alan, reflects our disciplined execution in terms of risk selection, pricing, and terms and conditions.

As for production across the segment, pricing remained attractive with renewal premium change just over 7%. Renewal premium change remains strong in select and middle market. From a line of business perspective, renewal premium change was positive in all lines, double digits in umbrella, CMP, and auto, and up from the second quarter or stable in all lines other than property. As you heard from Alan, excluding the property line, renewal premium change in this segment was 9%. Retention remained excellent at 85%, and new business of $673 million was about flat to a very strong prior year level. We’re very pleased with these production results and particularly our field’s execution for our proven segmentation strategy.

Across the book, pricing and retention results this quarter reflect excellent execution, aligning price, terms, and conditions with environmental trends for each lot. As for the individual businesses, in select, renewal premium change of 10.8% was about flat with the second quarter. Retention ticked up as expected as we near completion of our targeted CMP risk return optimization efforts. And lastly, for Select, we generated new business of $134 million, up 3% over the prior year. As we’ve mentioned previously, we’ve made meaningful strategic investments in this market in both product and user experience.

Our new BOP and auto products have been well received in the market, and we’re pleased that the industry-leading segmentation contained in both products is contributing to profitable growth. We’re also very pleased with the success of Travis, our digital experience platform for our distribution partners. As we continue our strategic rollout, Travis is already producing over 1 million transactions annually. In our core middle market business, renewal premium change of 8.3% was also about flat sequentially from the second quarter. Price increases remain broad-based as we achieved higher prices on more than three-quarters of our middle market accounts. And at the same time, the granular execution was excellent, with meaningful spread from our best-performing accounts to our lower-performing accounts.

We’re pleased that retention of 88% remained exceptional given the level of price increases we achieved. And finally, new business of $391 million was our highest ever third-quarter result and up 7% over the prior year. We’re pleased with the new business risk selection and strength of pricing and overall with the combination of strong returns and customer growth in middle market. On a strategic note for middle market, we continue to enhance our industry-leading underwriting workstation with models that assess new business opportunities for risk characteristics with the propensity to produce the highest level of lifetime profitability.

This information helps our field organization focus on the highest priority opportunities, resulting in a greater likelihood of success in winning more accounts that contribute to strong margins. To sum up, Business Insurance had another terrific quarter. We’re pleased with our execution in driving strong financial and production results while continuing to invest in the business for long-term profitable growth. With that, I’ll turn the call over to Jeff.

Jeffrey Klenk: Thanks, Greg. Bond and Specialty delivered very strong third-quarter results. We generated segment income of $250 million and an outstanding combined ratio of 81.6%, nearly one point better than the prior year quarter. The strong underlying combined ratio of 85.8% drove very attractive returns in the segment. Turning to the top line, we grew net written premiums in the quarter to $1.1 billion. In our high-quality domestic management liability business, renewal premium change improved to 3.7% while retention remained strong at 87%. These results reflect our intentional and segmented initiatives to improve pricing in certain lines, with a focus on employment practices liability, cyber, and public company D&O.

We’re pleased with the strong underlying pricing segmentation achieved by our outstanding field organization on both renewal and new business, enabled by our advanced analytics and sophisticated pricing models. New business was lower than in 2024, as Corvus production was reflected as new business in the prior year quarter and is now mostly reflected as renewal premium. Comparisons to prior year new business levels will be similarly impacted for the remainder of the year. Outside of the Corvus impact, we’re pleased with early returns on multiple tech and operational investments we’ve made to drive account growth. For example, in our private and nonprofit business, we’re leveraging predictive analytics and AI to enhance our customer segmentation and sales effectiveness.

We’re pleased that these initiatives drove a 40% increase in new lines of business sold to existing customers as compared to the prior year quarter. Turning to our market-leading surety business, where production can be lumpy based on the timing of bonded construction projects, net written premiums remain strong relative to the record high quarter in the prior year. This reflects our customers’ continued confidence in our industry-leading surety expertise and value-added service offerings, as well as benefits from digital investments we’ve made to enhance distribution experiences in our small commercial surety business.

So we’re pleased to have once again delivered strong results this quarter, driven by our continued underwriting and risk management diligence, excellent execution by our field organization, and the benefits of our market-leading competitive advantages. And with that, I’ll turn the call over to Mike.

Michael Klein: Thanks, Jeff, and good morning, everyone. In Personal Insurance, we delivered third-quarter segment income of $807 million, an excellent result that reflects the continued impact of our disciplined approach to selecting, pricing, and managing risks. The combined ratio of 81.3% improved 11 points relative to the prior year quarter, driven primarily by lower catastrophe losses and a lower underlying combined ratio. The underlying combined ratio of 77.7% was five points better compared to the prior year quarter, driven by continued improvement in both homeowners and other and auto.

Net written premiums of $4.7 billion in the third quarter reflect our continued focus on improving profitability in homeowners while seeking growth in auto as we execute our strategies to deliver appropriate risk-adjusted returns across the portfolio. The ceded premium impact of the enhanced personal insurance excess of loss reinsurance program we announced last quarter reduced net written premium growth in the quarter by one point as the full year’s worth of ceded premium was booked in the third quarter. In auto, the third-quarter combined ratio was very strong at 84.9%, reflecting lower catastrophe losses, a strong underlying combined ratio, and favorable net prior year development.

The underlying combined ratio of 88.3% improved by 2.9 points compared to the prior year quarter. The improvement was driven by favorable loss experience in bodily injury and, to a lesser extent, vehicle coverages. Similar to last year’s third-quarter result, this quarter’s underlying combined ratio included a two-point benefit related to the re-estimation of prior quarters and the current year. The year-to-date underlying combined ratio was also 88.3%, reflecting sustained profitability in an auto book that is larger than it was five years ago, both in terms of premium dollars and policy count.

Looking ahead to 2025, it’s important to remember that the fourth-quarter auto underlying loss ratio has historically been six to seven points above the average for the first three quarters because of winter weather and holiday driving. In Homeowners and Other, the third-quarter combined ratio of 78% improved by 13.5 points compared to the prior year quarter, primarily because of lower catastrophe losses and improvement in the underlying combined ratio. Net prior year development was favorable but lower compared to the prior year. The underlying combined ratio of 68% improved by almost 6.5 points compared to the prior year quarter. The year-over-year favorability in homeowners was primarily related to the benefit of earned pricing, as well as favorable non-catastrophe weather.

Overall, these outstanding results reflect favorable weather conditions throughout the third quarter, along with our actions to manage exposures in high catastrophe risk geographies to help optimize risk and reward. Turning to production, we’re making progress in positioning our diversified portfolio to deliver long-term profitable growth. While our production results don’t quite show it yet, we’re confident that the actions we’re taking will build momentum toward this objective. In domestic auto, retention of 82% remained consistent with recent quarters. Renewal premium change of 3.9% continued to moderate and will continue to decline in the fourth quarter, reflective of improved profitability and our focus on generating growth.

Auto new business premium was up year over year for the fourth consecutive quarter, as new business momentum continued in states less impacted by our property actions. In Homeowners and Other, retention of 84% remained relatively consistent with recent quarters. Renewal premium change remained strong at 18%, as we continue to align replacement costs with insured values. We expect RPC to remain elevated in the fourth quarter and then drop into single digits beginning in early 2026 as values will have largely aligned with replacement costs. We continued to execute actions to reduce exposure and manage volatility in high-risk catastrophe geographies in the quarter, causing further declines in property new business premium and policies in force.

Most of our property actions will be completed by the end of the year, at which point the downward pressure on both property and auto growth should begin to moderate. As we conclude this year and head into 2026, we’re focused on building momentum toward generating profitable growth.

To that end, we have a range of actions currently or soon to be in market, including the following: adjusting pricing, appetite, terms, and conditions to better reflect improved profitability in both Auto and Home; removing temporary binding restrictions and winding down some of our property new non-renewal actions in certain geographies; appointing new agents and partnering with existing agents to consolidate books of business; continuing to modernize our specialty products and platforms; and investing in artificial intelligence and digitization to deliver better experiences for our agents and customers. These messages resonate as we share them in the marketplace, reinforcing our commitment to being the undeniable choice for consumers and an indispensable partner for our agents.

To sum up, we delivered terrific segment income as our team continued to invest in capabilities and deliver value to customers and agents. These results position us well to build on a long track of profitably growing our business over time. Now I’ll turn the call back over to Abby.

Abbe Goldstein: Thanks, Michael. And with that, we’re ready to open up for Q&A.

Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of Gregory Peters from Raymond James.

Gregory Peters: Well, good morning, everyone. Boy, you’re producing great bottom line results. Kind of surprising the stock’s down as much as it is on the open. I think it’s probably a reflection of the top line. And I know you spoke in detail about the different headwinds that you’re facing, whether it’s in business insurance, the property, Corvus and Bond and Specialty, or the underwriting actions in personal insurance that have affected your top line. When you go beyond the balance of this year and you start thinking at 26%, 27%, what does the Travelers business model look like in terms of top line growth on a consolidated basis? And how are you thinking about them?

Alan Schnitzer: Hey, good morning, Greg. It’s Alan. Thanks for the thoughts and the question. So we’re not going to give outlook on the top line, as you can imagine. But clearly, we understand that in order to meet our objective of delivering industry-leading return on equity over time, we need to grow over time. So it’s a priority for us. And if you look back over the last couple of years, we’ve been very successful with that. In our, you know, we, as you noted by segment, we’ve talked about what’s driving the results this quarter. But I guess what I would say is we are very confident that we’ve got the right value proposition.

We’re investing in the right capabilities to make sure we’re positioned to grow this business. So we feel very good about the execution in the quarter. We feel very good about what we’ve accomplished in recent periods, and we feel very good about the outlook.

Gregory Peters: Okay. The other I seem to ask this like every other quarter on the technology front, but you keep bringing it up, talked about the digital initiative you have going on in business insurance. Talk about some of the stuff going on in personal insurance. I think one of your peers came out earlier in the third quarter and talked about the potential of artificial intelligence to deliver human resource savings and headcount reductions over time of maybe up to 20%.

I’m just curious if we can just go back to, I know you’ve got best use case on technology and AI, but go back to how you’re thinking about this in the three to five-year period in terms of what it might mean to your expense ratio?

Alan Schnitzer: Yes. So Greg, I’ll tell you, we are very bullish on AI, and we’re leaning into it. You know, we’re spending, you know, more than a billion dollars a year on technology. A lot of that is focused on AI. We expect significant benefits from it. And I think we’ve got a long track record, as I said in my prepared remarks, of identifying the right strategic initiatives and driving value from them. We’re not going to tell you what our plan is for the expense ratio beyond next year, but I’ll also tell you that more than our focus is on the expense ratio, it’s on creating operating leverage.

And that’s what gives us the flexibility to deploy those gains however we want to deploy them. And so maybe it’ll be efficiency, maybe it’ll be productivity, but we are very bullish about the opportunity for investments that we have underway. We’re very bullish about the data we have to fuel the AI. And think that it’ll make a big difference in the years to come.

Gregory Peters: Got it. Thanks for the answers.

Operator: Thank you. Your next question comes from the line of David Motemaden from Evercore. Your line is open.

David Motemaden: Hey, thanks. Good morning. I had a question. You gave the RPC and rate ex property. I was wondering, that’s a new disclosure. Wondering if you can just talk about what that was last quarter versus this quarter and then maybe zooming in specifically in business insurance. What do you guys see in property pricing outside of national property this quarter?

Greg Toczydlowski: Yes, certainly. Well, on the first one, David, it is a metric that we’re not going to give every quarter, and we’re not going to go back and give that. We offered it up this quarter just to give you some color and let you know how much property the leverage it had on the pricing for this particular quarter. As we’ve shared with you, the large property has definitely been a market where typically leads in terms of when softening may happen, and it certainly has been the case over the last couple of quarters. In the select and middle market, to directly answer your question, we continue to get positive price increases there.

But it’s certainly, we’re feeling some deceleration. But again, certainly still seeing positive increases.

David Motemaden: Got it. Thank you. And then maybe this is just sort of related to your answer there. But on business insurance premium growth by market. So it’s good to see the tick up in select year over year and national accounts, you know, sort of we know the story there. But I’m surprised we saw the deceleration in growth in middle market. I was hoping you could just impact that a little bit. Is that just sort of the property dynamics you just mentioned?

Greg Toczydlowski: Yes. And if you’re looking at overall quarter of middle market, I think you’re reading that wrong. The quarter alone was up for middle market 7% relative to year to date of five.

David Motemaden: Got it. Yeah. No, I was just looking at the because I know 1Q had the reinsurance dynamic. So I was just comparing it to 2Q, the 10 decelerating to seven. That’s what I was looking at there. But, no, appreciate the answer.

Operator: Your next question comes from the line of Mike Zaremski from BMO. Your line is open.

Michael Zaremski: Great. My first question is on the loss cost trend line. I know it’s not easy pinning a broad brush, but if we look at kind of your reserve release trend line, loss ratio trend line, we’re also adding IBNR. But a lot of good things going on. Curious if your view on loss cost inflation has changed at all or directionally, is it the I feel like you’ve only raised it over recent years. Over long periods of time. It flattening out? Thanks.

Dan Frey: Hey, Mike, it’s Dan. So another quarter of net favorable PYD despite the asbestos charge. I don’t really think you can put a trend on PYD. Really what matters for us is in aggregate across the enterprise is that favorable or unfavorable, and we’ve got now a very long track record of generally having that favorable. As it relates to loss trend, we haven’t explicitly commented on loss trend for a while because we think it’s just too narrow a way to look at the business in terms of what’s pure rate versus what’s some blended number of loss trend, but it hasn’t moved dramatically in recent periods. Alan’s talked about that in prior quarters.

We do take a look at it every quarter. Some lines do move up a little bit. Some lines do move down a little bit over time. But it’s been pretty stable for a while now. Mike, there was nothing in the quarter that particularly surprised us when it comes to loss activity.

Michael Zaremski: Okay, great. And my follow-up is honing in on the home segment. Maybe you need a comment on auto too since there’s a lot of bundle in there. But if we look at the RPC trends, they remain very high on I’m assuming there’s terms and conditions changes that you’re incorporating in kind of those double-digit RPC increases. But the last few years haven’t been great for you all in the industry. Consensus kind of has you guys pegged at a 95 combined ratio for the foreseeable future in home. If you can kind of remind us what do we expect RPC to eventually fall? Are those terms and conditions changes going to help?

Is 95% the right combined ratio that you guys are targeting given how profitable auto is? Thanks.

Michael Klein: Sure. Thanks, Mike. It’s Michael. So just to unpack the RPC part of your question for starters, as I mentioned in my prepared remarks, RPC remains elevated. Again, it’s rate and exposure, right? So RPC remains elevated largely because we’re raising insured limits to keep up with rising replacement costs. And my point about RPC dropping to single digits in 2026 is we’ll have largely caught up in getting replacement costs in line with insured values. And so the change in RPC as we head into 2026 will really be those the premium impact from increasing coverage A, the dwelling limits on property coming back to more normal levels.

Yes, baked into RPC is also a reflection of a number of the other actions we’re taking on the book. I think increasing deductibles, particularly across the Midwest, think different strategies around targeted limits on how big a coverage A we’re going to write in some hail-prone geographies, other things like that are all rolled into that figure. And again, I think it’s just reflective of the actions that we’re taking to improve the profitability of that book. As respect to target combined ratio, we’re not going to really disclose the target combined ratio by line. We are certainly encouraged by the progress we’ve made, particularly in improving the underlying combined ratio in property.

It’s down period to period, quarter over quarter for something like the last ten or eleven quarters in a row. So it’s demonstrative of the progress that we’re making there. And again, continue to be pleased with our progress there.

Operator: Your next question comes from the line of Meyer Shields from KBW. Your line is open.

Meyer Shields: Great, thanks. Good morning. I don’t know if this is a question for Alan or Greg, but is there really a disentangling the how much of a property premium decline in BI is from nonrenewed business as opposed to accepting lower rates because you still have adequacy?

Alan Schnitzer: Meyer, I don’t think we’re gonna unpack that. Certainly not right here right now. I don’t think we’re gonna get into that level of detail. And I honestly, we don’t have that level of data at our fingertips right now.

Meyer Shields: Okay. Fair enough. Also, to talk a little bit, Michael talked about, I guess, book rolls in personal lines. Does that involve any changes to agency commissions? Or what other tools are you using to encourage that?

Michael Klein: Sure, Meyer. Thanks for the question. Yes. So typically, and again, book growth consolidations in the personal lines space are pretty much standard operating procedure. We had stepped away from them. The reason I mentioned it is because we had stepped away from them as we were working to improve profitability. And I think it’s an important point to recognize that we’re back actively engaged in the marketplace in those conversations with agents looking for situations where their book of business may be disrupted for one reason or another. It is fairly typical in a book consolidation scenario to offer enhanced commission on that book roll for the first term as that business comes over.

Operator: Your next question comes from the line of Tracey Banque from Wolfe Research. Your line is open.

Tracey Banque: Good morning. My first question is for Mike. I’m curious what you’re seeing that’s driving favorable loss experience in bodily injury. And, to a lesser extent, vehicle coverages?

Michael Klein: Tracy. Thanks for the question. I mean, really is a combination of favorable frequency in both bodily injury and physical damage losses, as well as continued moderation in severity again really across coverages.

Tracey Banque: Got it. And a follow-up on Dan’s comment about elevated level of capital liquidity. Driven by your earnings that’s well in excess of your investment needed to growth. As you know, capital is a big focus for me. And I’ve really not seen so much excess capital for the entire sector. Is it fair to assume that your excess capital position surpasses the buyback targets you shared and could we expect concurrent deployment of capital on the technology side and or M and A.

Dan Frey: Yes, Tracy, it’s Dan. So I think I understand the question. So I guess I’d start by saying, look, there’s no change at all to what has been now our long-standing capital management philosophy, which is we’ve got a business that’s generating terrific margins. We generate a lot of capital. We generate more than we need just to support the growth of the business. First objective for that excess capital is going to be to find a way to deploy it and generate a return. And so we’ll make all the technology investments that we think we can and should make. Always be open to M and A, open to any opportunity to generate returns on an excess capital.

Once we’ve exhausted all those opportunities, then it’s not our capital, it’s the shareholders we’re going to give it back through dividends and buybacks.

Tracey Banque: Got it. Thank you.

Operator: Your next question comes from the line of Robert Cox from Goldman Sachs. Your line is open.

Robert Cox: Hey, thanks. Good morning. Yes, just wanted to go back to the removal of the growth restrictions. It looks like a couple of parts of the business, CMP, within Select and then also in homeowners you give us a sense of how much business is being unlocked for growth here? And if easing those can result in a noticeable uplift in growth?

Greg Toczydlowski: Robert, this is Greg. I’ll start off and then Michael can talk about the PI. We’ve been talking about the select mix optimization for some time now. And as we begin to finalize some of those actions, you saw a slight tick up in our retention. We’re not really going to quantify what that means for overall growth, but that was the reason that we pointed out the slight pickup in retention.

Michael Klein: Yeah. And Robert, Michael, up here on the personal lines side. I think the important point to note in terms of the impact on growth in personal insurance as we relax those property restrictions as our goal is to leverage that property capacity to write package business. And so if you my suggestion, if you want to sort of dimensionalize it, is just look back historically at retention in new business levels in property and in auto. You can see that retention remains depressed right now given the actions we’re taking. Again, the property actions depressed retention in both lines.

And you can see particularly in property the new business levels are pretty significantly depressed relative to what they’ve run historically. And so those levers, I think, would give you a way to kind of dimensionalize it.

Robert Cox: Okay, great. Thanks for the color there. And then I just wanted to follow-up on the business insurance underlying loss ratio. When you think about the margin improvements during this year, are we seeing improved picks in casualty at all? Or is the improvement year to date largely been a shift lower in some of the shorter tail exposures?

Dan Frey: Hey, Rob, it’s Dan. Look, I think if you look at the improvement in you’re talking about business insurance specifically, right?

Robert Cox: Yes. Is that correct?

Dan Frey: Yes. I think the single biggest factor we’d say in terms of that sort of 50 basis point improvement on a year-to-date basis has been the continued benefit of earned price. So in the casualty lines especially, and we’ve talked about this a couple of times, we’re continuing to include some provision for a level of uncertainty in those lines that we think is going to serve us well in the long term as opposed to taking those picks down the improvement in the loss ratio. You have other things that impact every quarter too. Mix will change a little bit.

But headline number the main driver of the improvement year over year has been the continued benefit of earned price.

Robert Cox: Thank you.

Operator: Your next question comes from the line of Elyse Greenspan from Wells Fargo. Your line is open.

Elyse Greenspan: Hi, good morning. I guess I want to stick there with business insurance. So if we look I guess, just specifically at the underlying loss ratio that was stable year over year in the Q3. So I’m not sure if there were certain pushes and pulls that you want to point out specific to the third quarter or if maybe this quarter rate you know, earned rate, you know, got close to trend and that’s kind of what we’re seeing in the numbers. And just how do we think from here, you know, just given, you know, slowing pricing, which I know is mostly driven by fiber property, do we think about just the underlying loss ratio and BI?

Should we think about that starting to deteriorate as rate gets closer to trend?

Dan Frey: Yeah. Good morning, Elyse. Let’s just start with where the margins are in business. I mean, they are pretty spectacular margins. And I don’t think we’re to parse out that level of detail. We’re certainly not going to get into what the outlook for margins is. But I’ll tell you at these margins, we really like the margins and we really like the business that we’re putting on the books at these margins.

Elyse Greenspan: Okay. And then I guess, you know, my second question would be, I guess, maybe shifting to personal auto. Have you guys did you guys see any impact of tariffs at all in the quarter, whether it was September relative to July and August? And how are you guys currently thinking about a potential impact of tariffs on the margins in that business?

Michael Klein: Sure Elyse, it’s Michael. Thanks for the question. I would say we haven’t seen a ton of impact to date from tariffs. But our results for the third quarter do include a small impact from tariffs. That said, it’s well below the single-digit severity numbers that we discussed a couple of quarters ago. There certainly is the potential for that impact to grow the longer tariffs remain in effect. As you know, it’s a very fluid situation. Tariff changes weekly, daily, fairly frequently. So predicting is challenging, but we are keeping a very close eye on it. To your point, there are some external industries that show some moderate increases. Others look largely unaffected.

So we’re going to continue to closely monitor it. But there is a little bit of a provision in the third quarter results for tariff increases, but it’s not yet at the level that we had potentially forecast. And just to be clear, Michael, correct me if I’m wrong, we’ve got a provision in there because we expected that we might see it. We’re not really seeing it in any meaningful way.

Michael Klein: Yes. It’s significant. Again, we’re seeing it on the margins, and so we booked the provision for it. But again, well below the mid-single-digit level that we had described before.

Elyse Greenspan: Thank you.

Operator: Your next question comes from the line of Paul Newsome from Piper Sandler. Your line is open.

Paul Newsome: Good morning. Yesterday, Progressive gave us a little unpleasant news about their poor charge. Just curious if that is something that you’ve looked at yourself and I’m also curious about the accounting related to these kinds of things. I know that orders not unique. There are other states that have restrictions on proper on profitability. Just curious about how you account for that as well.

Michael Klein: Sure, Paul. It’s Michael. I’ll start with sort of response on the overall situation. Maybe Dan can chime in on accounting. The Florida excess profit provision and the statute isn’t actually a new thing. It’s sort of standard operating procedure in Florida. It’s actually fairly infrequent that people have to return premiums given the statute. What I would say about our business in Florida is we’re pleased with our auto business in Florida. But we don’t expect to need to make a return of premium to policyholders in Florida due to excess profits for the 2023 to 2025 accident year period for which we would make the filing in 2026.

The other thing I would say is given the size of our business in Florida, think of our Florida auto business less than 10% of our PI auto business. Think of the Florida PI auto business 1.5% of Travelers’ overall premium. I mean, it’s just not going to be a significant issue for the organization even if we were to need to make a return of premium, which we don’t anticipate.

Dan Frey: Then Paul, it’s Dan. With regard to the accounting, I guess I’m going to not give a definitive answer. And one of the reasons I won’t give a definitive answer is if you go back to COVID, when we and some of our peer companies returned premium because frequency and losses declined so rapidly, so quickly, not every company accounted for that the same way. So we had a view of how that should be accounting for. That’s what we reflected in our results. Other peer companies had slightly different view of how that should be accounted for.

And reflected it differently in their results, by which I mean some companies took that as an expense, some companies took that as a return to premium. And as Michael said, since we’ve not had to deal with the Florida excess profit issue, we haven’t done a real deep dive on how we think it would come through the P and L. But most importantly, I think as Michael said, we ever had it, we wouldn’t expect it to be much of an impact on our consolidated results in any event.

Paul Newsome: Great. That’s super helpful. That’s all I had. Appreciate it.

Operator: Your next question comes from the line of Josh Shanker from Bank of America. Your line is open.

Josh Shanker: Yes. Very much for taking my question here at the end. I was trying to understand a little bit about the retention effective retention numbers that you give in the back of the supplement about auto and home. Your retention bottomed, I guess, about three quarters ago. And it’s ticked up, but you’re still losing more of cars or more policies than you were before. Is that a projected retention based on where you’re pricing the business today, or have you already seen retention bottom and it’s improving here?

Dan Frey: Josh, it’s Dan. So retention is a way that we try to give you color relative to what’s the change in net written premium. So a couple of things we know definitively. We know definitively at any point in time how many policies are enforced. We give you that number. We know definitively at any point in time how much premium made it into the ledger. We give you that number. Production statistics like retention, renewal premium change, new business, are all in the disclosure say. They’re all subject to actuarial estimate of what do we think the ultimate retention is going to be.

Because you could start on day one of a policy and look like you’d retained all of them, but we know that there’s some peer period of those that are going to cancel early in the term and either go somewhere else or drop their insurance. So it’s very challenging to do, I think, you’re trying to do at a very specific level and go A plus B equals C. Production statistics are really color around what’s happening with the top line. And I’m sorry, can’t give you a more helpful answer than that.

Josh Shanker: If I look back at 3Q 2024, is that a more because now you have all that data. Is that a more accurate representation of what you know to have happened over the past year?

Dan Frey: Production statistics do get updated. So if you went back in true in business insurance, true in personal insurance, if you looked at historical quarters, you could almost do a triangle of what was retention as originally reported because it’s an estimate. We true those up as time goes on.

Josh Shanker: And can you confidently say, and I’ll leave it at this, that retention has improved from where it was a year ago, or it’s still not certain?

Dan Frey: I think we’re pretty confident in saying that retention has improved from where it was a year ago.

Josh Shanker: Okay. Thank you.

Operator: Your next question comes from the line of Alex Scott from Barclays. Your line is open.

Alex Scott: Hey, thanks. First one I have is on commercial auto and general liability. Just noticing, you know, those are, you know, sort of the lines where net written premium is growing more and was just interested in if that’s more a reflection of, you know, the rate’s obviously different there than maybe some of the other lines where there’s pressure. But, you know, is there anything about the commercial auto product launch and some of the things you’re doing that are actually causing you to lean into businesses a little more?

Greg Toczydlowski: Hey, Alex. This is Greg. You know, just to get the second part of your question, we did roll out a new automobile product across all business insurance that includes select and middle market that would roll up into the aggregate commercial auto numbers. So we do think that’s our most sophisticated product in auto that we brought into the marketplace. So that helps us from a segmentation point of view. But we’ve been very thoughtful around our growth in commercial auto. The thrust of what you’re seeing there in premium deltas really is based on renewal premium change. And that’s why I gave you some of that color in my prepared comments at a product line level.

Alex Scott: Got it. Okay. That’s helpful. And over in personal lines, I mean, the appetite you’ve been pretty clear on in that should help on the growth front. Is there anything from just a marketing spend kind of standpoint and thinking through the expense ratio that we should be aware of is you think through ramping up growth?

Michael Klein: Sure, Alex. It’s Michael. I would say that on the margins, we have increased our marketing spend in personal insurance largely in support of our direct-to-consumer business. But it’s a very different ballgame for us than marketing spend other places. Our direct-to-consumer business is less than 10% of our overall business. So we are on the margin increasing marketing spend there to drive more growth. But it doesn’t have a dramatic impact on the overall financial results of the business.

Alex Scott: Got it. Thank you.

Operator: And we have time for one more question. And that question comes from the line of Ryan Tunis from Cantor. Your line is open.

Ryan Tunis: I just had a question, just one on in business insurance, just on incurred loss. But I guess it’s, in national property, we don’t trend losses like we do or property for that matter. We trend losses like we do with other stuff, but certainly are still attritional losses on that line. I guess I’m just curious if those attritional losses have run better or worse or in line with your expectations so far this year? Thanks.

Dan Frey: Hey, Ryan, it’s Dan. I think the quarter results are really strong. Weather was generally leaning towards favorable, including in business insurance. If you’re wondering about whether it’s so significant that we would say this isn’t really a clean jump-off point for business insurance and you’d make some big adjustment, we would say no sort of inside of the normal realm of variability from quarter to quarter, but leaning towards the favorable.

Operator: And we have reached the end of our question and answer session. I will now turn the call back over to Abby Goldstein for closing remarks.

Abbe Goldstein: Thanks, everyone, for joining us today. And as always, please follow up with Investor Relations if you have any other questions. Have a good day.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

Meta Platforms (META 0.52%) is no longer just a social media giant. It’s building one of the world’s largest AI infrastructures, recruiting elite talent, and embedding artificial intelligence into every layer of its ecosystem — from apps and ads to AR glasses.

While OpenAI and Google dominate the spotlight, Meta is quietly constructing the foundation to lead the next decade of AI development. Here’s how it plans to win.

Image source: Getty Images.

Building the backbone: A massive infrastructure bet

Meta’s AI ambitions rest on one of the biggest infrastructure buildouts in tech history. The company plans to spend $60 to 65 billion in capital expenditures this year, channeling much of that into data centers and custom AI hardware. By the end of 2025, Meta expects to operate over 1.3 million GPUs — a scale few companies can match.

This massive investment isn’t just brute force spending. It’s a strategic move to gain control. Meta is already testing its own AI chip, designed to reduce reliance on Nvidia and optimize training efficiency. Like Amazon‘s in-house silicon program, this initiative gives Meta tighter control over cost, performance, and innovation speed.

The company is also expanding a global network of data centers equipped with liquid cooling and energy-efficient designs. These facilities will train large language models such as LLaMA 3 and future generations while powering AI-driven features across Facebook, Instagram, and WhatsApp.

For Meta, infrastructure is more than a resource — it’s a moat. Every improvement in computing efficiency compounds across billions of users and trillions of interactions. That scale gives Meta a self-reinforcing infrastructure advantage.

Investing in people

Technology changes fast, but exceptional people adapt and shape the future. Meta understands that better than most. Over the past year, the company has aggressively recruited top AI researchers and engineers from DeepMind, OpenAI, and Anthropic.

In a bold move, Meta hired Alexandr Wang, the founder of Scale AI, to lead its new Superintelligence division. And that’s after investing $14.3 billion in Scale AI, the AI company Wang founded after dropping out of MIT. The hire signals Meta’s intent to compete not just in applied AI but in the broader race toward artificial general intelligence.

Zuckerberg’s philosophy is straightforward: world-class talent compounds like capital. So, it makes sense to spend heavily to acquire the best talent. This strategy is not new to Meta. Years ago, it paid a hefty sum ($16 billion) to acquire WhatsApp early on — mainly for the talent and technology.

While such a strategy does not guarantee an outcome, it has its advantages, particularly in securing the best talents — while eliminating a potential future competitor. That’s precisely what Meta did with its WhatsApp deal, and the learnings from the WhatsApp acquisition helped fuel the development of Messenger, Meta’s own messaging app.

Integration: Hardware, software, and ecosystem

Meta’s most significant edge lies in integration — uniting infrastructure, talent, and products under one ecosystem. The company’s open-source large language model, LLaMA, already powers its AI-driven functions such as real-time translation and intelligent assistants across Messenger and WhatsApp. Each deployment brings new data, which strengthens the next generation of models.

But Meta isn’t stopping at software. Its Reality Labs division is bringing AI into the physical world through devices like the Ray-Ban Meta smart glasses, which include conversational assistance, translation, and image recognition. Zuckerberg envisions a future where AI becomes ambient — invisible, intuitive, and always available.

Over time, Meta’s ecosystem could span everything from LLaMA models running on powerful clusters to lightweight AI running directly on AR glasses or smartphones. With more than 3 billion users, Meta holds an enormous testing ground for refining these systems at scale.

What does it mean for investors?

Meta’s AI strategy isn’t about racing to release the flashiest model. It’s about building the foundation of the next computing era. By investing heavily in hardware, empowering world-class talent, and integrating AI into every layer of its ecosystem, Meta aims to become the operating system of the AI age.

Execution remains the real test. Building trillion-parameter models and next-generation chips is one challenge; translating them into durable products is another. But Meta has a history of thriving when it builds patiently, at scale, and in plain sight. And that’s precisely what it’s doing right now.

Investors looking to invest in AI companies should keep the stock on watch.

Image source: The Motley Fool.

DATE

Wednesday, October 15, 2025 at 5:00 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Shelley Simpson

Chief Financial Officer — Brad Delco

Executive Vice President, Commercial — Spencer Frazier

Chief Operating Officer — Nick Hobbs

President, Highway Services — Brad Hicks

President, Intermodal — Darren Field

Need a quote from a Motley Fool analyst? Email [email protected]

TAKEAWAYS

Revenue — Roughly flat year over year, indicating limited top-line growth in a soft freight demand environment.

Operating income — Operating income improved 8% compared to the prior year period, reflecting successful cost discipline and margin repair efforts.

Diluted earnings per share — Diluted earnings per share increased 18% compared to the prior year period, despite inflationary headwinds in insurance, wages, and equipment costs.

Share repurchases — Over $780 million used to buy back 5.4 million shares year to date, maintaining balance sheet leverage around one times trailing twelve-month EBITDA.

Cost reduction initiative — More than $20 million of structural costs eliminated, with the majority of the $100 million target expected to be realized in 2026.

Intermodal volume — Decreased 1% year over year, with monthly trends of -3% in July, -2% in August, and flat in September.

Dedicated Contract Services (DCS) sales — Approximately 280 trucks sold, with ongoing visibility to fleet losses resulting in a truck count decline of about 85 units sequentially.

DCS margins — Maintained double-digit margins despite mature location losses and startup costs for new business.

ICS (Brokerage) rates — Reflecting improved new customer wins during the bid season.

Net Promoter Score (NPS) — Achieved a score of 53 in Intermodal.

Final Mile Services — Ongoing demand weakness for furniture, exercise equipment, and appliances, with challenged market conditions expected through year-end and anticipated legacy appliance business losses in 2026.

Safety performance — Achieved record-low DOT preventable accidents per million miles for the third consecutive year, improving further through the current period.

Regulatory impact — Recent U.S. regulations, such as English language proficiency and non-domiciled CDL, are reducing industry capacity but are not materially affecting the company’s own operations.

Technology & automation — Deployed 50 AI agents, automated 60% of third-party check calls, more than 73% of orders are auto-accepted, automated 80% of paper invoice payments, and saved about 100,000 hours annually across highway, dedicated, and CE teams.

Capital allocation priorities — Investment in the business is prioritized over buybacks and dividends, with an emphasis on maintaining investment-grade leverage.

SUMMARY

Management of J.B. Hunt Transport Services (JBHT -0.53%) reiterated strategic clarity on long-term operational excellence, pursuing aggressive cost reductions and process automation to strengthen margins in challenging market conditions. Executive commentary directly addressed the implications of rail industry consolidation, emphasizing the company’s experience in prior mergers and robust long-term agreements with key rail providers. Sequential volume trends in Intermodal highlighted ongoing softness offset by service-driven share gains. Technology deployment and automation initiatives were positioned as critical levers for future efficiency gains and margin sustainability. Near-term expectations for DCS and Final Mile Services included persistent end-market headwinds but pointed to a return to modest fleet growth and targeted business mix shifts in 2025 and 2026. The company explicitly reaffirmed its balanced capital allocation strategy focused on core investment.

Simpson stated, “we are making good progress towards reaching our $100 million savings goal and advancing towards our long-term margin target.”

Delco highlighted, “productivity and cost management efforts more than offset those headwinds to drive our improved results.”

Frazier noted, “truckload capacity continued to exit the market, and the pace of exits is accelerating,” though soft demand is limiting immediate pricing effects.

Spencer Frazier explained that intermodal volumes benefited from conversions “primarily because more customers are converting freight to intermodal from the highway as they see our commitment to operational excellence differentiating J.B. Hunt Transport Services, Inc.”

Brad Delco directly attributed recent improvements to “service efficiencies, balancing our networks, dynamically serving customers to meet their needs, focusing even more on discretionary spending, and driving greater asset utilization.”

Hicks indicated DCS expects “operating income to be approximately flat compared to 2024,” with potential for further growth in 2026 driven by new business startups.

Simpson emphasized strategic adaptability to rail consolidation: “our scale and influence allow us to coordinate complex intermodal moves and deliver unique solutions for our customers.”

INDUSTRY GLOSSARY

Drayage: The movement of freight over a short distance, typically as part of an intermodal shipment within a port or between rail terminals and customer locations.

DOT preventable accident rate: A safety performance measure calculated as the number of Department of Transportation (DOT)-recordable, preventable accidents per million miles driven.

Steel wheel interchange: The movement of an intermodal rail container car between two railroads without unloading the cargo, typically using physical rail routing connections.

Headhaul/Backhaul: ‘Headhaul’ refers to high-demand freight moves in a preferred direction, often at higher rates; ‘Backhaul’ refers to return moves that typically have lower rates or less freight volume.

IMC: Intermodal Marketing Company — a non-asset third-party intermediary arranging intermodal freight movement between shippers and railroads/trucking firms.

Full Conference Call Transcript

Shelley Simpson: Thank you, Andrew, and good afternoon. Throughout the year, our focus has been on three clear priorities: operational excellence, scaling into our investments, and continuing to repair our margins to drive stronger financial performance. We are executing these priorities with discipline and determination, guided by a strategy designed to strengthen our competitive position and unlock long-term value for our shareholders. I am highly confident that our approach is building a stronger company, one that is fully equipped to capitalize on meaningful growth opportunities ahead while driving stronger financial performance. Across our businesses, service levels remain excellent. We have systemically elevated our service standards to drive disciplined profitable growth with both new and existing customers.

Even as overall freight demand softened during the quarter, our unwavering commitment to service enabled our intermodal and highway businesses to capture additional volume and outperform the market. Operational excellence is now synonymous with J.B. Hunt Transport Services, Inc., and we are leveraging this reputation to drive strategic growth and maximize returns on our investments to match the unique value and strong service levels we provide for customers. We remain focused on controlling what we can, optimizing costs in the near term without sacrificing our future earnings power potential. In addition, we are placing a heightened emphasis on operational efficiency throughout the organization.

By streamlining processes, adopting best practices, and leveraging technology, we aim to utilize every resource as effectively as possible to maximize productivity and performance. Our initiative to lower our cost to serve, announced last quarter, is focused on removing structural costs from our business. The organization’s collaborative efforts continue to gain momentum, and Brad will share more details on our progress. This initiative marks our latest evolution in expense discipline, and we are making good progress towards reaching our $100 million savings goal and advancing towards our long-term margin target. Now, let me address the elephant in the room: rail consolidation. J.B.

Hunt Transport Services, Inc.’s position is rooted in our commitment to delivering exceptional intermodal service and creating long-term value for our customers and shareholders. We recognize both the opportunities and risks that consolidation presents. But our decades of experience, including navigating seven prior Class I railroad mergers, and our thoughtfully developed long-term agreements and strong relationships with NS, CSX, and BNSF should provide the basis for us to adapt to any changes in the industry. As the largest domestic intermodal provider, our scale and influence allow us to coordinate complex intermodal moves and deliver unique solutions for our customers. We are consistently rated best in class by third-party industry surveys of intermodal customers.

And our ability to deliver seamless, differentiated service across the entire North American intermodal network is a key competitive advantage. Our focus remains on providing reliable, efficient, and innovative service that benefits our customers now and into the future. As the rail industry evolves, we expect our proven adaptability and unwavering dedication to service will not only safeguard our leadership position but should also continuously set higher standards of excellence for our customers. I want to close by recognizing the entire organization for their hard work and progress across many areas of focus. The third quarter is extra special at J.B. Hunt Transport Services, Inc. as it includes National Truck Driver and National Technician Appreciation Week.

Our professional drivers and maintenance teams are the backbone of our success. And their record-breaking safety performance is a testament to their skill, dedication, and attention to safety every day. We appreciate all they do to keep our company, our customers, and our communities safe. With that, I’d like to turn the call over to our newly appointed CFO, Brad Delco.

Brad Delco: Thanks, Shelley, and good afternoon. I will hit on some highlights of the quarter, review our capital allocation plan, and give an update on the lowering our cost to serve initiative. Let me start with the quarter. As you have already seen from our release, revenue was roughly flat year over year while operating income improved 8% and diluted earnings per share improved 18% versus the prior year period. While inflation in insurance, wages, and employee benefits and equipment costs were all up, our productivity and cost management efforts more than offset those headwinds to drive our improved results.

Over the years, you have heard us talk about investing in our long-term growth, maintaining cost discipline without jeopardizing our future earnings power, and creating operating leverage when the market returns. Well, it’s no secret the market hasn’t returned yet, but the notable improvement in our financial performance this quarter should serve as a true testament to the talent and capabilities of the people throughout our organization and the execution of our strategy towards operational excellence in safety, service, and lowering our cost to serve. On capital allocation, our balance sheet remains healthy, maintaining leverage around our target of one times trailing twelve-month EBITDA while purchasing over $780 million or 5.4 million shares of our stock year to date.

This aligns with our messaging around prefunding our long-term future growth during the downturn and having the flexibility with the strong cash flow generation of the business to be opportunistic with share repurchases as a way to return value to our shareholders. We will be disciplined in our capital allocation approach with investing in the business as priority number one, sustaining our investment-grade balance sheet, supporting future dividend growth, and finally continuing our opportunistic repurchases. Last quarter, we outlined our lowering our cost serve initiative to remove $100 million of structural costs from the business. I’m happy to share we are off to a good start, having eliminated greater than $20 million in the quarter.

Examples of our success are in service efficiencies, balancing our networks, dynamically serving customers to meet their needs, focusing even more on discretionary spending, and driving greater asset utilization. We remain committed to updating you on our progress going forward. But our intent is to demonstrate our progress in our reported results rather than just speak to them. As we noted last quarter, we will realize a portion of these benefits this year, with the majority of the impact realized in 2026. Let me close with this and what I hope you take away from our quarter. First, our company continues to execute from a position of strength.

We have been transparent with our strategy, our investments to be best prepared to service our customers’ future capacity needs. Second, we also continue to remove structural costs from the business. We are off to a good start and have more work to do. Third, our business continues to generate a significant amount of cash, and we remain focused on generating strong returns with our deployed capital. We have been opportunistic with our share repurchases, all while maintaining modest leverage on our balance sheet. That concludes my remarks. Now I’d like to turn it over to Spencer.

Spencer Frazier: Thank you, Brad, and good afternoon. I’ll provide an update on our view of the market and some feedback we are hearing from our customers. Overall demand trended below normal seasonality for much of the quarter outside of the seasonal lift we saw at quarter-end. On the supply side, truckload capacity continued to exit the market, and the pace of exits is accelerating. But the soft demand environment is likely muting the market impact of capacity attrition. Outside of recent weeks, truckload spot rates remained under pressure in the quarter. More recent regulatory developments and, more importantly, regulatory enforcement is having an impact on capacity.

While this industry may have a chicken little reputation when it comes to predicting capacity changes, the capacity bubble may be deflating as we speak. In the near term, customers will remain skeptical of any predicted change, only believing it when they experience it. Shifting to intermodal, volumes declined 1% year over year. We believe our volumes held up better relative to the broader truckload market decline, primarily because more customers are converting freight to intermodal from the highway as they see our commitment to operational excellence differentiating J.B. Hunt Transport Services, Inc. Intermodal from the competition.

The service we provide ranks us at the top of our customer scorecards, and we continue to be ranked at the top of industry surveys as well, with a Net Promoter Score of 53. When we go to market, we work with customers to dynamically solve their supply chain needs by designing and executing our operations to meet their requirements. For example, in our intermodal business, customers trust us to select the most efficient service regardless of the rail provider to seamlessly move their freight throughout North America. Today, roughly half of our interchange volume on transcontinental shipments occurs through a steel wheel interchange.

This ratio can change dynamically and demonstrates our ability to be agile at scale to execute and meet our customer expectations. Regardless of how the rail landscape and operating scenarios might change over the next couple of years, we remain committed to delivering exceptional service and growing with our customers. Regarding the current peak season, the strong container volume into the West Coast in July generated headlines regarding a potential pull forward. Ocean peak season came early. That said, it is important to disconnect the timing of peak season on the water from the peak season of the inland supply chain. Our customers are still expecting a peak season, although the magnitude and duration of peak volumes will vary.

Our conversations indicate there is a large amount of freight that was imported early that hasn’t moved through the inland supply chain yet. No one has canceled Christmas. I’ll close with some customer feedback. Our customers realize the financial health of the transportation industry is not great. And as a result, they are choosing to do more with the best carriers and more with fewer carriers. Shippers are focused on creating efficiencies in their supply chains by working with providers who are safe and financially sound and who execute with agility and predictability. Our scroll of services continues to operate from a position of strength, creating value as the go-to transportation provider for our customers.

I would now like to turn the call over to Nick.

Nick Hobbs: Thanks, Spencer, and good afternoon. I’ll provide an update on our areas of focus across our operations, followed by an update on our Final Mile, truckload, and brokerage businesses. I’ll start on our safety performance. Safety is a core piece of our culture and a key differentiator of our value proposition in the market. We are coming off of two consecutive years of record performance measured by DOT preventable accidents per million miles, and our safety results through the third quarter are performing even better than these record performances. This performance is a testament to our people and the attention to detail they bring to the job every day, as well as our focus on proper training and technology.

Our safety performance is a key piece of driving out cost and will continue to be an area of focus. While the ultimate impact on industry capacity is hard to pinpoint, we believe the recent developments on regulations and enforcement, when taken together, could have a noticeable impact on available industry capacity. These include new regulations around English language proficiency, B1 Visas, FMCSA, biometric ID verification, and non-domiciled CDLs. Importantly, for J.B. Hunt Transport Services, Inc., we do not expect to see any material impact on our capacity. There have been some signs based on what we are seeing in our truck and brokerage operations that it could have a broader industry impact.

Moving to the business, let’s start with the final mile. As we said last quarter, business conditions in our end markets remain challenged with soft demand for furniture, exercise equipment, and appliances. We continue to see positive demand in our fulfillment network driven by off-price retail. Going forward, we expect market conditions to remain challenged through at least year-end. Our focus remains on providing the highest service levels, being safe and secure, ensuring that the value we provide in the market is realized to drive appropriate returns. In 2026, we do anticipate losing some legacy appliance-related business, but we will be working diligently on backfilling with other brands and service offerings in this segment of our business.

Moving to JBT, our focus in this business hasn’t changed, and we are winning business with strong service from both new and existing customers, leading to our highest quarterly volume in over a decade. We are remaining disciplined with our growth to ensure our network remains balanced in order to drive the best utilization of our trailing assets. Going forward, we are pleased with the direction of this business in this soft demand environment and the progress we are making on lowering our cost to serve. We see an opportunity for further efficiency and automation gains in the future as we continue to leverage our 360 platform.

That said, meaningful improvements in our profitability in this business will be driven by greater levels of rate improvement and overall demand for truckload drop trailing solutions. I’ll close with ICS. During the third quarter, volumes modestly improved sequentially as new volume from recent bid wins was partially offset by soft demand in the overall truckload market. Truckload spot rates remained depressed throughout the quarter, but we saw gross margins remain healthy. We are almost through bid season and are pleased with the awards we have received, with rates up low to mid-single digits, winning volume with new customers. Our focus here remains on profitable growth with the right customers where we can differentiate ourselves with service.

Going forward, we will remain focused on scaling into our while continuing to make improvements to our cost structure and leveraging our 360 platform to drive greater efficiency and automation, which will help lower our cost to serve. With that, I’d now like to turn the call over to Brad.

Brad Hicks: Thanks, Nick, and good afternoon everybody. I’ll provide an update on our dedicated results. Starting with the quarter, at a high level, our third quarter results were very strong, particularly in light of this challenging freight environment. We believe our results are a testament to the strength and diversification of our model, the value we create for our customers, and how we drive accountability at each site and customer location. As a result, we continue to see good demand for our professional outsourced private fleet solutions. During the third quarter, we sold approximately 280 trucks of new deals.

As a reminder, our annual net sales target is for 800 to 1,000 new trucks per year, and we would be on pace with this target absent the known losses disclosed almost two years ago. Encouragingly, our overall sales pipeline remains strong as our value proposition in the market remains differentiated. Our sales cycle in dedicated is typically eighteen months from start to finish, and our pipeline includes both large and small fleets at various stages of completion, all underwritten to our return targets. Overall, I remain pleased with the momentum and activity in the pipeline.

As I just mentioned and as we have communicated over the past eighteen months, we have had visibility to fleet losses that wrapped up in early July, which negatively impacted our third quarter ’25 truck count by about 85 trucks versus our second quarter results. Navigating through these losses, in addition to call outs we’ve had related to some customer bankruptcies and the overall market dynamics, demonstrates our discipline and strong execution. While we were losing locations that had historically delivered mature margins, we were simultaneously absorbing startup costs from onboarding new business. Despite facing these two margin pressures, we still maintain double-digit margins during this period. I am extremely proud of all of our teams for their effort.

Hope going forward, knowing that most of our fleet losses are behind us, is that we are back on track with our net fleet growth plan moving forward. We believe the performance of our dedicated business has been a standout not only for our company but also the industry. We have great visibility into the financial performance of each account, which provides a high level of accountability at each location and a diversified customer base with our managers on-site with our customers, which we believe creates unique value that is a differentiator for us. Going forward, with our known losses behind us, our expectation for modest fleet growth in 2025 has not changed.

As we have said previously, when we sell new truck deals, and that business starts up, we do incur some expenses as that business is onboarded. That said, this isn’t new for us. We are starting up new customer locations each quarter. Given our progress with respect to lowering our cost to serve, we expect our 2025 operating income to be approximately flat compared to 2024. The magnitude of any potential variance higher or lower to this outlook will be driven by the number of locations we start up during the quarter. We believe the setup is favorable for us to continue our growth trajectory in 2026 and beyond.

Our business model and value proposition are differentiated in the market and continue to attract new customers. We remain confident in our ability to compound our growth over many years to further penetrate our large addressable market. With that, I’d like to turn it over to Darren.

Darren Field: Thank you, Brad. Thank you to everyone for joining us this afternoon. I’d like to start by saying I feel really good about our performance and how our strategy and solid execution drove meaningful improvements in our results. I believe this is a true testament to our focus on operational excellence, cost discipline, and progress on lowering our cost serve initiative. Before we get into more detail on the results, I want to follow up on some of Shelley’s comments regarding the potential for Class I rail consolidation. First, there are still a lot of unknowns. But I am confident J.B.

Hunt Transport Services, Inc. should be a primary consideration and actively engaged in all discussions involving the future of the intermodal industry as well as the execution of all Class one’s desire to take share from the highway to grow their intermodal service offering. We have offered seamless transcontinental intermodal services for decades, connecting BNSF with both Eastern railroads, and believe that opportunity could exist well into the future regardless of the various outcomes we know are either announced or speculated in the market.

We continue to see a large opportunity to convert highway shipments to intermodal, and if the motivation for consolidation is to compete more with trucks, we believe this will present our industry-leading intermodal franchise additional growth opportunities. We are one of the largest purchasers of rail capacity in North America, and we will engage in discussions with all rail providers to execute on a strategy and plan that we think is in the best interest of our shareholders. Turning to the quarter, demand for our domestic intermodal service wasn’t all that strong, but nonetheless, we saw sequential improvement in volumes and executed some of the most efficient dray service in our history, particularly in September.

As Spencer mentioned, we still expect the peak season as lots of volume that moved on the water earlier this year will still need to advance in the inland supply chain ahead of the holidays. Volumes in the quarter were down 1% year over year and by month were down 3% in July, down 2% in August, and flat in September. After seeing unique strength off the West Coast last year due to the threat of the East Coast port labor disruption, TransCon volumes were down percent in the quarter, while Eastern loads were up 6%.

As we’ve communicated all year, we had a bid season strategy focused on getting better balance in our network to grow volumes and repair our margins with more price, particularly in our headhaul lanes. Last quarter, we talked about our success in the bid season, particularly around balance, and we think that success combined with our lowering our cost to serve initiatives were key contributors to our year-over-year and sequential performance improvement. Our service performance remains strong. Our primary rail providers BNSF, NS, and CSX continue to deliver excellent service, which we believe is taking share from Highway. I am confident our service offering is being recognized in the market.

Customers are reengaging with us with additional opportunities largely driven by our differentiated service and value compared to both highway and IMCs. As you all are keenly aware, we have the capacity and ability to execute on a meaningful growth plan over the coming years based on investments we’ve already made. In closing, we remain very confident in our intermodal franchise and the value we provide for our customers. We have shown the ability to grow and generate strong returns through many rail consolidation events over the past few decades and look forward to the opportunities we have in front of us. With that, I’d like to turn it back to the operator to open the call for questions.

Operator: Thank you. We will now begin the question and answer session. The first question comes from Chris Wetherbee with Wells Fargo. Please go ahead.

Chris Wetherbee: Hey, thanks. Good afternoon, guys. Hey, good afternoon. I guess maybe if we could start on the cost side and maybe unpack, I think you said $20 million in the quarter, I think $100 million is the total program. Can you give us a little sense maybe by segment how that played out? Any examples that you can provide in terms of detail would be great too. And then I guess as you think forward, is it sort of progressive from the 20 to the 100 over the several quarters? Any sort of insight there? And I guess in that context, boxes were down sequentially for the first time in quite some time.

So just kind of curious how that is sort of part of the plan if it is?

Brad Delco: Chris, I’ll try to address the first part and I’ll pass it over to Darren to address the second part. Really there’s progress across all areas of the business. And so when we think about, as we laid out last quarter, what are the three buckets that we were targeting for this initiative? It was around efficiency and productivity. That’s not just in the business, that’s also in back office and how all that gets allocated to businesses. Driving better asset utilization, I mean, saw that in intermodal. We certainly saw that and you heard some comments about almost record performance in our tractor utilization in our dray operations. You saw good improvement in productivity in Dedicated.

I wouldn’t want to say one segment versus the other, but I think you’ve seen it in the results across the board. In terms of how we’re going to progress going forward, I said in my comments, we’re going to give you an update each quarter. We said we think most of this will reveal itself next year. Listen, we’re off to a good start. We wanted to share that and I think you see it in the results. And while we do speak to it and we will speak to it each quarter, really the intent here is for you guys to see it in the results.

And I’m glad that you guys can see it in the results we printed this afternoon. So I’m going to pass it over to Darren and let him address maybe the container count question and appreciate the question, Chris.

Darren Field: Yes. I mean, the container count isn’t down. We have equipment that reaches useful life every quarter. It’s a small amount. Sometimes there’s a repair bill that may be greater than what the book value of that piece of equipment is, and we’ll retire it. The other component is we’ve worked closely with Dedicated in a few examples where we found what had been leased trailers in an account, we were able to use containers instead. It’s a pretty small number, but those would be the kind of moving pieces there. Nothing significant in terms of a real change in direction on container equipment.

Operator: The next question comes from Brian Ossenbeck with JPMorgan. Please go ahead.

Brian Ossenbeck: Hey, good evening. Thanks for taking the question. I think Mike was giving some commentary about pricing for next year. I think it was in ICS low to mid-single. So hoping you can kind of run through what you’re expecting across the different modes. And if I’m hearing you correctly, lowering the cost to serve, if rates do stay flat or don’t move a whole lot for next year, it sounds like the structural reductions here mean that the performance like this can be more durable and perhaps even better whenever we do get to that long-awaited upcycle? Thank you.

Nick Hobbs: Yes. Thank you. I was really talking about what we’ve seen in recent bids and the awards that we’ve seen, not really what we thought next year was going to be on rates. But we’ve seen in ICS in particular, we’ve seen some success and growth in the amount of loads and in our pricing as we kind of focus on the more difficult challenging business that’s not as commoditized, and so I think you see that in our gross margin. So it’s just the type of business that we’re working on that we saw that.

And then Brian, to the second part of your question, I mean, clearly, the rate environment has been challenged now for quite some time for our industry. This initiative, again, that we launched, you really dig in on the deep into all the details, we have a spreadsheet that has over 100 lines of things that we’re going to attack. And we’ve had very healthy debates around our executive table about what’s structural, what’s temporary, what we think are just cost avoidance versus are things that we’re removing. And the numbers we’re sharing, I mean, I think we said last quarter, our goal is and what we’ve identified as something far greater than $100 million.

We’ve always been, I believe we’ve always been a fairly conservative company. We have a very strong say-do culture. If we say something, we’re really setting out to do it. And so we’re comfortable sharing the $100 million. Again, we’re off to a good start. Our hope is while we’ve had tremendous headwinds in this industry, at some point headwinds will turn to tailwinds. And I think it will make it, it’ll make the work we’re doing look even stronger. Again, in my comments, you heard us say, we really are trying to set this business up to drive stronger incrementals when the market is more in our favor.

And I think some of the discipline we have around cost is setting us up very nicely for that.

Operator: The next question comes from Jonathan Chappell with Evercore ISI. Please go ahead.

Jonathan Chappell: Thank you. Good afternoon. Don’t know who wants to answer this, maybe Darren or Spencer or even Brad, but you’ve talked about the demand challenges. We all know about that. Pricing in the spot market doesn’t seem to have done very much from three months ago either. But if you look at revenue per load in both intermodal and you had a pretty nice sequential improvement. So I’m trying to understand is that a decision you have to make versus volume, volume versus pricing? Is that a mix situation? Is that surcharges? And is that now the starting point? You always talk about like the cake being baked into the next year.

Given that sequential increase down to 3Q, is this the starting point of which the cake is baked? Or is there a risk that could actually move backward closer to the 2Q levels?

Darren Field: Okay. This is Darren. I’ll try to tackle at least part of that. If Spencer has anything to add, he can certainly jump in. So we’ve often talked about we implement about 30% of prices in the first quarter, thirty percent second quarter, 30% third quarter, and call it 10% in the fourth quarter. I have long said the third quarter is the best time to see the results of the previous bid cycle. And I think that’s what we did just show in terms of the results is that’s a fully implemented bid season. What is washed in the results is there is some good pricing movement in the headhauls. There is some negative pricing in backhauls.

And when you combine them, it looks relatively muted in terms of price per load. We reported minus 1%. And so I don’t know that the sequential change did that come from some sort of a mix shift? It could have probably has some element of mix in there. I would say while our transcon volumes weren’t up year over year, I do believe our transcon volumes were up sequentially. And so that can play a role in terms of what happens sequentially from a revenue per load position.

Nick Hobbs: Yes. And Jonathan, this is Nick. I’ll talk about ICS. I would just say it’s really mix in ours and type of business from just think about team or hazmat, just various different things that we’re going after. It’s a little bit more difficult, multi-stop. So those carry a little higher rate. So it’s the type of business that we’re targeting in ICS.

Operator: The next question comes from Scott Group with Wolfe Research. Please go ahead.

Scott Group: Hey, thanks. Afternoon. So I want to follow-up maybe similar to that last question. So obviously, very good sequential margin improvement from Q2 to Q3 in intermodal. Like how much of that do you think is the cost side of what you’re talking about versus the yield side? I know we had earlier peak season surcharges this year. Ultimately, I’m trying to just figure out like the sustainability of this and as costs continue to ramp, should we be expecting further sort of sequential improvement off of this trough?

Q2 to Q3, further improvement in Q3 to Q4, or is it not necessarily going to play out that way given some of the puts and takes with timing of peak surcharges and things like that?

Darren Field: Well, clearly, peak season surcharges got a lot of press. We went early because a lot of customers had believed that they needed extra capacity. I wouldn’t say that the third quarter was a particularly strong peak season surcharge quarter. Frankly, we were disappointed in demand off the West Coast during the quarter and even adjusted our peak program in the middle of the quarter as an example. So I wouldn’t want our analysts to believe that’s driven largely by peak season charges. Really when we set out with our bid strategy a year ago, we wanted to grow clearly. We wanted to improve price and we wanted to improve balance.

And the improvement in balance, whether that be from growth westbound or an improvement in some price eastbound in the headhauls. I mean, of that result is driving improvements that we feel confident we can continue to sustain as we move forward. The cost side, we did, we were able to implement some small technology enhancements during the summer that really began at the end of the second quarter that helped define for our entire operations planning team some new flexibility that our customers had given us in some cases. And from that, we were able to drive real efficiency in our driver base. We were able to drive out some empty miles on the drayage system.

So these are areas that we feel are sustainable. And as we continue to look for opportunities to grow, what I don’t want anyone to hear is that growing in imbalanced lanes is a bad thing. It doesn’t have to be bad. It just ultimately the pricing on those loads has to cover the cost of positioning empties. And in a lot of cases, I think our customers are beginning to look hard at their supply chains, what’s happening with them, and can we look into the future and find a way to get back growing in markets that maybe are in balance that doesn’t have to be a bad thing for us.

But I believe the cost improvements that we made during the quarter, we must sustain those moving forward.

Operator: The next question comes from Brady Lares with Stephens. Please go ahead.

Brady Lares: Hey, great. Thanks. I wanted to touch on DCS for just a moment. Sales have continued to be pretty strong over the last few quarters despite trade uncertainty and a tough freight backdrop. Can you talk about what’s driving these wins at this point? Four years into a freight recession? And despite the strength in sales, you mentioned in your prepared remarks, you saw a pretty meaningful improvement in margins. Can you think of help us think about how much of that was just an improvement in your cost to serve versus kind of a maturation of these earlier sales?

Brad Hicks: Yes. Thanks, Brady. This is Brad. First, let me say just how remarkably proud I am of our entire team in DCS. The effort, the service, our drivers, maintenance teams, all the support personnel, our operators, just fantastic results in the quarter, both from an execution standpoint, from a safety standpoint, and certainly from a value creation and value delivery to our customers. And I think that the reason I say that is, I think that is one of the differentiations for J.B. Hunt Transport Services, Inc. is really our CVD program, customer value delivery.

And so when I think about the value that we can create for our customers, both through creative solutions, but also just our density and our ability to leverage and share our resources across multiple customers and multiple business types to really drive and create valuable solutions. The second part of that is, yes, we have worked hard and similar to Darren, there’s a variety of initiatives that we’ve kicked off. Some earlier in the year, some more recent. There’s been great work done by our maintenance teams helping lower our cost to serve, both by creating more uptime for our equipment and also lowering the cost of the actual maintenance program that we have.

And then lastly, risk is a critical component of private fleet, and the environment we’re in and what insurance has done the last several years that we’ve talked about often. And we’re doing a fantastic job there, as Shelley mentioned and Nick did as well in the prepared comments. And so can’t really say it’s one thing. It’s all those things together that makes our program different, we believe. And I think that’s why we’ve continued to have success even though the backdrop of this market has been pretty terrible as we all know.

Operator: The next question comes from Ken Hoexter with Bank of America. Please go ahead.

Ken Hoexter: Great. Good afternoon. Nick, you mentioned kind of seeing signs of impacts of ELP and the P1 visas. Is that what’s driving kind of spot rates up the last few weeks? Is that capacity removal already being seen in the market? Not the demand side, but the supply side? And then Shelley or Darren, I think you mentioned about the state of the potential rail mergers, but have you had conversations with UNP or Norfolk on sustaining your access or anything? Is that a discussion you’ve had at this point? Ahead of their filing?

Nick Hobbs: Yes. Well, Ken, I’ll start with one and let Darren get over to question two here in a second. So question one, yes, that’s the reason you’ve seen spot rates up in the last couple of weeks. It’s been because of enforcement activity and when you see the pockets, I would say it’s been able to cover freight, it’s just tightened it up and so we’ve seen a little tightness in probably eight to 10 markets and I think you can kind of follow the news around and see where ICE is active and in big metropolitan areas. And so it’s a combination of non-domicile. It’s also some cabotage. It’s also some fear factors.

But we’re prepared for that for whatever happens. We’re set up with intermodal, dedicated, our brokerage, just like when we went through COVID. We will be able to get the capacity no matter what happens in the market. So but we are seeing it in some spots, just a little notice, nothing extreme.

Darren Field: And for your second question there, Ken, clearly got two questions in there, very different subject. I don’t know how that slipped by the new IR guy. So I’m not going to talk through any kind of rail conversations. I think it is important that all of our shareholders and all of our customers hear any future merger that would be approved for whatever reason has been perceived that J.B. Hunt Transport Services, Inc. would have to move our traffic to CSX. And that’s not accurate at all. There’s nothing about a future state new railroad that would mean our current Norfolk Southern footprint that we have today would be required to change.

I think we referenced that we would intend to speak to all of the railroads to make sure that we can solve for our customers’ networks and continue to be what we’ve been to the market for decades now. And that’s just drive home the ability to take a customer’s needs, translate that into what the railroad capacity and capabilities are, combine it with our world-class drayage system, and provide intermodal solutions for those customers using the best solution available. And that will be our approach for as long as I’m here.

Operator: The next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

Jordan Alliger: Yes, hi. So given sort of the color and commentary on customers still expect peak season and load still to advance inland against the pull forward, is there any way you could sort of put that together a little bit and think through sort of loads and volumes for you guys relative to what we just saw in the third quarter as we look out the next quarter or so? Just from a high-level perspective, thanks.

Spencer Frazier: Yes. Hey, John, this is Spencer. Thanks for the question. The main point that I really wanted to make there, there’s been quite a few headlines that come out and say, hey, peak is over. There’s not going to be a peak. And I totally agree with that from an ocean perspective. But we always have to remember that domestic, that inland supply chain, the timing of that is really driven by actual consumer and customer demand. And that’s going to take place at the same time it does every year, associated with the holidays. So that was kind of point number one. And then back to our customers are expecting a peak season.

I think even the NRS came out with their retail sales number or retail sales for September being up 5.7%. Our customers are working to keep their consumers, to keep all of us engaged and make sure that they can hit their sales targets and goals for the holiday season. And that they’re expecting to do that. Now for us, definitely the deals and agreements and support that we have for our customers is unique. And each one of our customers is unique on how they’re executing their peak volume.

But the big thing when you think about going forward to your question, you look at last year, last year was artificially inflated due to the East Coast strike concerns and other issues. And that really started in the ‘4. And carried through to really where West Coast port volumes were up 20% significantly all the way through the year. I expect the comps associated with that change and really the current import volumes to really be challenged all the way through March ‘6. So I think that where we’re at today and what we’ve done and what we’re going to do to help our customers through peak, we’re looking forward to doing that.

And working with those customers that have provided us with the forecast and what their needs are.

Operator: The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi Shanker: Great, thanks. I’m going to throw in a long-term question here and maybe sharing this topic close to your heart. Just kind of given you guys probably led peers on JV360 and all the tech investments kind of many years ago, can you talk about kind of what you guys are working on right now? What that technology capital envelope looks like? Key initiatives there and kind of how the ICS business would look like from a tech and automation perspective maybe three, four years from now? Thank you.

Shelley Simpson: Thank you, Ravi. And love to talk about technology. Our strategy is rooted in how we transform our logistics. We want to be smarter, more predictive, and automated through JBM360. And if you just think about what our platform does, it supports $2 billion in carrier freight transactions, and that gives us scale to innovate. And we could do that quickly and effectively. As I think about what we’re working on, we’ve deployed 50 AI agents. That’s across the business. We’re trying to automate tasks, streamline our operations. And maybe just a few examples. Today, 60% of our third-party care check calls, those are automated.

More than 73% of our orders are auto accepted, 80% of our paper invoices are paid without a manual touch. Our dynamic quote API responds to 2 million quotes a year. And we’ve automated about 100,000 or a little more than one hundred thousand hours annually across our highway, dedicated, and CE teams. And so it’s not just about AI for us, it is about how we think about technology, but how does it empower our people. And so whether that’s engineering better processes or using robotic automation, leveraging AI, we’re focused on helping our teams work smarter and become more efficient. And that’s going to improve our operational performance and enhance our customers’ visibility and their experience.

So as we continue to refine our technology strategy, our goal remains very clear to us. We’re going to deliver measurable gains in cost savings, we’re going to increase our customer satisfaction, and we want to gain market share as a result. Now as I think about ICS, they have a great opportunity to do even more work when it comes to automation because the nature of the new customers they’re onboarding are less sophisticated from a technology perspective. So it’s really a new for them. If you think about our overall company, our company and the percentage of customers that we have that are large shippers, we’re heavily distorted to.

And so I would say that’s our opportunity to really grow with those small to midsized customers and that’s where automation will help significantly. We’ve got a clear path of things that we’re working on. And then I want to make sure that I do mention we did talk about Up Labs, which is a company that we’ve partnered with and really having them attack two of our areas that we believe need rewritten from a process and even more importantly technology where they’re integrating AI into those processes. Those two areas I would say, we’re in the middle of, really investigating and determining next path forward. But for us, all of this is about efficiency across our entire system.

And so that’s part of our lowering our cost to serve. It’s part of our transformation work. And I don’t think it just has to be AI that makes that happen. It could be a combination of processes, robotics, and AI.

Operator: The next question comes from Bascome Majors with SIG. Please go ahead.

Bascome Majors: Brad, as you get into the planning period for next year, can you talk a little bit about some of the higher visibility big-ticket cost items in the budget, be it health and welfare or insurance? Just what is the inflationary backdrop you’re continuing with now? And how do you think shifts into next year? And you put it on the blender with the $50 million plus incremental cost savings, how much do you really need to get from pricing and growth to offset that? Thank you.

Brad Delco: Well, Bascome, the way you started with that question, I was just going to say yes, yes, yes, and yes. I would say the big areas where we’re seeing inflationary pressure always on our people and wages but in particular around benefits. Group medical healthcare costs are, I don’t think it’s unique to J.B. Hunt Transport Services, Inc. I think it’s a challenge for any and all businesses. So that’s certainly an area that I think is a hot topic as we’re thinking about planning for 2026. Insurance, yes, we’re in the renewal process now. It’s probably too early to comment on that.

But particularly as you get into certain layers or areas of coverage, we’re seeing greater cost and largely because of how and how these claims are settling. And I think it’s again, it’s not that’s not unique to J.B. Hunt Transport Services, Inc. The thing that I’m really proud of is, and you heard Shelley and Nick both talk to it and our whole company should be proud of, is our safety performance. I mean, we’re coming off of a very strong year last year, which was best, which bested the prior year.

And year to date, I’ll knock on wood here, our performance is better than last year and the best way to reduce our cost on claims and insurance items is to really to avoid any incidents. And so that’s the goal. The goal is zero and we got a long ways to go to get there. In terms of what do we need, our customers I know are going to push hard unless there is a meaningful change or a change in the supply-demand balance. I think Nick alluded to the fact that there are maybe some things that are starting to pop up that might be reasons for more concern about what the capacity situation looks like going forward.

But we got to at least get above inflation. And if inflation is running 3%, I feel like our industry needs something better than that to get into a healthier spot. And our industry is not in a healthy spot. And I think most of you who have covered this for a long time know that. So our goal and we had a lot of follow-up conversations after our last earnings call about is $100 million net or gross, and I jokingly will say this here, I’ve asked each of those investors to define it for me and they all gave me a different example.

At the end of the day, lowering our cost to serve of $100 million, we want that to show up and be very visible to our owners. And we want to be obviously visible to you as well. But I would say we need something mid-single digits next year for our to at least get back on a healthier path to margin recovery and particularly for some of these transportation providers to reinvest or be at reinvestable levels. So that’s a long answer. I know I didn’t answer it specifically because I don’t want to give guidance as to what our rate expectations might be next year.

But I would hope the value that we’re providing customers will allow us to earn an appropriate return on the investments and the risk we’re taking serving those customers.

Operator: The next question comes from Tom Wadewitz with UBS. Please go ahead.

Tom Wadewitz: Yes, good afternoon. Want to give Shelley a shot at a question here if she wants to take it or I guess could pass along certainly. But when I think about coming out of a downturn in the industry, it seems like there we look for kind of a catalyst to change the shipper mindset. And I know you’ve got tons of experience working with shippers over time. So do you think this the DOT efforts that you listed a number of them, I think there’s a lot of focus on the non-domiciled CDL issue right now. But do you think that those DOT efforts are really causing a lot of concern in the mindset?

And there’s potentially a shift in that mindset that seems important to pricing. And then I guess within that is the 200,000 number DOT talked about, is that you think that sounds right? Or does that not sound right? Thank you.

Shelley Simpson: Yes. Thank you, Tom. And let me start and I’ll have the team kind of jump in here. Overall. When I think about how our shippers are viewing the market, it has been a surprise to all of us. So to J.B. Hunt Transport Services, Inc. and our shippers, how this market still is in the same place it’s been over the more than three years. And so I would tell you, our customers a year ago they were prepared and understood the why. That we would need more price.

It’s not that our customers are unsympathetic to our position, but they’re managing their costs based on what they see from a bid perspective and what they see from a cost perspective. And so, I think it’s incumbent on us. One of the things I think is important is we are a growth company, but we’re a disciplined growth company. We can’t just grow. We have to be disciplined in our growth strategy. And making sure we articulate that.

I’ll tell you this Tom, as much as Darren’s talked about our pricing change, although that might seem really simple to do, in this environment, those were very difficult discussions, but they were really fueled by our operational excellence and being able to talk to our customers about what great work we’re doing and they saw value in that. I’ve not seen us have to fight so hard for 12% before. When you know inflation is so much more than that overall. So I would tell you, I think customers want to help us. We need the market to change in order to do that. Do I think that non-domicile CDL could be a catalyst? Sure.

It would at least make a little more sense to me why there’s so much capacity in the market versus just our statistics say today. But I would tell you things have to change from here. If that’s one of the things that happens, then does that happen in the next twelve months? Does that take twenty-four months for it to happen? But let me just take a pause there and let Nick maybe you want to jump in on the non-doms.

Nick Hobbs: No, yes. And I might just add a couple of quick things here, Shelley. I totally agree. Our customers really the last two years have been planning for changes in cost that really didn’t materialize because they didn’t have to. I think some of the things that we’re seeing right now with a little bit of a disconnect in spot price rates going up versus volumes going down, the first time we’ve seen that. Maybe in the history of some of the data. Our customers look at macro data and spot pricing and volumes. Let me go back to until they actually experience it or feel it at the dock level, until freight is not picked up.

They won’t make a meaningful change. So that’s the area where we’ve got to give them confidence and predictability of our capacity and service, which we’ve done through operational excellence. That as this thing does change, whether it’s near term or over time, they can count on us to take care of their business. Nick?

Nick Hobbs: I’ll just add a couple of things. On the non-dom, I think the $200,000 is fairly legit. But I think there’s a lot of other factors of drivers that’s coming across the border, call it, cabotage. It should only be in the border zone. Is some good data out there. From a couple of sources that’s come out recently to talk about that. And so I just think there’s other factors that’s going to continue to impact that. But really to see any impact in the speed, it’s going to take the economic side along with the regulation side and that’s what’s going to drive the timing is those two. In my opinion.

Operator: The last question comes from Brandon Oglenski with Barclays. Please go ahead.

Eric Morgan: Hey, good afternoon. This is Eric Morgan on for Brandon actually. Thanks for taking the question. Just a quick one on intermodal growth in the East. I think you referenced in the prepared remarks having the labor port issue kind of playing in there. So I’m just wondering how sustainable that level of growth is moving forward and maybe in the context of some of this different seasonality you’re seeing this year would be helpful. Thanks.

Darren Field: Sure. So I think in reference to the labor situation, that had more to do with last year’s comps on the West Coast. Volumes being strong. Our Eastern network volume really doesn’t have a lot of interaction with the import economy a ton. I think that the Eastern network continues to be where we see the best highway to rail conversion opportunity. Our East network also includes Mexico as an example. And so we have really nice solid growth coming northbound out of Mexico as part of that. We think that the vast majority of the millions of loads that remain to be converted from highway to intermodal are in the East.

So we’re encouraged by our growth in the East, and we expect and anticipate we can continue to grow in the East for years to come.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Mrs. Shelley Simpson for any closing remarks. Please go ahead.

Shelley Simpson: Hey, thanks everyone for joining. Hey, we’re pleased with our results in the short term, especially considering this environment. But we have more work to do and we’re not satisfied. We’re going to continue to remain focused on our priorities of operational excellence in both service and safety. We’re going to scale into our investments through disciplined growth, and then we’re going to keep repairing our margins, and that will drive stronger financial performance. We’re a growth company. It’s important, and we have the highest service across all five of our business units. I think the highest since I’ve been with the company from a consistency across the segments.

We see that metric as a key enabler to execute on our strategy and maintain our say-do culture on delivering what we say and what we expect from ourselves. Thanks for your interest, and we’ll see you next quarter.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.