Brew Markets: "UPS Delivers, Royal Caribbean Shares Sink & OpenAI’s Critical Split"
Date: October 28, 2025
Host: Ann Berry (with John Curto)
Podcast: Brew Markets (Morning Brew)
Overview
In this episode, Ann Berry and John Curto break down major stock market moves and business stories from the day. They focus on the seismic split at OpenAI, examine UPS’s strategic shift away from Amazon, explain why Royal Caribbean shares slipped despite strong numbers, celebrate Wayfair’s outperformance, and untangle the creative financing behind Keurig Dr. Pepper's $18 billion JD Peet’s deal. The hosts round out the episode with quick hits on Nvidia’s news blitz and rapid-fire labor market updates.
1. OpenAI’s Critical Split: Nonprofit and For-Profit Pathways
Segment Start: [01:04]
Key Points
- OpenAI has split into two:
- Nonprofit arm: OpenAI Foundation (controls the mission).
- For-profit arm: OpenAI Group (valued at $500B, structured as a Public Benefit Corporation).
- Directors must weigh both profit and public benefit: “to ensure that artificial general intelligence benefits all of humanity” (Berry, [01:21]).
- Reason for the split:
- Fulfills conditions of SoftBank’s $40B investment (including lifting profit caps and allowing equity).
- Unlocks $20B from SoftBank now, and future fundraising/IPO potential.
- The OpenAI Foundation holds a controlling 26% stake in OpenAI Group, with a warrant for more if share price rises 10x in 15 years.
- Microsoft holds a similar stake (27%).
- Massive, credible board:
- Key members: Sam Altman, Brett Taylor, Adam D’Angelo, Dr. Sue Desmond-Hellmann, Dr. Zico Coulter, General Paul Nakasone, Adebayo Ogunlesi, Nicole Seligman, and Larry Summers.
- Ann: “I’m out of breath because that’s… a heck of a lot of collective credibility betting big on OpenAI’s reputation… trying to cocoon a company with very credible people to make sure that even if things are complicated, there’s at least the halo of trying to do things the right way.” [04:11]
2. UPS Earnings: A Bold Pivot Away from Amazon
Segment Start: [05:41]
Key Points
- UPS shares surged 8% on strong earnings ([06:08]), despite being down 25% on the year.
- Reported $21.4B in revenue, $1.8B op profit.
- In midst of post-pandemic turnaround.
- Strategic move: Aggressively cutting back business with Amazon.
- Amazon accounted for 12% of revenue last year.
- UPS is halving Amazon shipping volume by next year, aiming for higher margins.
- Quote: “Amazon is our largest customer, but it’s not our most profitable customer.” (Carol Torme, UPS, as cited by John Curto [06:45])
- Operational overhaul:
- Closed 19 buildings in the quarter, nearly 100 this year.
- Cut 48,000 management and ops positions.
- Cost savings: $2.2B for 2025.
- Margins up to 10% (a 1.2 percentage point increase from prior period).
- Ann’s macro perspective:
- She looks for clues in earnings call transcripts, separating company-specific “esoteric” issues from broader economic trends.
- “Part of the reason again that they’re having this very positive share price performance today is…you’re also telling your story convincingly.” [09:04]
3. Royal Caribbean: Strong Numbers, Sinking Shares
Segment Start: [10:13]
Key Points
- Royal Caribbean (RCL):
- Market cap near $80B; up 25% YTD.
- Cruises favored for value when times are tight (“when consumers are feeling pressure... it provides to the customer a really compelling value proposition”—Ann, [10:56]).
- Reported beats but shares fall 10%:
- Beat earnings expectations; raised full-year guidance.
- Cited strong demand and cost cuts.
- CEO Jason Liberty (quote): “Cruises...are an incredible value for the money...impossible to replicate for the money spent.” ([11:14])
- Missed on revenue by $30M due to adverse weather and temporary closure of their new private island (Labadee).
- Cash position up 75% YoY; dividends up 33%; share buyback executed.
- Ann: “The shares are down because expectations…were even stronger than was actually delivered...” ([12:33])
- Growth initiatives:
- Announced Royal Beach Club in Santorini, aiming for eight “private destination” properties by 2028.
4. Wayfair’s Impressive Growth: Loyalty Superpower & Supply Chain Savvy
Segment Start: [13:15]
Key Points
- Wayfair surges: Shares up 140% YTD; market cap of ~$14B.
- Net revenue: $3.1B (up 8% YoY).
- Orders up 5% YoY.
- Record EBITDA (outside pandemic peak).
- Resilience despite tariffs:
- Big White House tariff scare on furniture.
- CFO: “Limited impacts of price increases” ([13:45]).
- Massive, diversified supply chain lets Wayfair dodge supply-side shocks.
- Omnichannel retail:
- Brick-and-mortar under AllModern, Birch Lane, Joss & Main, Perigold, and one Wayfair store in Illinois.
- Physical+digital strength reminiscent of William Sonoma.
- Loyalty program:
- 80% of orders from repeat buyers (“It just feels like a very heavily concentrated set of spend.”—Ann, [15:56]).
- Marketing expenses down—efficiency up.
- Ann: “When you get this right, you really get it right. Ulta for the longest time had its loyalty program as a superpower.” ([16:10])
5. Creative Financing Explainer: Keurig Dr. Pepper’s Convertible Preferred Stock
Segment Start: [17:56]
Listener Question by Josh from Durham, NC
Key Points
- Keurig Dr. Pepper’s $18B deal for JDE Peet’s (splitting business into coffee vs. other beverage arms).
- High debt load ($22B combined), so they’re using convertible preferred stock—“sits halfway between regular shares and debt.”
- $3B issued to KKR & Apollo; pays 4.75% annual dividend; can convert to common stock at a 40% premium.
- Additional $4B backing from KKR, Apollo, Goldman Sachs for coffee pod manufacturing after split.
- Ann: “This structure checks a lot of boxes... brings in billions of dollars without adding as much traditional debt and also avoids the heavy dilution...” ([20:10])
- Big picture:
- Reflects “companies now getting really creative to fund big, big deals... now that mergers and acquisitions are back in full swing.” ([18:09])
- Use of this hybrid instrument signals management and investor confidence in future upside.
6. Stock Market & Labor News Roundup
Segment Start: [21:18]
Notable Moves
- Indices rose:
- S&P +0.25%, Dow +0.33%, NASDAQ +0.8%.
- Major layoffs:
- Paramount-Skydance (~1,000), Meta (100+), Amazon (14,000, 4% of workforce).
- Despite this, ADP private payroll data shows US labor market rebounding (+14,000 jobs/week average in October).
- Eyes on Federal Reserve's interest rate decision tomorrow.
7. Nvidia: Nonstop Announcements
Segment Start: [22:08]
- Major moves in a single day:
- Partnership with US Department of Energy.
- Seven new government supercomputers.
- $1B investment in Nokia.
- New AI partnerships with Samsung & Hyundai.
- $500B in expected business over next six quarters.
- Ann’s reflection:
- “That was a lot of news coming out of just one company. We're going to keep watching that...” ([22:52])
Memorable Quotes
-
On OpenAI’s public benefit structure:
- “Even if things are complicated, there’s at least the halo of trying to do things the right way.” — Ann Berry [04:12]
-
On UPS cutting Amazon ties:
- “Amazon is our largest customer, but it’s not our most profitable customer.” — Carol Torme (via John Curto) [06:45]
-
On Royal Caribbean’s value:
- “Cruises...are an incredible value for the money...impossible to replicate for the money spent.” — CEO Jason Liberty (read by John Curto) [11:14]
-
On Wayfair’s loyalty moat:
- “80% of total orders... are being driven by repeat customers. Which sort of begs the question, how much repeat purchasing do you need to do to spend on your home?” — Ann Berry [15:56]
-
On financial creativity:
- “There’s going to be more creative financing. I’ve no doubt about that. We’re going to keep watching.” — Ann Berry [21:01]
Timestamps for Key Segments
- OpenAI split/deep-dive: [01:04] – [05:04]
- UPS earnings & strategy: [05:41] – [10:07]
- Royal Caribbean results: [10:13] – [13:03]
- Wayfair breakdown: [13:15] – [16:10]
- Keurig Dr. Pepper financing: [17:56] – [21:04]
- Market news & Nvidia: [21:18] – [22:59]