Earnings call transcript: Almarai tops revenue forecasts in Q2 2026

Almarai reported Q2 2026 revenue of SAR 5.9B (+11% YoY), beating the SAR 5.67B forecast by ~3.53%, while EPS was $0.5693—exactly in line with estimates. Operating profit was flat at SAR 814M and net income slipped 1.8% to SAR 636M as cost pressures (freight/logistics, energy inflation, commodity inflation and ramp-up costs) offset the stronger sales. Management guided margins to improve in Q3–Q4 as the late-May dairy price increase fully flows through and poultry ramp-up costs ease; shares rose 1.86% to $46.98, a constructive but restrained reaction.

Analysis

The NVDA headline is more important for sentiment than for this quarter’s fundamentals: custom-chip efforts at frontier AI customers are a gradual margin and bargaining-power risk, not an immediate demand cliff. The first-order loser is NVDA’s multiple if investors start discounting a larger ASIC mix, but the second-order effect is more nuanced: the ecosystem moat still matters, so the real threat is slower price realization over 12-24 months rather than unit displacement in the next few quarters.

The more actionable read is on GCC staples. Almarai is signaling that pricing is finally catching up to input and logistics inflation, while its willingness to sacrifice low-margin share suggests a healthier portfolio mix ahead. That creates a relative winner set in branded regional food with strong distribution and local sourcing; import-heavy or price-led competitors should feel margin pressure if freight/war premiums stay elevated. The catch is cash conversion: inventory cover and higher funding costs can keep free cash flow weak even as reported margins improve.

Catalyst path matters: over the next 1-3 months, the market will trade the H2 margin inflection versus stubborn freight/energy costs and whether the dairy price increase actually compounds in the run rate. Over 6-18 months, the key question is whether capex tapering and poultry scale translate into ROIC expansion or just more working-capital drag. Contrarian view: consensus may be too focused on top-line resilience and underappreciating that management is intentionally giving up low-quality revenue; if that discipline sticks, earnings quality can improve faster than reported EPS.

Key Decisions for Investors

• NVDA: do not short the stock aggressively on the DeepSeek-chip headline alone; if anything, use any post-news weakness as a watch item for a 1-3 month tactical long only after confirming hyperscaler capex commentary does not deteriorate. Falsifier: evidence that major AI customers are moving meaningful inference workloads to in-house silicon faster than expected.
• Almarai (2280): accumulate on pullbacks ahead of Q3/Q4 as a margin-recovery trade, with the thesis driven by full-quarter pricing realization and easing poultry ramp costs. Risk/reward is attractive if gross margin expands sequentially; falsifier: freight/insurance or energy costs re-accelerate and offset pricing.
• Pair trade: long Almarai / short a more price-sensitive regional food competitor or import-heavy GCC consumer basket if available in the book; the relative winner should be the operator with the strongest pass-through and local supply chain, not the cheapest shelf-price brand.
• If we want an options expression, buy medium-dated calls on Almarai only on a pullback after the next freight-data or Q3 margin confirmation; avoid chasing here because working-capital drag can keep the stock range-bound despite better earnings quality.