It has been a rough week of being sick. I have slept a ton but thankfully, prior to going down and out, Cerebras provided a teaching moment, and driving in to work Friday at 4:30 a.m. provided another as I listened on CNBC to Ed Bastian, the CEO of Delta, talk about the company’s earnings release.
Delta: How companies respond to rising costs
In my September 12 Weekly Notes, I discussed the inflation report and how differently rising prices affect businesses and consumers.
While overall inflation was at 3.4 percent, the nuances within that figure were dramatic. Gasoline prices had increased 27.4 percent over the prior year, and airline fares were up 23.4 percent.
I used my own employer as an example. I am the CFO of a large auto transportation company, and fuel is one of our biggest expenses. When diesel prices rise, we don’t have the option of simply using less fuel. We still have vehicles to transport, trucks to operate, and customers to serve.
As I explained then, a company facing higher costs has two basic choices. It can absorb the increase, reducing its profitability, or it can attempt to pass the increase along to customers. In reality, most companies end up doing some combination of the two.
Friday morning, Delta reported its September quarter earnings and provided a great example.
The airline consumed 1.146 billion gallons of fuel during the quarter, compared with 1.138 billion gallons a year earlier. That’s an increase of less than 1 percent.
But the amount Delta spent on fuel increased from $2.565 billion to $4.143 billion.
Delta used less than 1 percent more fuel but spent nearly $1.6 billion more to purchase it, an increase of 62 percent. That is the impact of higher fuel prices discussed in September.
Airlines can respond by raising ticket prices, although they may not be able to recover every additional dollar. The September inflation report showed industrywide airline fares up 23.4 percent. That figure is not specific to Delta.
Delta reports earnings under generally accepted accounting principles (GAAP), along with adjusted results that exclude certain items management believes do not reflect its underlying operating performance. I am using adjusted figures here. I explained the differences in How to Read an Earnings Release.
Delta’s adjusted revenue increased from approximately $15.2 billion to $17.6 billion, a gain of nearly $2.4 billion, or 16 percent. Higher fares contributed, but passenger demand and other revenue sources also affect the total. We cannot attribute the entire increase to ticket prices, but higher fares absolutely contributed to Delta’s ability to offset its rising fuel costs. Ultimately, customers paid more to travel.
Despite the nearly $1.6 billion increase in fuel expense, Delta’s adjusted operating profit declined by only $26 million, from $1.688 billion to $1.662 billion.
The additional revenue helped offset higher fuel costs, along with changes elsewhere in the business. Delta did not pass every additional fuel dollar directly to customers, and fuel was not its only expense that changed. But the impact on operating profit was far smaller than the increase in its fuel bill.
That is the choice I described in September. Companies try to recover higher costs through pricing, absorb what they cannot recover, and manage other parts of the business to protect profitability. For investors, the important question is not just how much a major expense increased, but how the company responded.
That brings me back to the CNBC interview I listened to on my way to work Friday morning. During that interview, Bastian expressed pride in how his team responded to the higher fuel costs.
Cerebras: The story really wasn’t over
Last Saturday, in my October 3 Weekly Notes, I revisited several IPOs I had discussed throughout the summer: Cerebras, SpaceX, and SK Hynix.
My point was that an IPO isn’t a one-day event. The excitement surrounding a new stock eventually gives way to the realities of running a business, meeting expectations, and convincing investors that the company is worth its valuation.
We reviewed the stock price performance now that some of the IPO mania had worn off. I closed that discussion by reminding readers that the story wasn’t over.
Well, it didn’t take long for Cerebras to prove my point. A report from research firm SemiAnalysis indicated that OpenAI was using Nvidia hardware rather than Cerebras chips for a particular high-speed version of its latest AI model.
That raised concerns about Cerebras’ relationship with one of its most important customers. The stock declined nearly 20 percent during the week, closing Friday, October 2, at $166.43.
Then Sam Altman, CEO of OpenAI, posted on X that Cerebras is “a close partner, and we have a deep engagement pushing on the frontiers of speed.”
On Monday, Cerebras jumped more than 9 percent, closing at $181.55.
That’s a $15.12 increase in the stock price in a single trading session.
But by the market close on Friday, October 9, the shares had fallen to $164.17, giving up all of Monday’s gain and then some.
The original report suggested OpenAI had selected Nvidia hardware for a specific application. Altman’s statement reassured investors that Cerebras remained an important partner.
But those are two different things.
A company can remain an important partner while losing out on a particular piece of business.
Altman’s statement did not directly resolve the question raised by the original report. Yet investors initially reacted as though the news had meaningfully improved Cerebras’ outlook.
We cannot know precisely what motivated every buyer or seller.
But for newer investors, there is an important distinction between a change in a company’s business and a change in how investors feel about that business.
Stock prices respond to expectations, and those expectations can change quickly, particularly for recently public companies with uncertain future earnings.
That doesn’t mean the market is always wrong. It means a stock’s movement isn’t necessarily proof that the underlying business has improved or deteriorated.
Before reacting to a headline, ask yourself a simple question:
Did this news actually change the company’s future prospects, or did it just change investor sentiment?
Yet again, the story is still not over.
Twenty Two Years
Just a quick note before I go. Happy Heavenly birthday (October 9) to my Dad. He passed away 22 years ago but his lessons continue to shape me to this day. He was an amazing man and father.
Blessings Come From the Worst of Times.
See you next Saturday.
Christopher
Weekly Notes — October 3, 2026