Episode 205: Budget Destroys Gen Z Hope, Xero Calamity Continues, Atlassian Rebounds, Lime to IPO and Temple & Webster Crunched
The guys discuss Australia's Federal Budget Horror Show, Xero's highly paid CEO fails again, Atlassian rebounds (a little), Temple & Webster downgraded and Lime Bike prepares to IPO.
The Contrarians catchup
The budget fallout dominated the week. Adir’s read on the mix: “10% good intentions, 50% incompetence, and 40% malice.”
Xero suffered five straight days of outages, with CEO Sukhinder Singh Cassidy forced to issue a personal apology. Adir: “It’s still an incredible business. I’m going to say we have to have a category of business, Atlassian is very much inside it, which is: you’re a really good business making lots of revenue. Stop spending it, generate profits and give it to your shareholders.”
Speaking of which, Atlassian announced it will make a profit next year, ending a run of losses dating back to 2016. Revenue grew 32%, margins expanded. But the number of customers paying $10,000+ per year went effectively flat for the first time in the company’s history. Adam: “All that revenue uptick was expansion revenue. There’s only so long these guys can keep pushing customers to pay more.”
Alphabet’s search business is up 9% year on year despite years of predictions it would collapse. Adir: “Two years ago I’m like, well, search is over. Everyone’s just gonna AI the answers to everything. And like their search business is growing at 20%.”
The budget
Six days on from Jim Chalmers’ budget, Adam and Adir delivered a full post-mortem. The headline changes: removal of the 50% CGT discount on all assets, replacement with an inflation-indexing scheme, and negative gearing restricted to new-build properties only. The verdict was damning on almost every front.
On who this actually hurts:
Adam: “This is a budget that is absolutely smashing anybody under the age of 50. It is taking a knife to their throat. You could not have had a bigger suite of policies that is making rich people richer and poor people poorer. And you can literally go through them.”
Adir: “They walk up to you and they say, are you wealthy enough, or probably old enough, to already own property? Yes. Did you benefit from a special tax concession to build your wealth with property? Yes. Okay, we’ll let you keep that forever. Are you aspirational to buy property? Are you too young to have already owned a property? Well, when you own a property, we’re not going to let you have that benefit. Why not? Because you were kind of born 20 to 40 years too late. I mean, that is ultimately the pitch that they’re giving to the electorate.”
On founders:
Adir: “There’s a 28-year-old and they’re working in a cafe as a barista. They go and do that and over the course of five years build up three cafes. They sell that business for a million dollars. Under the old system, they would have paid $250,000 tax and kept $750,000. Under the new system, instead of getting paying 25% tax, they now pay 50% tax. Instead of having $750,000, they have $500,000. That is an enormous difference. That is not a rich person.”
Adam: “If you’re a founder, at least with product market fit, and you don’t need to be in Australia for running this business, you absolutely should not be a tax resident in Australia. As soon as you realise you’ve got product market fit, you flee. And Australia will just lose all that upside. Everybody’s gonna do that. People aren’t stupid.”
On the lying:
Adir: “Whatever you think of the Labor Party, if you vote to re-elect them, what you’re effectively saying is: we are going to reward you for directly lying. This was a straight repeated lie under direct questioning. And what that means is, the crime pays message, there is no point having integrity in politics, because we will only punish you for it.”
Adam: “They broke, as you say, incredible election promises by removing negative gearing on established homes and creating what is literally the world’s highest capital gains tax regime. We now have basically the highest capital gains tax, the highest individual tax, or very close to the highest individual tax, and one of the higher company tax rates, unless of course you’re a foreign-owned company which you pay virtually no tax.”
On the revenue it actually raises:
Adam: “After all this destruction that’s going to cause, it barely raises any money. The amount they’re going to raise in this tax is about half as much as they spend on autistic kids through the NDIS. And you know what? We’re gonna destroy startups.”
On the rental market:
Adir: “I went and spoke to some real estate agents today. The rental stock in Melbourne apparently has already fallen through the floor because of the land tax changes. There’s a whole lot of people that have put their properties on the market and are selling them. Because after you pay for the land tax increase, the rent is not worth collecting. And now, a whole lot of these people that were about to sell have now put them back on the rental market. Because they can still keep the negative gearing if they rent them out. My point is not that it’s good or bad. My point is the law of unintended consequences runs deep. This government has come along and said ‘let’s just go and break everything and see what happens’.”
Temple & Webster played out exactly as predicted
Temple & Webster revealed underlying EBITDA for FY26 of $20-22M, well below analyst consensus of $30.2M. Revenue guidance came in 6% below forecasts. The company pointed to its most profitable April ever and guided to $40M EBITDA in FY27, 13% above consensus.
Adir: “Four weeks ago, like I was ultra explicit on what I thought was gonna happen to Temple and Webster. It’s played out exactly as expected. A new CEO was gonna change the narrative away from growth at all costs. That’s what’s happened. But the lack of revenue is not going to make up the profitability hole that they’re going to have.”
Adam: “The Contrarians were a couple of years ahead of what pretty much the entire market thought. We both said this at least two or three years ago. We said it was a brilliantly run $300M business, and this was when the business was worth three billion. Since then the share price has slumped by 80% and it’s now worth just under $600M.”
Adir: “Well, I think they can grow. I think this business should happily grow fifteen plus percent. This revenue miss is the market’s fault. They’re still growing. I just think this is what we thought it was. Just took a while to get there. God, I wish I would have shorted this in actuality all the way down.”
Deep dive: Lime
Lime, the global e-bike and scooter rental business, filed its S1 last week ahead of an IPO targeting a $2B valuation. Revenue has grown from $521M to $887M over three years. The company has a debt bomb: $846M in convertible notes with $700M due by end of 2026 and only $260M in cash. The IPO is essentially a necessity.
Adir: “They say we are the largest global shared micromobility business. Their footnote is: we define global operators as businesses with micro mobility solutions available in cities on at least three continents. Well that doesn’t sound arbitrary at all.”
Adir: “They report adjusted gross profit margin, which means, imagine if we got to make a gross profit, but imagine we didn’t have to buy the actual bikes. And the problem is if you’re a scooter and bike business and you decided not to have scooters and bikes, it would be probably difficult to earn the rest of the gross profit. You have just undermined your credibility with me completely with that single action.”
Adam: “If you believe in powers, they’ve got scale, they’ve got brand, they’ve got a bit of counterpositioning, if you’ve got three and a half powers, it’s pretty rare when a business doesn’t do well.”
Adir: “Do you think this business can 11x in size from what it did in 2025? That’s $10B in revenue. And do you think they could make a 20% margin? Probably. And so that’s two billion dollars in NPAT they could achieve in the future. This could be a $50B business.”
Adam: “If I was Uber, I’d buy this tomorrow and pay three or four billion. There is no more logical fitting business for Uber than this.”
Five other stories worth following:
Claude is reportedly nudging some users to sleep or rest, prompting mixed reactions. Fans call it charming self-care; critics find it intrusive, especially since Claude can misread time. Anthropic is investigating the quirk now.
An advisory jury in Oakland begins deliberating Musk v. Altman, though Judge Yvonne Gonzalez Rogers decides liability. A remedies phase also starts, weighing consequences if Musk prevails over OpenAI’s shift from nonprofit to for-profit.
Berkshire Hathaway’s new CEO Greg Abel is already reshaping the portfolio, pausing Buffett’s Apple sell-off, boosting Alphabet, and cutting Amazon, Visa, Mastercard, Domino’s, UnitedHealth, and nearly all of Constellation Brands.
A federal judge has paused Anthropic’s $1.5B copyright settlement with authors, seeking more clarity on why some class members objected to the deal and chose to opt out before approval proceeds.
Drake surprised fans by releasing three albums and 43 songs, boosting his odds of overtaking Justin Bieber for May 2026 Spotify listeners, though both artists still trail Bruno Mars in prediction markets.