U.S. SMID FIRST TO MARKET

Research evidence excerpt

U.S. SMID FIRST TO MARKET

North America Equity Research

U.S. SMID First to Market 17 July 2026

Top Stories

AFL | Vertical Software (Alexei Gogolev/Ella Smith)

The New Mote: Distribution, Governed Data and Workflow Entrenchment; ADSK, GWRE, and QTWO

Among Top Picks

Generative AI has reframed the core question in vertical software: not whether software can be built, but what actually makes it

defensible. For years, the bull case was specialization: niche workflows, industry-specific data, and switching costs that

horizontal players struggled to replicate. AI complicates that narrative by compressing the marginal cost of building

applications, pushing defensibility beyond the application layer and into deeper control points.

| | AFL | Mortgage REIT 2Q26 Preview (Richard Shane)

Playing the Long Game; Establishing 2027 PTs; Upgrading ABR to N, Downgrading AGNC to N and

KREF to UW; Rest Unchanged

The defining shift since our last sector outlook is the market's pivot from anticipating rate cuts to bracing for higher-for-longer,

and potentially higher-from-here. Persistent inflation and fiscal concerns have kept the front end elevated, and our U.S.

Economics team expects the Federal Reserve to remain on hold through at least 3Q27, with rate hikes a real possibility if

inflation continues to exceed target.

Mentions

US Equity Derivatives Strategy (Bram Kaplan, CFA/Daniel Motoc, CFA/Arda Sebuktekin)

Q2 Earnings Volatility, Trading Tech and Consumer Segments into Reporting, Single Stock Futures

Launching

Duolingo (Bryan M. Smilek) (DUOL, N, PT $125.00)

Raising DAU Estimates into 2Q Earnings; Focus on User Growth, 2H Bookings Re-Accel, & Adj.

EBITDA Margins; Neutral w/$125 PT

CW | Arrowhead Pharma (Brian Cheng) (ARWR, OW, PT $95.00)