July 30, 2025 • 19 mins
Microsoft reported better-than-expected growth in its cloud business and said spending on AI infrastructure hit a record. The closely watched Azure cloud-computing unit posted a 39% rise in sales during Microsoft’s fiscal fourth quarter, the company said in a statement on Wednesday. Analysts projected 34% revenue growth. The shares rose about 7% in extended trading after closing at $513.24 in New York. The company’s stock was up about 22% this year through the Wednesday close.
Meta also reported results that sent shares higher after the close. Meta topped projections for second-quarter sales and gave a stronger-than-expected forecast for the current period, a sign that the social media company’s advertising business is still growing quickly enough to support aggressive spending on artificial intelligence. Shares jumped as much as 10% in late trading. Third-quarter sales will be $47.5 billion to $50.5 billion, Meta said in a statement Wednesday, with the midpoint of that range exceeding the average analyst estimate of $46.2 billion, according to data compiled by Bloomberg. The social media giant, which owns Instagram and Facebook, reported second-quarter revenue of $47.5 billion. Meta stock was up 18.7% so far this year before Wednesday’s report.
For instant reaction and analysis to earnings for both big tech companies, hosts Carol Massar and Tim Stenovec speak with:
- Dan Ives, Global Head of Technology Research at Wedbush Securities
- Bloomberg Intelligence Senior Technology Analyst Anurag Rana
- Greg Halter, Director of Research at Carnegie Investment Counsel
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is a breaking
news update from Bloomberg, instant reaction and analysis from our
three thousand journalists and analysts around the world.
Speaker 2 (00:19):
We've got Meta platforms, Microsoft both out with earnings. Those
are the big ones. There's a lot that are out there,
but we want to get to We've got great team
coverage here at Bloomberg and also some great outside voices.
Speaker 3 (00:28):
So let's get to it with Dan Ives.
Speaker 2 (00:30):
He's managing director and senior equity analyst and global head
of Technology Research at Webbush Securities. We're going to start
with Meta. Let's talk about it. The stocks up about
eight and a half percent a year in the aftermarket.
What do you like and what don't you like? Do
you not like anything?
Speaker 4 (00:44):
There's nothing not to wy.
Speaker 1 (00:46):
I like book.
Speaker 4 (00:47):
It speaks to.
Speaker 5 (00:50):
You.
Speaker 4 (00:50):
Go through this AI revolution, it's in his next stage
of growth. And all the money that you're seeing these
big tech players hat bocsw you're ultimately starting to see
some of those differdence get paid. And then you think
about the advertising growth and of what we saw with Alphabet,
what you see with meta subscriber growth. I mean this
(01:11):
it's goldilocks.
Speaker 1 (01:13):
You know, for for tech, how how does Meta harness
AI to make money? Apart from making its advertising more efficient, It's.
Speaker 4 (01:22):
About the billions of users. It's about going forward, how
they're going to monetize AI. They're not just spending to spend.
They're going to be able to monetize from an advertising perspective.
When you think about the billions of users.
Speaker 1 (01:38):
They have, that's how do they do that?
Speaker 5 (01:39):
Though?
Speaker 4 (01:40):
Dan, And the reason Zuckerberg right now is what I
do is like a wartime CEO. It's the view that
when you think about AI today, this is just the beginning.
You're gonna and you're gonna have AI driven search, You're
going to have sort of the future that Meta alphabet
(02:03):
are going to play huge pieces in the advertising piece.
Speaker 3 (02:09):
But I want to.
Speaker 2 (02:10):
Go so it's just advertising that that's where they're going
to make all their money back. We know that they
have been on such an aggressive AI talent grab and
you know Meta.
Speaker 1 (02:20):
Has hundreds of millions of dollars, Yeah, like pay individuals.
Speaker 2 (02:25):
So there that's all going to pay off their return
on just the beginning.
Speaker 4 (02:29):
Okay, advertising advertising just to begin when you think about
full what I've used sort of like fully GI and
it was like the Holy graul. What Meta is trying
to build, what every big tech player is trying to build,
Meta is basically, we're going to create a whole nother
company over the next decade. That's what they're spending on.
Speaker 1 (02:54):
This is what I'm still waiting for, like you know,
meta platforms. Look, no question, this was in a credible quarter.
The stock is up nine point three percent in the
after hours. Just to repeat the numbers. Second quarter earnings
per share a huge beat, seven dollars and fourteen cents,
the estimus for five dollars and eighty nine cents. Second
quarter revenue a huge beat, forty seven point five billion dollars,
(03:16):
the estimus for forty four point eight billion dollars. Third
quarter revenue forty seven point five to fifty point five billion,
that's the outlook. The estimate was for below that at
forty six point two billion. But I want, Dan, I
want to look with you years out when the hardware
that they're working on that they're spending billions of dollars
on will start paying dividends. What does that future look
(03:38):
like for Meta users and for Meta investors?
Speaker 4 (03:41):
And you have to think about it like, what's the
future in terms of robotics, in terms of software, in
terms of how AI is going to play a role
in the every day of a consumer. I mean Meta
is thinking not in the next year, three, five, eight,
ten years out.
Speaker 2 (04:03):
I want to bring in man deep saying if I
may of our Bloomberg intelligence team.
Speaker 3 (04:07):
I don't know if it's too soon.
Speaker 2 (04:08):
I know you're going through all the numbers because I
want to bring into the conversation with.
Speaker 3 (04:10):
Dan good quarter killer quarter. How do you see it
for that?
Speaker 6 (04:15):
Yeah, I mean there is a sequential acceleration in ad
impressions as well as ad pricing growth, and to my mind,
there is a sign of them applying AI to boost engagement. Obviously,
the user growth has been almost the same every quarter,
you know, four to five percent, So the fact that
impressions grew eleven percent is a sign that people are
(04:37):
spending more time on their family of apps. And then
the ad pricing going up nine percent, That to me
is the real tailwind, because that was the risky part.
Chinese advertisers like Timu and Cheen pull it back because
of the Deminimus rule changes that didn't happen, that didn't
show up in the numbers, and look when it comes
(04:58):
to applying AI. I mean small advertisers are now connecting
META to their CRM systems and actually that is what's
driving the at targeting and efficiency. That wasn't the case before.
That has been enabled by JENNYI. So that's why you
see that list.
Speaker 3 (05:14):
Do you agree with Dan?
Speaker 6 (05:16):
I think jenny I use case is quite prominent. We
keep hearing about coding agents, customer service. Here is the
precise use case for meta, and that is what they
are showing in their ad pricing numbers.
Speaker 1 (05:29):
Dan, come on in I saw you. You're saying something
that sounds like that.
Speaker 4 (05:33):
Sounds like a bullish man deep. I mean that's probably
on the man deep scale. That's that's pretty both.
Speaker 1 (05:42):
I like that. Hey, Dan, I noticed something striking today
when I opened up Instagram. I was searching for a
video from Mike Berbigley, a comedian who I really like.
And what I noticed when I was just I was
just looking for his profile. When I typed in his name,
what appeared was as an AI answer about a biography
of who he was. Information about him is the goal?
(06:04):
What is the vision for Instagram? Is this going to
be metas super app.
Speaker 4 (06:10):
I mean to some extent, they're basically creating a super
I mean similar to what you see in China, but
an AI driven super Adit that's and you start to
go through that, you look in at a four digit stop.
Speaker 1 (06:25):
They tried to do this years ago with David Marcus
on the messenger side. Man Deep, it didn't necessarily work.
It was supposed to be payments and everything. Is that still,
in your view, an area of growth for the company
here or is that strategy gone?
Speaker 6 (06:42):
I mean right now, it feels like they have a
lot of runway with ads and there is a clear
use case for Jenni with ads. I mean, they still
have to fix the model. So I think the advantage
that they have is really they are the best when
it comes to at targeting and know with everything that's
going on, I mean, they have the surface area to
(07:05):
apply jen Ai. But look when it comes to payments
and other areas, they still lack the diversification of a
Microsoft or a Google. It's still a one trick set.
I mean, albeit a two dollar company, yees still dependent
on ads.
Speaker 1 (07:21):
Dan.
Speaker 2 (07:22):
You know, it's funny because I was thinking about that
because we you know, we talk about all of these companies,
and I think about the hyperscalers like an alphabet. We've
talked about that a lot man deep about just all
of their different platforms and how much data that gives
them to make their model smarter and smart smarter. I mean, Dan,
is it going to be okay for Meta to be
kind of a one trick pony even if it's I
mean it's a massive one trick pony, But is it enough?
Speaker 5 (07:44):
Well?
Speaker 4 (07:45):
I mean, like, look, I think if you think about
like on a packing scale of course, like Nvidio the
top Microsoft, and you'll get these numbers just just unbelievable
in terms of across the board. You look at Meta, Yeah,
you call one trick pony ish, but that's but they're
going to significantly expand that over the coming years.
Speaker 6 (08:07):
I mean, at least for now, there is no proof.
I feel they are under earning by twenty percent because
of all the losses in reality labs, But the street
doesn't care because their ad business is really going gangbusters.
When the ads slow down and the comps will get
tougher and there will be a point when ads will
not grow twenty percent, That's when I think the question
(08:29):
will be asked why are they losing twenty billion dollars
on reality labs because it's not making any money.
Speaker 1 (08:35):
When will it start making money?
Speaker 6 (08:37):
Dan?
Speaker 3 (08:38):
And does it matter?
Speaker 4 (08:38):
I mean, look, that's it's going to be okay, it's
going to be a while. But the whole point is
right now, that's background noise. Like you know, it's like
Street wants them to continue to in fast and vast
builders further out and at the end of the day,
that is going to come into the fold. But you're
not right now in this arms race in big tab
(09:00):
you're a weaser focused on who's going to be the winner,
and that's what we're seeing from Microsoft to Alphabet to
Meta you know obviously you know across bording we'll scale
with Amazon as well. Like it's an arm trace.
Speaker 6 (09:13):
I mean, the one other data point I would want
to bring in is token counts. So Google and Microsoft
have shared the GENII consumption, the token count We don't
know how much metas models are being used. Yes, their
AT targeting is great, which is why AT pricing was
such a solid number this quarter. But at the end
(09:35):
of the day, if you're investing seventy billion dollars in capex,
you want to see your model being used and the
open series strategy work. We have no proof points of that,
so I still believe they have the most uphill task
in terms of showing ROI on the you know, the Capex,
besides their family of apps. And that's still the case.
Speaker 4 (09:57):
Dan.
Speaker 1 (09:57):
I know you got to go, but thirty seconds, last
question for you. What's the one question you'd ask Mark
Zuckerberg tonight.
Speaker 4 (10:04):
Look, I think it's really about cap back trajectory because
I think that's even though that was slow a bit,
they're putting as they continue to spend, you know what,
That shows confidence and that's what we saw on Alphabet.
That's what you've seen the Microsoft, and that means it
continues to be like the AI revolution is AI party.
It's ten pm, was nine pm, party goes to four am.
Speaker 2 (10:29):
Hey, listen before you go. I know we said last question,
but not that we lie. But you know you're here
in your Dan ives Microsoft you said that was also
a big, big, big killer report. I mean the stock
was just crazy in the aftermarket's up about six point
eight percent.
Speaker 4 (10:43):
Scotti Scheffer like results, right. I mean the point is
like massive beat on cloud. You see more and more
of these use cases, these hyper scalers, those are the
best indicators. That just shows where the next spending in
AI is going. And that's why right now, if you're
attagged back, you're in hibernation mode in that cave and
you can't find AI in the spreadsheet.
Speaker 3 (11:07):
Pretty crazy, pretty interesting.
Speaker 2 (11:08):
Hey, listen, we know you're busy, we know you're bouncing
around and got stuff to do, but always good to
get some time with you. Dan I was managing director
and senior equity analyst oft web Bush Securities, also Globe
Ahead of Technology Research.
Speaker 1 (11:19):
I just want to remind everybody where we've come in
the last few years with Meta Platforms. There was a
lot of talk in late twenty twenty two of leaving
this company for dead. When they made their pivot to
the Metaverse, shares were trading at eighty eight dollars.
Speaker 3 (11:30):
Now it's back to the IPO. Oh sorry, yeah, I.
Speaker 1 (11:33):
Mean, but I mean even a recent history. Right, it's
up six hundred and eighty six percent since then. That
doesn't include the surge in the after hours, which, if
it holds, will be a new record for Meta Platforms tomorrow.
Speaker 6 (11:45):
Yeah, and look when people were, you know, selling the
stock at eighty dollars. Then they didn't really factor in
you know, Meta's engagement. So what's really brought them back
in such a big way is people are still spending
over an hour and a half across their family of apps,
so that's sort of engage. And look, that's where the
(12:07):
real risk comes in. So Chatchipt now is about thirty
minutes across its daily active users, which is much smaller
than Meta. Meta has over three billion, and chat ChiPT
is still you know, less than four or five hundred million,
so still much small, but they are taking share in
terms of engagement time. People are spending thirty minutes on chatchipt.
(12:29):
So as long as Meta keeps growing engagement, I think
they will keep growing earnings. And that's what they're showing
with their AD revenue.
Speaker 2 (12:39):
All Hell's man Deep Man, Deep seeing of course, with
our Bloomberg Intelligence team. He is Bloomberg Intelligence Globalhead of
Technology Research. Be sure to check out his research on
the Bloomberg When it comes to Meta.
Speaker 3 (12:50):
So appreciate it.
Speaker 2 (12:51):
Meta shares, by the way, are up about eleven percent
here in the aftermarket, the company giving us stronger than
expected third quarter revenue. Four has to sign that that
core AD business is still growing quickly enough to support
aggressive spending on AI. Devil in the details, and we
heard that certainly from Mandeep. And then we've also got
Microsoft that stock is up here in the aftermarket, and
(13:14):
that one some really really strong numbers as well, quarterly
cloud sales profit exceeding expectations.
Speaker 3 (13:22):
They say they brought in more than seventy five billion.
Speaker 2 (13:24):
Dollars in the past year in terms of its cloud
business as the company continues to commercialize AI services.
Speaker 1 (13:30):
Tim, We've got a great group of folks, a great
duo to talk Microsoft and more. I want to bring
in Greg Halter, director of research at the registered investment
advisor Carnegie Investment Council. They've got about six and a
half billion dollars in assets under management. I also want
to bring in Bloomberg Intelligence senior tech analyst anurog Rana.
He joins us from our Chicago bureau. Greg. Just for
(13:51):
some context, Microsoft is the largest holding, Is it the
largest individual holding for your group or is it because
it's an index funds I just want to set the
stage before we get into the details.
Speaker 7 (14:04):
Thank you, Tim, and thanks for having me. We do
not count the index fund holding positions in that number.
If you look at our latest thirteen F filing, Microsoft
is the largest individual stockholding at Carnegie.
Speaker 3 (14:18):
All right, so Microsoft investors certainly like it.
Speaker 2 (14:21):
In the aftermarket, as we mentioned, Greg, the stock is
definitely soaring up about seven eight percent.
Speaker 3 (14:27):
Now as I speak, what jumps out at you?
Speaker 7 (14:31):
I think the Azure growth thirty nine percent versus the
thirty four percent expected, that is huge. I'll also point
out that their EPs beat of eight percent plus is
the best in seven quarters. Usually they do beat. I
think it's been now only three times four times over
the last forty five periods they have missed on earnings,
(14:54):
and this is a larger point of exceeding the estimate
that they've had in seven periods.
Speaker 3 (15:03):
All Right, I want to agree you like it? All right,
Anna rag Grana, I want to bring you in here.
I'm not sure. I think we all went into this
week with a little trepidation.
Speaker 2 (15:13):
Over everything that was coming at investors, including some of
these big tech earnings. But this certainly investors like what
they got from the company, and certainly with the outlook.
What's your take here, what's important for investors to learn
off of this release?
Speaker 5 (15:28):
You know, I would go what our other guests said.
I mean, the acceleration in Azure is pretty impressive. And
one of the things I think it's going to do.
It's case, it's going to tell people that all the
capex Microsoft is spending, you know, they're getting the benefit
of it on the other side of it, and they're
probably the first one to recognize a bigger, you know,
load of AI revenue coming in. And you know, this
(15:48):
will pacify a lot of people out there that may
be worried that wire these companies spending so much on
infrastructure and you know, and where is the other side
of the equation. So I think a good results not
just from Microsoft, but the entire tech platform.
Speaker 2 (16:02):
Well, that's what I want to just follow Ana Rogic.
You know, our preview of all of this was Microsoft
Meta investors are going to be scrutinizing over the AI
spending bench. So for Microsoft, clearly do you we are
clearly seeing the ROI when it comes to that AI spend.
Speaker 5 (16:17):
Yeah, both on the top side and you know, they
are doing extremely well on the expense management side. Because
what happens is when you're seeing a rapid growth and Azure,
which has a relatively lower gross margin than the rest
of the Microsoft business. Profitability does get dented with In
addition to all the AI investments that they're making, what
they did this time was, you know, year over year
(16:37):
they kept their headcount flat. I mean that's a huge
boost to you could say profitability as well as productivity,
and you know, I think that's that's something for people
to take home.
Speaker 1 (16:48):
Also, Hey, Greg, I want to bring you back in here.
Looking at the Azure growth here, the company reported better
than expected growth in its cloud business, the Microsoft saying
it brought in more than seventy five billion dollars in
the past year. The company continues to commercialize AI services.
Give us your bull case on AI and Microsoft because essentially,
(17:09):
this company is deploying AI tools and it's betting that
these conversant chatbots and more powerful automation tools are going
to boost sales of Microsoft productivity software and cloud services.
Is that bet paying off right now?
Speaker 7 (17:25):
I don't know that you can say it's one hundred
percent paying off. The reaction to the stock indicates that
investors believe that it will. You know, this stock was
coming into the report at thirty four times earning, so
a lot has to go right and it appears that
a lot is going right. So yes, you know, we've
(17:48):
done a look at their CAPEX and R and D
over the last ten twelve years or so. It's not
like this is new. It's just that the numbers are big.
I mean the percentages are also fairly large. But you
know they're spending a billions and billions on R and D.
Of course, now they can get the text benefits from
that billions of dollars, not just Microsoft but others, and
(18:09):
you would hope that they're wisely investing in that R
and D for future profitable products and services.
Speaker 2 (18:17):
Hey, I do want to point out too that we
see Amazon shares up about two point seven percent here
in the after market, shares of alphabet or down about
four tenths of a percent. But of course Amazon reporting
along with Apple tomorrow, Anna Rag, I don't know, is
there any any cause for concerns or things that you
want to question or would question with the C suite
(18:39):
following Microsoft's release here?
Speaker 5 (18:41):
No, I think I would talk about the headcount growth
for next year. You know, what are they baking because
it's been almost two years where they have added very
little headcount to the overall company size. And the big
question over there is is this something that we should
anticipate going forward, that you know, you're getting all this
cloud revenue, but you're not adding a lot more headcount.
Because I think that's slightly concerning. I mean not so
(19:03):
much for Microsoft, but the rest of the tech industry,
because you know, somebody that is selling HR software or
sales software depends on companies hiding quite a bit because
it's a seat based model, and I think that's an area.
But that's not so much I would say Microsoft's problem,
but that the rest of the tech industry is issue.
Speaker 4 (19:21):
All right.
Speaker 3 (19:22):
Going to leave with there, folks, thank you so much.
Speaker 2 (19:24):
Anda Grana, senior tech analyst with Bloomberg Intelligence out there
in Chicago, and Greg Halter are thanks to you as well,
director of research at the registered investment advisor Carnegie Investment,
with the latest on Microsoft and NETA.
Bloomberg Audio Studios, podcasts, radio news. This is a breaking
news update from Bloomberg, instant reaction and analysis from our
three thousand journalists and analysts around the world.
Speaker 2 (00:19):
We've got Meta platforms, Microsoft both out with earnings. Those
are the big ones. There's a lot that are out there,
but we want to get to We've got great team
coverage here at Bloomberg and also some great outside voices.
Speaker 3 (00:28):
So let's get to it with Dan Ives.
Speaker 2 (00:30):
He's managing director and senior equity analyst and global head
of Technology Research at Webbush Securities. We're going to start
with Meta. Let's talk about it. The stocks up about
eight and a half percent a year in the aftermarket.
What do you like and what don't you like? Do
you not like anything?
Speaker 4 (00:44):
There's nothing not to wy.
Speaker 1 (00:46):
I like book.
Speaker 4 (00:47):
It speaks to.
Speaker 5 (00:50):
You.
Speaker 4 (00:50):
Go through this AI revolution, it's in his next stage
of growth. And all the money that you're seeing these
big tech players hat bocsw you're ultimately starting to see
some of those differdence get paid. And then you think
about the advertising growth and of what we saw with Alphabet,
what you see with meta subscriber growth. I mean this
(01:11):
it's goldilocks.
Speaker 1 (01:13):
You know, for for tech, how how does Meta harness
AI to make money? Apart from making its advertising more efficient, It's.
Speaker 4 (01:22):
About the billions of users. It's about going forward, how
they're going to monetize AI. They're not just spending to spend.
They're going to be able to monetize from an advertising perspective.
When you think about the billions of users.
Speaker 1 (01:38):
They have, that's how do they do that?
Speaker 5 (01:39):
Though?
Speaker 4 (01:40):
Dan, And the reason Zuckerberg right now is what I
do is like a wartime CEO. It's the view that
when you think about AI today, this is just the beginning.
You're gonna and you're gonna have AI driven search, You're
going to have sort of the future that Meta alphabet
(02:03):
are going to play huge pieces in the advertising piece.
Speaker 3 (02:09):
But I want to.
Speaker 2 (02:10):
Go so it's just advertising that that's where they're going
to make all their money back. We know that they
have been on such an aggressive AI talent grab and
you know Meta.
Speaker 1 (02:20):
Has hundreds of millions of dollars, Yeah, like pay individuals.
Speaker 2 (02:25):
So there that's all going to pay off their return
on just the beginning.
Speaker 4 (02:29):
Okay, advertising advertising just to begin when you think about
full what I've used sort of like fully GI and
it was like the Holy graul. What Meta is trying
to build, what every big tech player is trying to build,
Meta is basically, we're going to create a whole nother
company over the next decade. That's what they're spending on.
Speaker 1 (02:54):
This is what I'm still waiting for, like you know,
meta platforms. Look, no question, this was in a credible quarter.
The stock is up nine point three percent in the
after hours. Just to repeat the numbers. Second quarter earnings
per share a huge beat, seven dollars and fourteen cents,
the estimus for five dollars and eighty nine cents. Second
quarter revenue a huge beat, forty seven point five billion dollars,
(03:16):
the estimus for forty four point eight billion dollars. Third
quarter revenue forty seven point five to fifty point five billion,
that's the outlook. The estimate was for below that at
forty six point two billion. But I want, Dan, I
want to look with you years out when the hardware
that they're working on that they're spending billions of dollars
on will start paying dividends. What does that future look
(03:38):
like for Meta users and for Meta investors?
Speaker 4 (03:41):
And you have to think about it like, what's the
future in terms of robotics, in terms of software, in
terms of how AI is going to play a role
in the every day of a consumer. I mean Meta
is thinking not in the next year, three, five, eight,
ten years out.
Speaker 2 (04:03):
I want to bring in man deep saying if I
may of our Bloomberg intelligence team.
Speaker 3 (04:07):
I don't know if it's too soon.
Speaker 2 (04:08):
I know you're going through all the numbers because I
want to bring into the conversation with.
Speaker 3 (04:10):
Dan good quarter killer quarter. How do you see it
for that?
Speaker 6 (04:15):
Yeah, I mean there is a sequential acceleration in ad
impressions as well as ad pricing growth, and to my mind,
there is a sign of them applying AI to boost engagement. Obviously,
the user growth has been almost the same every quarter,
you know, four to five percent, So the fact that
impressions grew eleven percent is a sign that people are
(04:37):
spending more time on their family of apps. And then
the ad pricing going up nine percent, That to me
is the real tailwind, because that was the risky part.
Chinese advertisers like Timu and Cheen pull it back because
of the Deminimus rule changes that didn't happen, that didn't
show up in the numbers, and look when it comes
(04:58):
to applying AI. I mean small advertisers are now connecting
META to their CRM systems and actually that is what's
driving the at targeting and efficiency. That wasn't the case before.
That has been enabled by JENNYI. So that's why you
see that list.
Speaker 3 (05:14):
Do you agree with Dan?
Speaker 6 (05:16):
I think jenny I use case is quite prominent. We
keep hearing about coding agents, customer service. Here is the
precise use case for meta, and that is what they
are showing in their ad pricing numbers.
Speaker 1 (05:29):
Dan, come on in I saw you. You're saying something
that sounds like that.
Speaker 4 (05:33):
Sounds like a bullish man deep. I mean that's probably
on the man deep scale. That's that's pretty both.
Speaker 1 (05:42):
I like that. Hey, Dan, I noticed something striking today
when I opened up Instagram. I was searching for a
video from Mike Berbigley, a comedian who I really like.
And what I noticed when I was just I was
just looking for his profile. When I typed in his name,
what appeared was as an AI answer about a biography
of who he was. Information about him is the goal?
(06:04):
What is the vision for Instagram? Is this going to
be metas super app.
Speaker 4 (06:10):
I mean to some extent, they're basically creating a super
I mean similar to what you see in China, but
an AI driven super Adit that's and you start to
go through that, you look in at a four digit stop.
Speaker 1 (06:25):
They tried to do this years ago with David Marcus
on the messenger side. Man Deep, it didn't necessarily work.
It was supposed to be payments and everything. Is that still,
in your view, an area of growth for the company
here or is that strategy gone?
Speaker 6 (06:42):
I mean right now, it feels like they have a
lot of runway with ads and there is a clear
use case for Jenni with ads. I mean, they still
have to fix the model. So I think the advantage
that they have is really they are the best when
it comes to at targeting and know with everything that's
going on, I mean, they have the surface area to
(07:05):
apply jen Ai. But look when it comes to payments
and other areas, they still lack the diversification of a
Microsoft or a Google. It's still a one trick set.
I mean, albeit a two dollar company, yees still dependent
on ads.
Speaker 1 (07:21):
Dan.
Speaker 2 (07:22):
You know, it's funny because I was thinking about that
because we you know, we talk about all of these companies,
and I think about the hyperscalers like an alphabet. We've
talked about that a lot man deep about just all
of their different platforms and how much data that gives
them to make their model smarter and smart smarter. I mean, Dan,
is it going to be okay for Meta to be
kind of a one trick pony even if it's I
mean it's a massive one trick pony, But is it enough?
Speaker 5 (07:44):
Well?
Speaker 4 (07:45):
I mean, like, look, I think if you think about
like on a packing scale of course, like Nvidio the
top Microsoft, and you'll get these numbers just just unbelievable
in terms of across the board. You look at Meta, Yeah,
you call one trick pony ish, but that's but they're
going to significantly expand that over the coming years.
Speaker 6 (08:07):
I mean, at least for now, there is no proof.
I feel they are under earning by twenty percent because
of all the losses in reality labs, But the street
doesn't care because their ad business is really going gangbusters.
When the ads slow down and the comps will get
tougher and there will be a point when ads will
not grow twenty percent, That's when I think the question
(08:29):
will be asked why are they losing twenty billion dollars
on reality labs because it's not making any money.
Speaker 1 (08:35):
When will it start making money?
Speaker 6 (08:37):
Dan?
Speaker 3 (08:38):
And does it matter?
Speaker 4 (08:38):
I mean, look, that's it's going to be okay, it's
going to be a while. But the whole point is
right now, that's background noise. Like you know, it's like
Street wants them to continue to in fast and vast
builders further out and at the end of the day,
that is going to come into the fold. But you're
not right now in this arms race in big tab
(09:00):
you're a weaser focused on who's going to be the winner,
and that's what we're seeing from Microsoft to Alphabet to
Meta you know obviously you know across bording we'll scale
with Amazon as well. Like it's an arm trace.
Speaker 6 (09:13):
I mean, the one other data point I would want
to bring in is token counts. So Google and Microsoft
have shared the GENII consumption, the token count We don't
know how much metas models are being used. Yes, their
AT targeting is great, which is why AT pricing was
such a solid number this quarter. But at the end
(09:35):
of the day, if you're investing seventy billion dollars in capex,
you want to see your model being used and the
open series strategy work. We have no proof points of that,
so I still believe they have the most uphill task
in terms of showing ROI on the you know, the Capex,
besides their family of apps. And that's still the case.
Speaker 4 (09:57):
Dan.
Speaker 1 (09:57):
I know you got to go, but thirty seconds, last
question for you. What's the one question you'd ask Mark
Zuckerberg tonight.
Speaker 4 (10:04):
Look, I think it's really about cap back trajectory because
I think that's even though that was slow a bit,
they're putting as they continue to spend, you know what,
That shows confidence and that's what we saw on Alphabet.
That's what you've seen the Microsoft, and that means it
continues to be like the AI revolution is AI party.
It's ten pm, was nine pm, party goes to four am.
Speaker 2 (10:29):
Hey, listen before you go. I know we said last question,
but not that we lie. But you know you're here
in your Dan ives Microsoft you said that was also
a big, big, big killer report. I mean the stock
was just crazy in the aftermarket's up about six point
eight percent.
Speaker 4 (10:43):
Scotti Scheffer like results, right. I mean the point is
like massive beat on cloud. You see more and more
of these use cases, these hyper scalers, those are the
best indicators. That just shows where the next spending in
AI is going. And that's why right now, if you're
attagged back, you're in hibernation mode in that cave and
you can't find AI in the spreadsheet.
Speaker 3 (11:07):
Pretty crazy, pretty interesting.
Speaker 2 (11:08):
Hey, listen, we know you're busy, we know you're bouncing
around and got stuff to do, but always good to
get some time with you. Dan I was managing director
and senior equity analyst oft web Bush Securities, also Globe
Ahead of Technology Research.
Speaker 1 (11:19):
I just want to remind everybody where we've come in
the last few years with Meta Platforms. There was a
lot of talk in late twenty twenty two of leaving
this company for dead. When they made their pivot to
the Metaverse, shares were trading at eighty eight dollars.
Speaker 3 (11:30):
Now it's back to the IPO. Oh sorry, yeah, I.
Speaker 1 (11:33):
Mean, but I mean even a recent history. Right, it's
up six hundred and eighty six percent since then. That
doesn't include the surge in the after hours, which, if
it holds, will be a new record for Meta Platforms tomorrow.
Speaker 6 (11:45):
Yeah, and look when people were, you know, selling the
stock at eighty dollars. Then they didn't really factor in
you know, Meta's engagement. So what's really brought them back
in such a big way is people are still spending
over an hour and a half across their family of apps,
so that's sort of engage. And look, that's where the
(12:07):
real risk comes in. So Chatchipt now is about thirty
minutes across its daily active users, which is much smaller
than Meta. Meta has over three billion, and chat ChiPT
is still you know, less than four or five hundred million,
so still much small, but they are taking share in
terms of engagement time. People are spending thirty minutes on chatchipt.
(12:29):
So as long as Meta keeps growing engagement, I think
they will keep growing earnings. And that's what they're showing
with their AD revenue.
Speaker 2 (12:39):
All Hell's man Deep Man, Deep seeing of course, with
our Bloomberg Intelligence team. He is Bloomberg Intelligence Globalhead of
Technology Research. Be sure to check out his research on
the Bloomberg When it comes to Meta.
Speaker 3 (12:50):
So appreciate it.
Speaker 2 (12:51):
Meta shares, by the way, are up about eleven percent
here in the aftermarket, the company giving us stronger than
expected third quarter revenue. Four has to sign that that
core AD business is still growing quickly enough to support
aggressive spending on AI. Devil in the details, and we
heard that certainly from Mandeep. And then we've also got
Microsoft that stock is up here in the aftermarket, and
(13:14):
that one some really really strong numbers as well, quarterly
cloud sales profit exceeding expectations.
Speaker 3 (13:22):
They say they brought in more than seventy five billion.
Speaker 2 (13:24):
Dollars in the past year in terms of its cloud
business as the company continues to commercialize AI services.
Speaker 1 (13:30):
Tim, We've got a great group of folks, a great
duo to talk Microsoft and more. I want to bring
in Greg Halter, director of research at the registered investment
advisor Carnegie Investment Council. They've got about six and a
half billion dollars in assets under management. I also want
to bring in Bloomberg Intelligence senior tech analyst anurog Rana.
He joins us from our Chicago bureau. Greg. Just for
(13:51):
some context, Microsoft is the largest holding, Is it the
largest individual holding for your group or is it because
it's an index funds I just want to set the
stage before we get into the details.
Speaker 7 (14:04):
Thank you, Tim, and thanks for having me. We do
not count the index fund holding positions in that number.
If you look at our latest thirteen F filing, Microsoft
is the largest individual stockholding at Carnegie.
Speaker 3 (14:18):
All right, so Microsoft investors certainly like it.
Speaker 2 (14:21):
In the aftermarket, as we mentioned, Greg, the stock is
definitely soaring up about seven eight percent.
Speaker 3 (14:27):
Now as I speak, what jumps out at you?
Speaker 7 (14:31):
I think the Azure growth thirty nine percent versus the
thirty four percent expected, that is huge. I'll also point
out that their EPs beat of eight percent plus is
the best in seven quarters. Usually they do beat. I
think it's been now only three times four times over
the last forty five periods they have missed on earnings,
(14:54):
and this is a larger point of exceeding the estimate
that they've had in seven periods.
Speaker 3 (15:03):
All Right, I want to agree you like it? All right,
Anna rag Grana, I want to bring you in here.
I'm not sure. I think we all went into this
week with a little trepidation.
Speaker 2 (15:13):
Over everything that was coming at investors, including some of
these big tech earnings. But this certainly investors like what
they got from the company, and certainly with the outlook.
What's your take here, what's important for investors to learn
off of this release?
Speaker 5 (15:28):
You know, I would go what our other guests said.
I mean, the acceleration in Azure is pretty impressive. And
one of the things I think it's going to do.
It's case, it's going to tell people that all the
capex Microsoft is spending, you know, they're getting the benefit
of it on the other side of it, and they're
probably the first one to recognize a bigger, you know,
load of AI revenue coming in. And you know, this
(15:48):
will pacify a lot of people out there that may
be worried that wire these companies spending so much on
infrastructure and you know, and where is the other side
of the equation. So I think a good results not
just from Microsoft, but the entire tech platform.
Speaker 2 (16:02):
Well, that's what I want to just follow Ana Rogic.
You know, our preview of all of this was Microsoft
Meta investors are going to be scrutinizing over the AI
spending bench. So for Microsoft, clearly do you we are
clearly seeing the ROI when it comes to that AI spend.
Speaker 5 (16:17):
Yeah, both on the top side and you know, they
are doing extremely well on the expense management side. Because
what happens is when you're seeing a rapid growth and Azure,
which has a relatively lower gross margin than the rest
of the Microsoft business. Profitability does get dented with In
addition to all the AI investments that they're making, what
they did this time was, you know, year over year
(16:37):
they kept their headcount flat. I mean that's a huge
boost to you could say profitability as well as productivity,
and you know, I think that's that's something for people
to take home.
Speaker 1 (16:48):
Also, Hey, Greg, I want to bring you back in here.
Looking at the Azure growth here, the company reported better
than expected growth in its cloud business, the Microsoft saying
it brought in more than seventy five billion dollars in
the past year. The company continues to commercialize AI services.
Give us your bull case on AI and Microsoft because essentially,
(17:09):
this company is deploying AI tools and it's betting that
these conversant chatbots and more powerful automation tools are going
to boost sales of Microsoft productivity software and cloud services.
Is that bet paying off right now?
Speaker 7 (17:25):
I don't know that you can say it's one hundred
percent paying off. The reaction to the stock indicates that
investors believe that it will. You know, this stock was
coming into the report at thirty four times earning, so
a lot has to go right and it appears that
a lot is going right. So yes, you know, we've
(17:48):
done a look at their CAPEX and R and D
over the last ten twelve years or so. It's not
like this is new. It's just that the numbers are big.
I mean the percentages are also fairly large. But you
know they're spending a billions and billions on R and D.
Of course, now they can get the text benefits from
that billions of dollars, not just Microsoft but others, and
(18:09):
you would hope that they're wisely investing in that R
and D for future profitable products and services.
Speaker 2 (18:17):
Hey, I do want to point out too that we
see Amazon shares up about two point seven percent here
in the after market, shares of alphabet or down about
four tenths of a percent. But of course Amazon reporting
along with Apple tomorrow, Anna Rag, I don't know, is
there any any cause for concerns or things that you
want to question or would question with the C suite
(18:39):
following Microsoft's release here?
Speaker 5 (18:41):
No, I think I would talk about the headcount growth
for next year. You know, what are they baking because
it's been almost two years where they have added very
little headcount to the overall company size. And the big
question over there is is this something that we should
anticipate going forward, that you know, you're getting all this
cloud revenue, but you're not adding a lot more headcount.
Because I think that's slightly concerning. I mean not so
(19:03):
much for Microsoft, but the rest of the tech industry,
because you know, somebody that is selling HR software or
sales software depends on companies hiding quite a bit because
it's a seat based model, and I think that's an area.
But that's not so much I would say Microsoft's problem,
but that the rest of the tech industry is issue.
Speaker 4 (19:21):
All right.
Speaker 3 (19:22):
Going to leave with there, folks, thank you so much.
Speaker 2 (19:24):
Anda Grana, senior tech analyst with Bloomberg Intelligence out there
in Chicago, and Greg Halter are thanks to you as well,
director of research at the registered investment advisor Carnegie Investment,
with the latest on Microsoft and NETA.
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Tim Stenovec
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