WEBVTT - Instant Reaction Earnings Roundup: Microsoft, Meta & Tesla Deliver Results 0:00:02.480 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.160 --> 0:00:13.800 This is a breaking news update from Bloomberg, instant reaction 0:00:14.080 --> 0:00:17.919 and analysis from our three thousand journalists and analysts around 0:00:17.960 --> 0:00:18.439 the world. 0:00:20.000 --> 0:00:22.400 Carol Masser along with Tim Stanovik live in our Bloomberg 0:00:22.480 --> 0:00:26.479 Interactive Brokers studio. As we mentioned, those big three of 0:00:26.480 --> 0:00:29.400 the MAGS seven reporting right now, Meta is up about 0:00:29.400 --> 0:00:32.360 four and a quarter percent. Microsoft down about five percent 0:00:32.400 --> 0:00:36.400 off its after market lows. Tesla has also bounced back here. 0:00:36.440 --> 0:00:39.120 I want to bring in Bloomberg Intelligence Senior technology analyst 0:00:39.159 --> 0:00:42.960 on orog Rana. He joins us in Bloomberg's Chicago bureau. 0:00:43.120 --> 0:00:47.080 Microsoft down five percent right now. Taking a look at 0:00:47.440 --> 0:00:50.040 some of the headlines on arog dot crossed, I know 0:00:50.080 --> 0:00:53.040 you've only had a few minutes to actually look at these. 0:00:53.240 --> 0:00:56.760 Second quarter Azure and other cloud revenue XFX was up 0:00:56.880 --> 0:00:59.880 thirty eight percent, meeting estimates. Second quarter revenue for the 0:00:59.880 --> 0:01:04.440 company beat estimates at eighty one point two seven billion dollars. 0:01:05.040 --> 0:01:09.160 Second quarter intelligent cloud revenue beat estimates. We also saw 0:01:09.240 --> 0:01:12.440 forty three hundred Microsoft three sixty five commercial seats grew 0:01:12.520 --> 0:01:15.520 six percent. Forty five percent of commercial RPO was driven 0:01:15.520 --> 0:01:19.640 by Open Ai commitments Commercial Remaining Performance Obligation six hundred 0:01:19.640 --> 0:01:23.400 and twenty five billion dollars. What's not to love here? 0:01:23.560 --> 0:01:24.560 Is it all about capex? 0:01:25.680 --> 0:01:28.400 No? I think it's usually high expectations, and you know 0:01:28.440 --> 0:01:31.600 the fact that they only met Azure growth rates, which 0:01:31.680 --> 0:01:34.040 was thirty eight percent. I think that's probably weighing on 0:01:34.080 --> 0:01:36.600 the stock because you know, one would have expected them 0:01:36.640 --> 0:01:39.039 to blow out that number. It has been around thirty 0:01:39.080 --> 0:01:41.280 nine percent the last couple of quotos, so I think 0:01:41.280 --> 0:01:43.840 that's where a little disappointment could be. But that could 0:01:43.840 --> 0:01:46.080 also be because of supply constraints. That's something we have 0:01:46.160 --> 0:01:49.160 highlighted in our research before. But you know, if you 0:01:49.160 --> 0:01:50.920 look at some of the other numbers, such as our 0:01:50.960 --> 0:01:53.800 PO you mentioned above, six hundred billion, that's very impressive, 0:01:54.120 --> 0:01:56.280 and we already know the capex was going to go up, 0:01:56.320 --> 0:01:58.800 So I think in tandem, that's the only number that 0:01:58.840 --> 0:02:01.880 sticks out that they didn't beat by a decent amount. 0:02:02.040 --> 0:02:03.720 All right, So then I don't know, what do we 0:02:03.760 --> 0:02:06.600 want to dig into a little bit more deeper? It 0:02:06.640 --> 0:02:10.000 does Microsoft's quarter includes net gains from investments. 0:02:09.560 --> 0:02:10.200 In open Ai. 0:02:10.680 --> 0:02:11.840 Are we going to get a little bit more of 0:02:12.320 --> 0:02:15.000 a picture about that and what's going on there? 0:02:16.000 --> 0:02:17.799 I think the question I have is, you know, there's 0:02:17.840 --> 0:02:19.959 a big number that you know, that six hundred and 0:02:20.000 --> 0:02:23.600 ninety six hundred plus billion RQO you mentioned, there is 0:02:23.760 --> 0:02:26.480 a large portion of that comes from OPENINGI. So the 0:02:26.520 --> 0:02:28.480 big question is, you know, how is Opening I going 0:02:28.520 --> 0:02:30.680 to fund this thing? Do they have the capital to 0:02:31.000 --> 0:02:33.560 actually fund let's say two hundred plus billion dollar commitment. 0:02:33.960 --> 0:02:36.680 But other than that, what are other clients spending that 0:02:36.720 --> 0:02:39.079 are not Open EI? And you know, how is that 0:02:39.120 --> 0:02:42.400 business going? And if that wasn't the case, how should 0:02:42.400 --> 0:02:44.720 we look at as your growth in the coming quarters. 0:02:44.880 --> 0:02:46.560 I think those are the big questions that we need 0:02:46.600 --> 0:02:47.240 answered right now. 0:02:47.280 --> 0:02:49.520 I don't remember where I saw this. I don't remember 0:02:49.520 --> 0:02:53.160 if it was on a program yesterday. I think I might. 0:02:53.240 --> 0:02:56.760 My brain is mush. I'm sorry on rock, but was it? 0:02:56.760 --> 0:02:57.440 It was all. 0:02:57.320 --> 0:03:03.640 About Claude from Anthropic competing with Copilot and Claude offering 0:03:04.400 --> 0:03:08.880 products and services at a fraction of the cost or 0:03:08.880 --> 0:03:13.080 even free versus what companies are paying for. When it 0:03:13.120 --> 0:03:16.400 comes to Microsoft Copilot, how big of a threat is that? 0:03:17.200 --> 0:03:17.359 Oh? 0:03:17.440 --> 0:03:19.920 Actually, I mean to be very honest, right now, the 0:03:20.080 --> 0:03:24.360 entire software sector has been absolute under threat because of 0:03:24.440 --> 0:03:26.720 a lot of what you are mentioning, whether it's claud 0:03:26.840 --> 0:03:29.400 or whether it's opening Eye tools, or whether it's open source. 0:03:29.400 --> 0:03:32.280 I mean, look at the valuations of software companies. They've 0:03:32.280 --> 0:03:35.640 been completely destroyed over the last six to nine months, 0:03:35.800 --> 0:03:37.800 and a large portion of that is driven by what 0:03:37.840 --> 0:03:38.440 you just said. 0:03:40.360 --> 0:03:43.000 So interesting, Well, you know, yeah, I mean, so is 0:03:43.040 --> 0:03:46.080 it in flux still safe to say, Ana Rag in 0:03:46.160 --> 0:03:49.880 terms of who ultimately are going to be the leaders 0:03:50.320 --> 0:03:53.760 when it comes to this AI world or will there 0:03:53.800 --> 0:03:55.320 be multiple big players. 0:03:56.400 --> 0:03:58.640 So we are absolutely influx right now as to who 0:03:58.680 --> 0:04:01.480 will own the final product, and that's partially the reason 0:04:01.560 --> 0:04:04.280 when you have these valuations go all over the place. 0:04:04.440 --> 0:04:06.960 But I would you know, comfortably say, when it comes 0:04:07.000 --> 0:04:10.560 to somebody like a Microsoft's cloud portfolio or Amazon's cloud 0:04:10.600 --> 0:04:14.240 portfolio or Google's cloud revenue, I think these three companies 0:04:14.320 --> 0:04:17.120 will dictate a large portion of that market share just 0:04:17.160 --> 0:04:19.160 because they have the capital to do it, they have 0:04:19.279 --> 0:04:22.160 massive market shares, and they have also the distribution. So 0:04:22.400 --> 0:04:24.400 these three I think will remain the way it is, 0:04:24.640 --> 0:04:27.720 the rest of the industry will shift around. We still 0:04:27.760 --> 0:04:30.520 think software has a place in this world and you know, 0:04:30.839 --> 0:04:32.800 there will be some damage, but it's not going to 0:04:32.839 --> 0:04:36.360 get completely blown up. And let's see how that shapes up. 0:04:36.400 --> 0:04:38.520 What's the damage That will say in your view, what's 0:04:38.520 --> 0:04:38.960 your production. 0:04:39.920 --> 0:04:42.080 So if you are just selling a tool out there 0:04:42.080 --> 0:04:45.760 in the public to an enterprise or a small business, 0:04:45.960 --> 0:04:48.039 you may not get the same kind of premium that 0:04:48.080 --> 0:04:51.600 you were before. Remember software a business with eighteen ninety 0:04:51.640 --> 0:04:54.240 percent gross margin business. But if you can spin some 0:04:54.360 --> 0:04:57.680 of that coded up, you know, using wipe coding or internally, 0:04:57.880 --> 0:05:00.560 you may not need some of those tools out there. Now. 0:05:00.560 --> 0:05:04.280 We think, at least on the enterprise side, having a 0:05:04.320 --> 0:05:06.880 core system of record something like you know, the one 0:05:06.880 --> 0:05:10.120 that's sold by SAP or a workday they're far more 0:05:10.120 --> 0:05:12.320 important and people are not going to rip them apart 0:05:12.480 --> 0:05:15.280 and use white boarding tools internally out there. But if 0:05:15.320 --> 0:05:17.960 you are a visualization software or some kind of connected 0:05:18.000 --> 0:05:20.679 in between, you may not need to have that software. 0:05:20.680 --> 0:05:22.880 So there is a lot that's going to happen over 0:05:22.920 --> 0:05:24.280 the next three to five years. 0:05:24.120 --> 0:05:24.279 You know. 0:05:24.400 --> 0:05:27.760 Interestingly, you know, looking at Microsoft Meta this year and 0:05:27.880 --> 0:05:30.280 last year, how the stock the stocks have done. They 0:05:30.320 --> 0:05:33.400 definitely underperformed some of the other mags seven names and 0:05:33.440 --> 0:05:35.520 certainly some of the other large. 0:05:35.200 --> 0:05:37.360 Cap tech names. But I'm just curious. 0:05:37.720 --> 0:05:40.440 You know, the concerns have been about the AI spend 0:05:40.520 --> 0:05:42.640 and whether it's going to pay off signs here for 0:05:42.800 --> 0:05:46.200 Microsoft analog that you're seeing that it does make sense 0:05:46.360 --> 0:05:48.200 this spend that Microsoft is doing. 0:05:48.600 --> 0:05:50.159 The ROI is there. 0:05:51.120 --> 0:05:53.600 Yeah, well, Microsoft, it's definitely there. I Mean. The only 0:05:53.680 --> 0:05:55.800 I would say, the long term hangarp is you know 0:05:55.880 --> 0:05:59.240 what happens when the opening air relationship breaks through? I mean, 0:05:59.320 --> 0:06:01.720 all goes up way. That's the only big risk for 0:06:01.800 --> 0:06:03.960 Microsoft in the long run. They'll have to figure out 0:06:03.960 --> 0:06:06.560 their own LLM by then. But other than that, I mean, 0:06:06.560 --> 0:06:09.599 their cloud infrastructure product is pretty good and you know, 0:06:09.640 --> 0:06:12.640 it's gaining market share and according to our calculations, it 0:06:12.720 --> 0:06:15.560 will overtake Amazon in the next you know, let's say 0:06:15.560 --> 0:06:16.680 three audios or so. 0:06:16.839 --> 0:06:18.840 On a rock. Do they really have to figure out 0:06:18.839 --> 0:06:21.000 their own LLM? I mean, how much of open ai 0:06:21.080 --> 0:06:21.560 do they own? 0:06:22.880 --> 0:06:24.719 But it just doesn't matter if they own or not, 0:06:24.800 --> 0:06:27.240 because they have the IP rights only until I think 0:06:27.279 --> 0:06:30.119 it's twenty thirty two, one of those years, and after 0:06:30.160 --> 0:06:32.720 that they can't use those models after that, So remember 0:06:32.760 --> 0:06:34.880 that part of it as well, not the financial part 0:06:34.920 --> 0:06:38.640 will stay. But it's the actual engine that is driving copilot, 0:06:38.920 --> 0:06:42.120 that's driving GitHub copilot or the Microsoft three sixty five 0:06:42.160 --> 0:06:44.640 copilot that you talk about. You know, that's the intelligence 0:06:44.720 --> 0:06:45.760 that goes into that model. 0:06:45.800 --> 0:06:47.200 How do you do that? How do you do that? 0:06:47.240 --> 0:06:50.000 From just a resources perspective, if you have if you 0:06:50.040 --> 0:06:54.040 have spent so many billions of dollars supporting open ai 0:06:54.760 --> 0:06:56.800 and chat GPT, well. 0:06:56.720 --> 0:06:58.480 They have their own models that are going on. It's 0:06:58.560 --> 0:07:00.480 just not as good as whether it's opening a lot 0:07:00.520 --> 0:07:02.400 at this point, but they are putting a lot of 0:07:02.440 --> 0:07:04.800 effort behind it, and most of our leads that and 0:07:04.839 --> 0:07:07.000 that's where we need to see what kind of ROI 0:07:07.080 --> 0:07:09.560 do we see there and do they actually get their 0:07:09.600 --> 0:07:11.360 act together over the next few years. 0:07:11.400 --> 0:07:13.120 All right, I want to go over to IBM, which 0:07:13.240 --> 0:07:16.960 actually outperformed Microsoft last year. It was up about thirty 0:07:17.000 --> 0:07:20.520 five percent, and we are seeing this stock up about 0:07:20.560 --> 0:07:24.960 eight point four percent following its earnings release. Here they 0:07:25.000 --> 0:07:29.520 post revenue that topped estimates. They talked about software gains, 0:07:29.560 --> 0:07:33.440 specifically at software unit revenue up twelve percent to nineteen 0:07:33.480 --> 0:07:36.040 point seven billion in the fourth quarter, software business jumping 0:07:36.080 --> 0:07:39.280 fourteen percent to just over nine billion dollars and the 0:07:39.320 --> 0:07:42.520 company projecting that revenue will grow more than five percent 0:07:42.640 --> 0:07:45.760 this year, and the company's CEO saying, quote, we enter 0:07:45.840 --> 0:07:49.080 twenty twenty six with momentum and in a position of strength. 0:07:49.120 --> 0:07:50.360 I don't know if you've had a chance to look 0:07:50.400 --> 0:07:54.040 at IBM an a rag walk us through what we're 0:07:54.040 --> 0:07:55.040 seeing with this company. 0:07:56.120 --> 0:07:58.360 Yeah, I was a bit surprised. Actually, the nine percent 0:07:58.440 --> 0:08:01.040 number on the software side is a witch shocking. I mean, 0:08:01.080 --> 0:08:03.080 for them to be, you know, total growth rate of 0:08:03.160 --> 0:08:05.560 nine percent and software in double digits, I mean, we 0:08:05.560 --> 0:08:07.960 were not expecting that. So there's a lot to feel 0:08:07.960 --> 0:08:10.120 in that particular one and go back and see, you know, 0:08:10.120 --> 0:08:13.360 which segments outperformed. Now there's a tiny bit of MNA there, 0:08:13.480 --> 0:08:16.240 but even without that, I mean, I think this is 0:08:16.360 --> 0:08:18.920 very good. And the big number for one us is 0:08:19.320 --> 0:08:20.640 that the cash flow is going to go up by 0:08:20.640 --> 0:08:23.600 a billion dollars next year. So I think IBM's turned 0:08:23.600 --> 0:08:26.880 them around very well. I think the strategy is executing 0:08:26.920 --> 0:08:28.840 well and Urvan's done a good job in this case. 0:08:29.120 --> 0:08:33.320 The acquisitions red Hat Hashi Corp, Confluent. That's a big 0:08:33.360 --> 0:08:36.440 part of the spend is that like looking to sort 0:08:36.440 --> 0:08:38.920 of what Salesforce has done in recent years growing through 0:08:38.960 --> 0:08:39.760 these acquisitions. 0:08:40.760 --> 0:08:43.160 I think there's nothing wrong in growing through acquisitions if 0:08:43.200 --> 0:08:45.160 you don't pay enough for them. If you pay the 0:08:45.240 --> 0:08:47.880 right amount, and in this case for IBM, every two 0:08:47.920 --> 0:08:50.320 years they'd go out and buy something that would help 0:08:50.320 --> 0:08:53.600 their gross margins, that would help their adjusted EBITA, that 0:08:53.640 --> 0:08:55.560 would help their free cash flow, and they use that 0:08:55.600 --> 0:08:58.400 cash flow to buy more. But they're already concentrated in 0:08:58.440 --> 0:09:02.240 certain areas such as hybrid cloud or the ability to 0:09:02.280 --> 0:09:05.920 make sure that the internal IEA infrastructure of a company 0:09:06.280 --> 0:09:08.760 or the enterprises is something that they have a good 0:09:08.800 --> 0:09:11.880 handle on and I think they're doing executing it very well. 0:09:11.920 --> 0:09:15.679 Listen, there are bookings for their AI business at IBM 0:09:15.800 --> 0:09:17.800 exceeded twelve point five billion. 0:09:19.240 --> 0:09:21.440 Since mid twenty twenty three. 0:09:21.840 --> 0:09:24.280 That's an increase from the nine and a half billion 0:09:24.360 --> 0:09:27.079 disclosed during its prior earnings report. A bit more than 0:09:27.120 --> 0:09:29.960 eighty percent of the bookings come from the consulting unit, 0:09:30.000 --> 0:09:32.360 with the rest in software. According to the CFO in 0:09:32.400 --> 0:09:37.160 an interview, their AI exposure, I mean this is something 0:09:37.200 --> 0:09:40.920 that has been I think helping the struggling along struggling 0:09:40.960 --> 0:09:41.840 consulting division. 0:09:41.960 --> 0:09:43.800 So are we seeing improvement. 0:09:44.360 --> 0:09:46.840 But the consulting division only grew up one percent, So 0:09:46.960 --> 0:09:48.520 even though they are getting a lot of that, as 0:09:48.520 --> 0:09:51.920 you said, eighty percent of those bookings from consulting, it's 0:09:51.920 --> 0:09:55.120 not driving the entire division up because, as we know 0:09:55.240 --> 0:09:57.439 from some of the other vendors and we'll find out 0:09:57.440 --> 0:10:01.319 today also, the non AI spending is pretty bad right 0:10:01.360 --> 0:10:04.600 now throughout the ecosystem, so people are cutting back on 0:10:04.640 --> 0:10:08.559 that and deploying those funds into AI related services, and 0:10:08.640 --> 0:10:11.839 that's something that's hurting IBM as well. But imagine, even 0:10:11.880 --> 0:10:15.320 with consulting growing only one percent, the total compan growth 0:10:15.400 --> 0:10:17.600 rate was nine percent, and I think that's something to 0:10:18.120 --> 0:10:18.680 be proud of. 0:10:19.240 --> 0:10:23.360 All Right, Bloomberg Intelligence Senior technology analyst Anna Ragrana, just 0:10:23.400 --> 0:10:24.840 stay with us for a moment, because we do want 0:10:24.880 --> 0:10:27.480 to bring in James chockmac partner and chief investment officer 0:10:27.520 --> 0:10:31.200 at Clockwise Capital with about seventy million in assets under 0:10:31.200 --> 0:10:34.480 management of fund that we often talk about owns and 0:10:34.559 --> 0:10:36.720 invest in a lot of these big cap names. I 0:10:36.760 --> 0:10:41.520 want to go back to Microsoft, Jim, James, tell us 0:10:41.840 --> 0:10:43.920 your take on what we got from Microsoft the stock 0:10:44.000 --> 0:10:44.440 right now? 0:10:44.679 --> 0:10:46.040 Data about four and a quarter percent. 0:10:48.200 --> 0:10:49.040 Yeah, it's interesting. 0:10:49.360 --> 0:10:51.760 Right before earnings came out, I was getting the latest 0:10:51.760 --> 0:10:54.840 Bogie numbers for the Azure number, and you know, it 0:10:55.000 --> 0:10:57.679 remained in the high thirties, around thirty nine percent, and 0:10:57.720 --> 0:11:00.320 that's kind of where the numbers landed right around there. 0:11:00.360 --> 0:11:02.719 And uh, I was saying, I'm telling our team that, 0:11:02.880 --> 0:11:06.440 you know, this is a pretty lofty expectation, especially the 0:11:06.480 --> 0:11:09.640 fact that you know it's retraced somewhat heading into the quarter. 0:11:09.760 --> 0:11:13.120 So you know, a lot of I expectations on all 0:11:13.200 --> 0:11:16.720 these companies, Microsoft right on up there with all of them, 0:11:16.840 --> 0:11:19.360 and the valuation it is where it is, with that 0:11:19.480 --> 0:11:22.760 double digit times sales, you know you want it. It's 0:11:22.800 --> 0:11:26.280 great that it's a subscription asset, it's a recurring revenue business. 0:11:27.160 --> 0:11:29.280 But at the end of the day, you know, you've 0:11:29.280 --> 0:11:31.679 got to deliver the growth and it's all about the 0:11:31.720 --> 0:11:35.040 growth relative to expectations. And in this case, it was 0:11:35.120 --> 0:11:36.840 just inline on Microsoft. 0:11:37.320 --> 0:11:42.040 James, you own Microsoft in your clockwise US core equity 0:11:42.120 --> 0:11:45.160 TF ticker time it's the sixth biggest holding, about four 0:11:45.160 --> 0:11:47.800 point six percent of the fun It's down three point 0:11:48.040 --> 0:11:51.520 six percent after hours four sixty four roughly would you 0:11:51.520 --> 0:11:53.040 buy at these levels out to your position. 0:11:54.679 --> 0:11:57.240 No, No, I think what we're maintaining it. The way 0:11:57.280 --> 0:12:00.800 we're looking at it is, you know, we're about half 0:12:00.840 --> 0:12:03.600 the weight of where it is in the Nasdaq. You know, 0:12:03.640 --> 0:12:06.920 we feel comfortable being underweight that, and that's on a 0:12:06.960 --> 0:12:09.880 growth basis. We actually have hedges within the ETF as 0:12:09.880 --> 0:12:14.520 well where we're short the NASDAC and the SMP, so 0:12:14.559 --> 0:12:17.319 the net weight is actually closer to four percent, So 0:12:17.720 --> 0:12:20.160 you know, it is a top top ten weight within 0:12:20.200 --> 0:12:22.800 the fund. But you know, we think that you know, 0:12:22.880 --> 0:12:26.200 where you want to be overweight is outside of big cap. 0:12:26.280 --> 0:12:28.440 You know, we're looking at small cap, We're looking at 0:12:28.600 --> 0:12:30.959 continue to look at commodities. We think that's where the 0:12:31.000 --> 0:12:31.599 money is going to go. 0:12:31.800 --> 0:12:33.560 James, We're going to broaden out. But safe to say 0:12:33.559 --> 0:12:35.040 you're not that impressed with Microsoft. 0:12:35.040 --> 0:12:37.320 It sounds it was. 0:12:37.480 --> 0:12:39.600 It was a whole hump. You know, it's kind of 0:12:39.679 --> 0:12:44.480 what we expected. It just didn't surpassed expectations. But does 0:12:44.640 --> 0:12:48.320 the results do not warrant to change in our view? 0:12:48.480 --> 0:12:49.480 All Right, We're going to broad out. 0:12:49.480 --> 0:12:51.040 In just a moment, I want to bring in anorog 0:12:51.120 --> 0:12:54.400 Rana back from our Bloomberg Intelligence team. He's senior tech analyst. 0:12:54.800 --> 0:12:58.240 Just a final thought, James isn't impressed? 0:12:58.600 --> 0:12:59.160 Should he be? 0:13:00.520 --> 0:13:02.720 Well, the thing is, think about it this way. The 0:13:02.760 --> 0:13:05.800 backlog is up and the capexis up, then why is 0:13:05.840 --> 0:13:08.280 in growth accelerating? And I think that's the biggest question 0:13:08.320 --> 0:13:11.320 for all of us. I personally think it's a supply problem. 0:13:11.400 --> 0:13:13.880 But it's a temporary problem. But as you know, we 0:13:14.080 --> 0:13:17.760 know right now people the trade is to sell software 0:13:17.800 --> 0:13:19.920 and buy semis and I think you know, I don't 0:13:19.920 --> 0:13:21.280 see that changing tomorrow morning. 0:13:21.720 --> 0:13:23.120 All right, we're going to leave it there. Hey, listen, 0:13:23.120 --> 0:13:25.120 we'll be checking out your research an ourang, Thank you 0:13:25.120 --> 0:13:28.120 so much. Bloomberg Intelligence Senior technology analyst Anna rog Rana. 0:13:28.320 --> 0:13:30.680 James Schachmak though still with us right now. We want 0:13:30.679 --> 0:13:34.160 to get more meta platforms. Bloomberg New Senior Technology reporter 0:13:34.280 --> 0:13:36.360 Kurt Wagner with us. He is author of Battle for 0:13:36.440 --> 0:13:38.840 the Bird, Jack Dorsey, Elon Musk and the forty four 0:13:38.840 --> 0:13:41.160 billion dollar Fight for Twitter. So he's out there in 0:13:41.160 --> 0:13:42.840 the Bloomberg San Francisco bureau. 0:13:43.240 --> 0:13:44.400 Take it away, meta. 0:13:44.200 --> 0:13:46.040 What jumps out for you, because right now we're looking 0:13:46.040 --> 0:13:47.880 at a stock that's up here in the aftermarket. 0:13:48.240 --> 0:13:51.199 Yeah, I mean it's it's pretty much all good news, 0:13:51.520 --> 0:13:54.720 especially if you believe in this AI vision that Mark 0:13:54.760 --> 0:13:58.000 Zuckerberg has the Q four holiday quarter sales where it 0:13:58.000 --> 0:14:02.600 beats the Q one projection, We're beat. The real, maybe 0:14:02.640 --> 0:14:06.160 surprising thing was just how high the capital expenditures are 0:14:06.200 --> 0:14:08.160 supposed to be in twenty twenty six. I think the 0:14:08.280 --> 0:14:12.280 estimate was around one hundred and eleven billion metas forecasting 0:14:12.320 --> 0:14:15.839 in between one fifteen and one thirty five billion. But again, 0:14:15.880 --> 0:14:18.360 if you are a believer in this sort of AI 0:14:18.760 --> 0:14:22.240 world that we're living in right now, that's an exciting thing. 0:14:22.280 --> 0:14:24.960 I mean, this is a company that is going absolutely 0:14:25.080 --> 0:14:29.160 full steam ahead into AI, and you know, I think 0:14:29.200 --> 0:14:30.320 those numbers reflect that. 0:14:30.440 --> 0:14:32.840 Not into the metaverse. We should note that meta shares extend. 0:14:32.840 --> 0:14:34.800 They're getting to more than five percent right now. So 0:14:34.800 --> 0:14:36.880 there are a lot of people out there, Kurt, who 0:14:37.320 --> 0:14:40.360 who are believing this story. It's not like this though 0:14:40.400 --> 0:14:46.880 every quarter. There have been quarters of late where meta platforms, 0:14:46.960 --> 0:14:49.960 almost at Facebook comes out and says we're spending more 0:14:50.000 --> 0:14:53.320 money than you want us to spend and you and 0:14:53.400 --> 0:14:55.880 then investors do not reward them for it. What is 0:14:55.920 --> 0:14:57.080 different this time. 0:14:57.160 --> 0:15:00.680 Well, not just quarters of late, how about just last order? Right, 0:15:01.080 --> 0:15:03.800 this is exactly what we talked about in Q three. 0:15:04.080 --> 0:15:07.160 They didn't have these specific numbers, but they basically said, hey, 0:15:07.800 --> 0:15:11.040 our capex is going to increase meaningfully. In twenty twenty six, 0:15:11.280 --> 0:15:14.680 the stock went down fourteen percent. Everyone was very concerned 0:15:14.720 --> 0:15:18.520 with this added spending. And yet today when the numbers 0:15:18.520 --> 0:15:21.920 come out and they're they're higher than estimate, sessimate's presumably 0:15:21.960 --> 0:15:25.200 built in that commentary from last quarter, it doesn't seem 0:15:25.280 --> 0:15:27.680 to be as much of a problem. My guess is 0:15:27.720 --> 0:15:30.680 that they are seeing, you know, this Q one revenue, 0:15:30.720 --> 0:15:33.560 for example, which is going to come in two three 0:15:33.720 --> 0:15:37.800 four billion dollars higher than expected. They're just seeing this 0:15:38.000 --> 0:15:42.520 ads business that is completely churning money out. And so 0:15:43.000 --> 0:15:45.520 if you feel that you have the money coming in, 0:15:45.880 --> 0:15:49.800 maybe you stomach those higher numbers than you would have expected. 0:15:50.120 --> 0:15:52.600 Yeah, I mean on the live blog, you guys, I 0:15:52.640 --> 0:15:55.920 think you put this out Kurt Family daily active people 0:15:56.160 --> 0:15:58.560 three point fifty eight billion, an increase of seven percent 0:15:58.640 --> 0:16:00.760 year over year, and then the average price per AD 0:16:01.160 --> 0:16:03.320 increase by six to nine percent year over year for 0:16:03.360 --> 0:16:06.360 the fourth quarter and full year twenty twenty five, respectively. 0:16:06.480 --> 0:16:10.200 So I mean this is showing that they're investing in AI. 0:16:10.720 --> 0:16:12.440 We're seeing it on the platform, we're seeing it in 0:16:12.520 --> 0:16:13.360 the ad dollars. 0:16:13.760 --> 0:16:13.960 Yeah. 0:16:14.000 --> 0:16:16.120 I mean my guess is that we're going to jump 0:16:16.120 --> 0:16:18.200 on this earnings call here in a minute or two, 0:16:18.800 --> 0:16:20.920 and you're going to hear the company talk a lot 0:16:20.920 --> 0:16:23.680 about how AI is impacting the ads business, because that's 0:16:23.680 --> 0:16:25.320 what they need to do to sell this right now. 0:16:25.400 --> 0:16:27.400 Right, it's hard to say are they right? 0:16:27.680 --> 0:16:28.720 But current is it? 0:16:28.800 --> 0:16:28.880 Like? 0:16:28.960 --> 0:16:30.240 Are we seeing it in the numbers? 0:16:31.520 --> 0:16:34.600 It is in part because you see that that rise 0:16:34.960 --> 0:16:37.560 in average cost per AD, that's because people are getting 0:16:37.600 --> 0:16:41.960 more granular, more targeted. They're spending less to create some 0:16:42.040 --> 0:16:44.440 of this ad copy because AI can do it for them. 0:16:44.600 --> 0:16:48.680 There's a bunch of ways that AI can truly improve 0:16:48.920 --> 0:16:49.680 the ads business. 0:16:49.720 --> 0:16:50.200 You just don't. 0:16:50.480 --> 0:16:52.720 It's not as sexy, right, It's not as obvious, maybe 0:16:52.720 --> 0:16:55.400 because a lot of it's happening incrementally behind the scenes. 0:16:56.360 --> 0:16:58.960 That is a story in a narrative that this company 0:16:59.000 --> 0:17:01.280 needs to sell. Because if you're just simply saying trust 0:17:01.360 --> 0:17:04.000 us for building a fifty billion dollars data center in Louisiana, 0:17:04.240 --> 0:17:06.520 and you'll see the returns of that in seven years. 0:17:06.880 --> 0:17:07.919 That's the hard pitch. 0:17:08.119 --> 0:17:09.680 But if you say, hey, look, check it out. 0:17:09.760 --> 0:17:12.879 The ads business is growing quarter after quarter because of 0:17:12.920 --> 0:17:16.480 these AD improvements, these AI improvements we're making. That's the 0:17:16.560 --> 0:17:18.600 narrative that they're going to want to sell to people today. 0:17:18.720 --> 0:17:20.680 Kirk Wagner, you got to go. You got some work 0:17:20.720 --> 0:17:23.000 to do. I want you to I want to let 0:17:23.000 --> 0:17:24.560 you get back to that work. Thanks so much for 0:17:24.840 --> 0:17:27.359 joining us. That's Kurt Wagner, senior technology reporter who covers 0:17:27.359 --> 0:17:29.959 social media. He's the author of Battle for the Bird Jackdoor, 0:17:30.040 --> 0:17:32.240 c Elon Musk in the forty four billion dollar Fight 0:17:32.600 --> 0:17:33.560 for Twitter's soul. 0:17:33.760 --> 0:17:35.720 All right, right now, we're looking at Meta shares. They're 0:17:35.760 --> 0:17:38.560 up about six point two percent as we speak. We've 0:17:38.560 --> 0:17:42.240 got Microsoft down about three point six percent. Tesla is 0:17:42.320 --> 0:17:44.720 up three and a quarter percent. And then check this out. 0:17:44.960 --> 0:17:47.480 IBM been around for a while. It's up about eight 0:17:47.480 --> 0:17:49.000 percent here in the aftermarket. 0:17:49.000 --> 0:17:49.280 All right. 0:17:49.400 --> 0:17:52.080 James Chokmak, we're talking with him, partner and chief investment 0:17:52.080 --> 0:17:54.199 officer at Clockwise Capital with us from Miami. 0:17:54.240 --> 0:17:55.600 He is not going anywhere. 0:17:55.760 --> 0:17:58.440 Ed Lulow also with as Bloomberg Tech a co host 0:17:58.440 --> 0:18:00.479 on Bloomberg Television. He's out there in the bog San 0:18:00.480 --> 0:18:03.320 Francisco bureau. He has been glued to his phone and 0:18:03.400 --> 0:18:06.399 computer watching all of the results since he did his 0:18:06.440 --> 0:18:10.879 broadcast earlier on BTV. Hey, ed, what's jumping out? You know, 0:18:10.920 --> 0:18:12.760 I don't know where do you think we should start with? 0:18:12.800 --> 0:18:15.120 Whether it's Meta, Microsoft or Tesla. 0:18:15.920 --> 0:18:18.159 I would start with Tesla, but only because you know, 0:18:19.000 --> 0:18:21.239 the story that jumped out wasn't the story we were 0:18:21.280 --> 0:18:24.119 prepared for, and I think that it's important to be 0:18:24.119 --> 0:18:26.920 honest about that. And that is Tesla pulling the trigger 0:18:27.320 --> 0:18:30.399 on a two billion dollar investment in Xai. If you 0:18:30.440 --> 0:18:34.080 guys remember, this was a non binding shareholder resolution in 0:18:34.119 --> 0:18:37.840 November as part of the annual shareholder meeting, and the 0:18:37.920 --> 0:18:40.480