WEBVTT - Instant Reaction: Meta Reports Earnings

0:00:02.600 --> 0:00:10.799
<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business

0:00:10.840 --> 0:00:14.080
<v Speaker 1>Week inside from the reporters and editors who bring you

0:00:14.120 --> 0:00:18.439
<v Speaker 1>America's most trusted business magazine, plus global business, finance and

0:00:18.520 --> 0:00:22.320
<v Speaker 1>tech news as it happens. Bloomberg Business Week with Carol

0:00:22.360 --> 0:00:25.920
<v Speaker 1>Messer and Tim Stenebek on Bloomberg Radio.

0:00:26.280 --> 0:00:29.120
<v Speaker 2>It is Bloomberg Business Week. Shares some meta platforms bouncing around,

0:00:29.160 --> 0:00:31.920
<v Speaker 2>but up about five percent in the after hours. Now,

0:00:32.000 --> 0:00:35.360
<v Speaker 2>the company did report second quarter revenue that beat estimates.

0:00:36.159 --> 0:00:39.600
<v Speaker 2>Revenue coming in at thirty nine point oh seven billion dollars.

0:00:39.600 --> 0:00:42.360
<v Speaker 2>That's a twenty two percent year over year increase, beating

0:00:42.440 --> 0:00:45.680
<v Speaker 2>estimates of thirty eight point three four billion dollars in

0:00:45.720 --> 0:00:48.240
<v Speaker 2>that family of apps revenue that is the core business

0:00:48.560 --> 0:00:50.840
<v Speaker 2>thirty eight point seven two billion dollars in the quarter,

0:00:50.880 --> 0:00:53.920
<v Speaker 2>up twenty two percent. Estimate was for thirty seven point

0:00:53.960 --> 0:00:58.800
<v Speaker 2>seven six Carol highlighted the capex, the company seeing total

0:00:58.840 --> 0:01:01.960
<v Speaker 2>capex thirty seven to forty billion where they sought where

0:01:01.960 --> 0:01:04.720
<v Speaker 2>investors saw thirty five to forty billion. The estimate was

0:01:04.720 --> 0:01:08.679
<v Speaker 2>for thirty seven point five to three billion dollars. So again,

0:01:08.840 --> 0:01:12.200
<v Speaker 2>what we saw from Microsoft and what we saw from Alphabet.

0:01:12.240 --> 0:01:13.800
<v Speaker 3>Here's what I'm going to say. Their bread and butter

0:01:13.920 --> 0:01:16.039
<v Speaker 3>is advertising. They did report better than a sales for

0:01:16.080 --> 0:01:20.559
<v Speaker 3>the second quarter, So again, are right through the Wagner

0:01:20.800 --> 0:01:23.720
<v Speaker 3>Carol offering evidence at the company's heavy investments in AI

0:01:23.880 --> 0:01:27.600
<v Speaker 3>helping itself more targeted and personal personalized advertisements. That is

0:01:27.600 --> 0:01:30.080
<v Speaker 3>still their bread and butter. So if they are saying

0:01:30.120 --> 0:01:32.200
<v Speaker 3>we are spending guys, and we're going to spend even more,

0:01:32.200 --> 0:01:34.440
<v Speaker 3>but look at the results from the past quarter. And

0:01:34.440 --> 0:01:36.840
<v Speaker 3>that's where I'm trying to make sense of the stock

0:01:36.880 --> 0:01:39.399
<v Speaker 3>being up here in the aftermarket, up five percent. It's

0:01:39.440 --> 0:01:41.039
<v Speaker 3>not like people are saying, oh my god, what are

0:01:41.040 --> 0:01:41.479
<v Speaker 3>you spending?

0:01:41.480 --> 0:01:43.600
<v Speaker 2>You all thought you all thought that AI was going

0:01:43.640 --> 0:01:46.679
<v Speaker 2>to make our jobs easier, when in reality it just

0:01:46.720 --> 0:01:49.120
<v Speaker 2>makes Facebook better at targeting ads to you.

0:01:49.320 --> 0:01:52.680
<v Speaker 3>Yeah, yeah, well done. All right, So let's get to it.

0:01:52.720 --> 0:01:55.480
<v Speaker 3>Our team coverage with Bloomberg News contributor John Earlekman joining

0:01:55.520 --> 0:01:58.400
<v Speaker 3>us from Toronto, along with Bloomberg News social media reporter

0:01:58.720 --> 0:02:01.640
<v Speaker 3>Asha Counts joining Usgosh, I want to start with you,

0:02:01.720 --> 0:02:02.400
<v Speaker 3>how did meta do?

0:02:03.920 --> 0:02:05.640
<v Speaker 4>I mean? I think you said it earlier. They beat

0:02:05.720 --> 0:02:09.720
<v Speaker 4>on everything right, The revenue beat expectations actually the top

0:02:09.840 --> 0:02:13.239
<v Speaker 4>end of what analysts expected. And they also beat on

0:02:13.240 --> 0:02:14.880
<v Speaker 4>the amount of users that they have. I mean, they

0:02:14.919 --> 0:02:17.000
<v Speaker 4>just they beat in every dimension. Now, the one thing

0:02:17.040 --> 0:02:19.079
<v Speaker 4>you did mention right with that capex, which is that

0:02:19.200 --> 0:02:20.960
<v Speaker 4>spending a lot of which is going to things like

0:02:21.000 --> 0:02:25.720
<v Speaker 4>a infrastructure. You're talking servers and data and hardware and

0:02:25.760 --> 0:02:29.760
<v Speaker 4>stuff like that. That increased a little bit. But because

0:02:29.800 --> 0:02:32.320
<v Speaker 4>it was that bottom range, right, like, their top line

0:02:32.400 --> 0:02:35.160
<v Speaker 4>level didn't increase. I don't think investors are going to

0:02:35.200 --> 0:02:37.080
<v Speaker 4>be that upset about that. So, yeah, they beat on everything,

0:02:37.680 --> 0:02:39.840
<v Speaker 4>changed a couple of things, but I think overall it's

0:02:39.840 --> 0:02:40.320
<v Speaker 4>good for them.

0:02:40.520 --> 0:02:42.680
<v Speaker 2>Hey, John, what sticks out to you here? You've had

0:02:42.680 --> 0:02:45.840
<v Speaker 2>a few minutes to go over these numbers. What sticks

0:02:45.840 --> 0:02:46.200
<v Speaker 2>out to you?

0:02:47.520 --> 0:02:50.880
<v Speaker 5>Just tim that Mark Zuckerberg and Metas seem to have

0:02:50.919 --> 0:02:51.919
<v Speaker 5>the script down.

0:02:51.720 --> 0:02:53.079
<v Speaker 6>Pretty cold at this point.

0:02:53.120 --> 0:02:55.880
<v Speaker 5>I mean, building on everything you've said, here's a company

0:02:55.960 --> 0:02:58.400
<v Speaker 5>that over the last couple of years, has learned its

0:02:58.520 --> 0:03:03.200
<v Speaker 5>lessons when it comes to what starts to make Wall

0:03:03.240 --> 0:03:06.680
<v Speaker 5>Street uncomfortable on the spending front. And I think that

0:03:07.000 --> 0:03:11.040
<v Speaker 5>the fact that the as you guys highlighted earlier, that

0:03:11.120 --> 0:03:14.480
<v Speaker 5>they can make the case that the revenue that came

0:03:14.520 --> 0:03:19.280
<v Speaker 5>in stronger than expected gets assistance from the investment that's

0:03:19.360 --> 0:03:21.440
<v Speaker 5>coming from all this AI focus.

0:03:22.080 --> 0:03:24.520
<v Speaker 6>That seems to be a helping hand here.

0:03:24.760 --> 0:03:26.840
<v Speaker 5>I would add though, that if you go back to

0:03:26.840 --> 0:03:29.919
<v Speaker 5>the last quarter, remember and by the way, this stock

0:03:29.960 --> 0:03:33.520
<v Speaker 5>always moves a lot. Generally, it moves a lot after earnings,

0:03:33.600 --> 0:03:36.560
<v Speaker 5>either up or down. But the shares got crushed because

0:03:36.720 --> 0:03:41.160
<v Speaker 5>investors had to do another reassessment on this AI spending.

0:03:41.240 --> 0:03:43.680
<v Speaker 5>So arguably we've had some time to fit with this

0:03:44.160 --> 0:03:45.880
<v Speaker 5>and even the stock price. I know it's up a

0:03:45.880 --> 0:03:49.640
<v Speaker 5>lot this year, but at last check it was coming

0:03:49.680 --> 0:03:50.800
<v Speaker 5>into this earnings.

0:03:50.480 --> 0:03:52.440
<v Speaker 6>Report a little bit lower than where it.

0:03:52.440 --> 0:03:55.600
<v Speaker 5>Was heading into the last quarter. So I don't think

0:03:55.640 --> 0:03:58.040
<v Speaker 5>anyone would have been surprised to see a big spending bill.

0:03:58.200 --> 0:04:01.680
<v Speaker 5>But you have stronger than expect did numbers. And remember

0:04:01.680 --> 0:04:04.240
<v Speaker 5>this is also the company that's starting to find shareholder

0:04:04.280 --> 0:04:07.200
<v Speaker 5>friendly tricks and it's playbook. They issued their first dividend

0:04:07.800 --> 0:04:09.760
<v Speaker 5>and they're buying back a lot of stocks, so they've

0:04:09.760 --> 0:04:12.280
<v Speaker 5>got the levers they can pull. But we still have

0:04:12.320 --> 0:04:14.160
<v Speaker 5>to see how all this AI spending nets out in

0:04:14.200 --> 0:04:16.160
<v Speaker 5>the long term. We don't quite know, but they're trying

0:04:16.200 --> 0:04:17.479
<v Speaker 5>to paint a good picture so far.

0:04:17.640 --> 0:04:20.040
<v Speaker 3>Yeah, and for a stock that bopped up I think

0:04:20.040 --> 0:04:22.039
<v Speaker 3>about ten percent here in the aftermarket, we're now just

0:04:22.080 --> 0:04:25.400
<v Speaker 3>up about three point six percent, still higher, but it

0:04:25.680 --> 0:04:28.240
<v Speaker 3>continues as I think investors and analysts continue to go

0:04:28.240 --> 0:04:29.880
<v Speaker 3>through the report and we'll wait to see what comes

0:04:29.880 --> 0:04:32.880
<v Speaker 3>out on the call. Having said that, John, how does

0:04:32.960 --> 0:04:36.159
<v Speaker 3>Meta square with some of the other companies that we

0:04:36.240 --> 0:04:40.800
<v Speaker 3>are so intently focused on their AI spending and their

0:04:40.839 --> 0:04:43.200
<v Speaker 3>AI ROI return on investment?

0:04:44.560 --> 0:04:46.760
<v Speaker 5>You know, everybody is in an arms race here, and

0:04:46.839 --> 0:04:48.400
<v Speaker 5>I think at the end of the day, Carol, you

0:04:48.400 --> 0:04:52.040
<v Speaker 5>could make an argument that because Alphabet came first and

0:04:52.200 --> 0:04:55.800
<v Speaker 5>investors got a little jittery on the roadmap for the

0:04:55.839 --> 0:04:59.880
<v Speaker 5>spending on AI and the return on investment. Remember that

0:05:00.160 --> 0:05:03.080
<v Speaker 5>to coming into this week, tech had been pretty roughed up,

0:05:03.440 --> 0:05:06.960
<v Speaker 5>So it almost dare I say, set the bar lower

0:05:07.360 --> 0:05:10.480
<v Speaker 5>for the tech giants that would be putting out numbers

0:05:10.520 --> 0:05:13.800
<v Speaker 5>this week. I think that at the end of the day,

0:05:14.480 --> 0:05:18.000
<v Speaker 5>longer term, and Mark Zuckerberg said it himself in his

0:05:18.040 --> 0:05:20.359
<v Speaker 5>interview with Emily Chang not that long ago, there is

0:05:20.400 --> 0:05:23.239
<v Speaker 5>a possibility that all the spending they are doing today

0:05:23.880 --> 0:05:28.280
<v Speaker 5>might be an overshoot, but they're right now trying to

0:05:28.400 --> 0:05:32.480
<v Speaker 5>build a future where engagement can be increased through AI,

0:05:33.360 --> 0:05:37.200
<v Speaker 5>that advertisers can have better, more targeted ads through AI,

0:05:37.320 --> 0:05:42.520
<v Speaker 5>that they can have a much cleaner thread between software

0:05:42.560 --> 0:05:44.960
<v Speaker 5>and hardware, like the glasses you're talking about.

0:05:45.480 --> 0:05:47.640
<v Speaker 6>I think they really like where this story is going.

0:05:47.720 --> 0:05:51.000
<v Speaker 5>Over the long term, they're probably getting a boost as well,

0:05:51.520 --> 0:05:54.040
<v Speaker 5>just because there's a lot of eyeballs on big events

0:05:54.160 --> 0:05:56.800
<v Speaker 5>right now like the Olympics, and so they can benefit

0:05:56.839 --> 0:05:57.240
<v Speaker 5>from that.

0:05:58.360 --> 0:06:00.839
<v Speaker 6>But there's the other side of that we don't know

0:06:00.880 --> 0:06:01.400
<v Speaker 6>a lot about.

0:06:01.440 --> 0:06:03.560
<v Speaker 5>Mark Zuckerbergs spent a lot of time in front of

0:06:03.880 --> 0:06:05.520
<v Speaker 5>lawmakers in Washington over.

0:06:05.320 --> 0:06:06.200
<v Speaker 6>The last decade.

0:06:06.320 --> 0:06:09.240
<v Speaker 5>People are still a little concerned, maybe more than a

0:06:09.240 --> 0:06:14.599
<v Speaker 5>little concerned about the ramifications of all this AI technology

0:06:14.640 --> 0:06:18.159
<v Speaker 5>that they're weaving into the Meta ecosystem. But you know,

0:06:18.200 --> 0:06:19.680
<v Speaker 5>at the end of the day, if they can keep

0:06:19.720 --> 0:06:24.400
<v Speaker 5>the bottom line in a relatively clean manner and keep

0:06:24.440 --> 0:06:27.159
<v Speaker 5>growing the revenue story, you know, Meta is in a

0:06:27.160 --> 0:06:30.640
<v Speaker 5>position to have a arguably a cleaner quarterly story than

0:06:30.680 --> 0:06:31.640
<v Speaker 5>some of its peers.

0:06:31.880 --> 0:06:33.400
<v Speaker 2>Hey, so can you talk a little bit about the

0:06:33.839 --> 0:06:39.320
<v Speaker 2>integration of LAMA and AI into meta platforms family of apps.

0:06:39.440 --> 0:06:41.800
<v Speaker 2>You know, Carol and I were joking about the idea

0:06:41.839 --> 0:06:45.080
<v Speaker 2>of the result of all this investment in AI is

0:06:45.120 --> 0:06:46.279
<v Speaker 2>just better targeted ads.

0:06:47.920 --> 0:06:50.240
<v Speaker 4>It's funny because Metta is one of those companies where

0:06:50.279 --> 0:06:53.560
<v Speaker 4>the AI is all behind the scenes, right. So obviously

0:06:53.560 --> 0:06:56.880
<v Speaker 4>they've been using AI for years, per decades to recommend

0:06:56.920 --> 0:06:59.960
<v Speaker 4>content on your feed, whether that's on Instagram or Facebook,

0:07:00.240 --> 0:07:02.760
<v Speaker 4>whether that's posts and images or videos, and so a

0:07:02.760 --> 0:07:05.240
<v Speaker 4>lot of it goes towards that. But then they've also

0:07:05.279 --> 0:07:08.720
<v Speaker 4>released new products like AI chatbot that you could talk to, right,

0:07:08.800 --> 0:07:11.000
<v Speaker 4>So meta AI, if you go on Instagram or Facebook,

0:07:11.040 --> 0:07:12.920
<v Speaker 4>it'll pop up and you can ask it questions and

0:07:13.200 --> 0:07:16.680
<v Speaker 4>things like that, so you see some product experiences. They

0:07:16.720 --> 0:07:19.400
<v Speaker 4>also had rolled out some things like celebrity chatbots, so

0:07:19.480 --> 0:07:23.240
<v Speaker 4>you could chat with a chatbot that looked and sounded like,

0:07:23.760 --> 0:07:25.560
<v Speaker 4>you know, Tom Brady, for example.

0:07:25.240 --> 0:07:29.200
<v Speaker 2>I knew you were gonna say Tom Brady, Yeah, I

0:07:29.200 --> 0:07:30.400
<v Speaker 2>remember he showed that off.

0:07:30.280 --> 0:07:33.480
<v Speaker 4>Right, Yes, yeah, they showed that off. But then they

0:07:33.560 --> 0:07:37.200
<v Speaker 4>shuddered it recently, and so it's like, how much are

0:07:37.240 --> 0:07:39.440
<v Speaker 4>those products and services really moving the needle for them

0:07:39.520 --> 0:07:41.440
<v Speaker 4>or is it really just again like you're saying, going

0:07:41.480 --> 0:07:44.680
<v Speaker 4>back to the core advertising business, going back to the feed,

0:07:44.720 --> 0:07:46.960
<v Speaker 4>and how do they recommend content that users actually want

0:07:46.960 --> 0:07:47.520
<v Speaker 4>to watch the view?

0:07:47.800 --> 0:07:50.160
<v Speaker 3>Can I help me out here? Is there something in

0:07:50.200 --> 0:07:53.600
<v Speaker 3>this release that sells specifically shows specifically is there a

0:07:53.760 --> 0:07:57.400
<v Speaker 3>number or something that says, Yep, here's our AI investing

0:07:57.560 --> 0:07:59.720
<v Speaker 3>and here's how it paid off? I mean, or John,

0:07:59.720 --> 0:08:03.760
<v Speaker 3>do we just assume that if the revenue is beating

0:08:03.960 --> 0:08:06.720
<v Speaker 3>that it's because of AI spending? You know what I mean?

0:08:07.840 --> 0:08:10.480
<v Speaker 6>Yeah, I absolutely know what you mean.

0:08:10.560 --> 0:08:13.000
<v Speaker 5>I mean, the first line in the press release itself

0:08:13.120 --> 0:08:15.760
<v Speaker 5>was really trying to talk more about how AI is

0:08:15.840 --> 0:08:17.640
<v Speaker 5>complementing the hardware that they've got.

0:08:17.840 --> 0:08:19.840
<v Speaker 6>Yeah, and that might just speak to the fact that

0:08:20.080 --> 0:08:21.440
<v Speaker 6>go back a couple of years.

0:08:21.240 --> 0:08:26.840
<v Speaker 5>Ago, as we were just highlighting like AI is technically

0:08:26.840 --> 0:08:29.280
<v Speaker 5>not a new thing for the company, but it is

0:08:29.320 --> 0:08:31.160
<v Speaker 5>the hot thing for the world to talk about. So

0:08:31.240 --> 0:08:32.800
<v Speaker 5>it is front and center right now. But a couple

0:08:32.800 --> 0:08:35.080
<v Speaker 5>of years ago what was front and center was quite

0:08:35.080 --> 0:08:37.640
<v Speaker 5>literally changing the name from Facebook to Meta and talking

0:08:37.679 --> 0:08:40.480
<v Speaker 5>about the metaverse and talking about you know, other VR

0:08:40.559 --> 0:08:43.040
<v Speaker 5>and AR opportunities. And so I think that there is

0:08:43.080 --> 0:08:47.400
<v Speaker 5>still because of the explosive spending in that area. You know,

0:08:47.520 --> 0:08:50.720
<v Speaker 5>maybe this is Mark Zuckerberg just wanted to put a

0:08:50.760 --> 0:08:53.640
<v Speaker 5>pin in the fact that they can actually make all

0:08:53.679 --> 0:08:56.400
<v Speaker 5>of this thing together. I would imagine, Carol, you get

0:08:56.480 --> 0:08:59.959
<v Speaker 5>more color on how they're connecting the advertising dots on

0:09:00.120 --> 0:09:04.040
<v Speaker 5>the quarterly conference call. But the revenue growing. I think

0:09:04.280 --> 0:09:08.079
<v Speaker 5>already analysts, in reaction to this as Bloomberg is reporting,

0:09:08.240 --> 0:09:09.400
<v Speaker 5>are suggesting that as the case.

0:09:09.520 --> 0:09:11.439
<v Speaker 3>Listen, both of you. Thank you so much. Bloomberg News

0:09:11.480 --> 0:09:14.360
<v Speaker 3>contributor John Arlokman out there in Toronto. Bloomberg News social

0:09:14.360 --> 0:09:17.560
<v Speaker 3>media reporter Asha Counts in Chicago shares a mediciin right

0:09:17.559 --> 0:09:18.960
<v Speaker 3>now up five point four percent,