Instant Reaction: Meta Reports Earnings

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.840 --> 0:00:14.080 Week inside from the reporters and editors who bring you 0:00:14.120 --> 0:00:18.439 America's most trusted business magazine, plus global business, finance and 0:00:18.520 --> 0:00:22.320 tech news as it happens. Bloomberg Business Week with Carol 0:00:22.360 --> 0:00:25.920 Messer and Tim Stenebek on Bloomberg Radio. 0:00:26.280 --> 0:00:29.120 It is Bloomberg Business Week. Shares some meta platforms bouncing around, 0:00:29.160 --> 0:00:31.920 but up about five percent in the after hours. Now, 0:00:32.000 --> 0:00:35.360 the company did report second quarter revenue that beat estimates. 0:00:36.159 --> 0:00:39.600 Revenue coming in at thirty nine point oh seven billion dollars. 0:00:39.600 --> 0:00:42.360 That's a twenty two percent year over year increase, beating 0:00:42.440 --> 0:00:45.680 estimates of thirty eight point three four billion dollars in 0:00:45.720 --> 0:00:48.240 that family of apps revenue that is the core business 0:00:48.560 --> 0:00:50.840 thirty eight point seven two billion dollars in the quarter, 0:00:50.880 --> 0:00:53.920 up twenty two percent. Estimate was for thirty seven point 0:00:53.960 --> 0:00:58.800 seven six Carol highlighted the capex, the company seeing total 0:00:58.840 --> 0:01:01.960 capex thirty seven to forty billion where they sought where 0:01:01.960 --> 0:01:04.720 investors saw thirty five to forty billion. The estimate was 0:01:04.720 --> 0:01:08.679 for thirty seven point five to three billion dollars. So again, 0:01:08.840 --> 0:01:12.200 what we saw from Microsoft and what we saw from Alphabet. 0:01:12.240 --> 0:01:13.800 Here's what I'm going to say. Their bread and butter 0:01:13.920 --> 0:01:16.039 is advertising. They did report better than a sales for 0:01:16.080 --> 0:01:20.559 the second quarter, So again, are right through the Wagner 0:01:20.800 --> 0:01:23.720 Carol offering evidence at the company's heavy investments in AI 0:01:23.880 --> 0:01:27.600 helping itself more targeted and personal personalized advertisements. That is 0:01:27.600 --> 0:01:30.080 still their bread and butter. So if they are saying 0:01:30.120 --> 0:01:32.200 we are spending guys, and we're going to spend even more, 0:01:32.200 --> 0:01:34.440 but look at the results from the past quarter. And 0:01:34.440 --> 0:01:36.840 that's where I'm trying to make sense of the stock 0:01:36.880 --> 0:01:39.399 being up here in the aftermarket, up five percent. It's 0:01:39.440 --> 0:01:41.039 not like people are saying, oh my god, what are 0:01:41.040 --> 0:01:41.479 you spending? 0:01:41.480 --> 0:01:43.600 You all thought you all thought that AI was going 0:01:43.640 --> 0:01:46.679 to make our jobs easier, when in reality it just 0:01:46.720 --> 0:01:49.120 makes Facebook better at targeting ads to you. 0:01:49.320 --> 0:01:52.680 Yeah, yeah, well done. All right, So let's get to it. 0:01:52.720 --> 0:01:55.480 Our team coverage with Bloomberg News contributor John Earlekman joining 0:01:55.520 --> 0:01:58.400 us from Toronto, along with Bloomberg News social media reporter 0:01:58.720 --> 0:02:01.640 Asha Counts joining Usgosh, I want to start with you, 0:02:01.720 --> 0:02:02.400 how did meta do? 0:02:03.920 --> 0:02:05.640 I mean? I think you said it earlier. They beat 0:02:05.720 --> 0:02:09.720 on everything right, The revenue beat expectations actually the top 0:02:09.840 --> 0:02:13.239 end of what analysts expected. And they also beat on 0:02:13.240 --> 0:02:14.880 the amount of users that they have. I mean, they 0:02:14.919 --> 0:02:17.000 just they beat in every dimension. Now, the one thing 0:02:17.040 --> 0:02:19.079 you did mention right with that capex, which is that 0:02:19.200 --> 0:02:20.960 spending a lot of which is going to things like 0:02:21.000 --> 0:02:25.720 a infrastructure. You're talking servers and data and hardware and 0:02:25.760 --> 0:02:29.760 stuff like that. That increased a little bit. But because 0:02:29.800 --> 0:02:32.320 it was that bottom range, right, like, their top line 0:02:32.400 --> 0:02:35.160 level didn't increase. I don't think investors are going to 0:02:35.200 --> 0:02:37.080 be that upset about that. So, yeah, they beat on everything, 0:02:37.680 --> 0:02:39.840 changed a couple of things, but I think overall it's 0:02:39.840 --> 0:02:40.320 good for them. 0:02:40.520 --> 0:02:42.680 Hey, John, what sticks out to you here? You've had 0:02:42.680 --> 0:02:45.840 a few minutes to go over these numbers. What sticks 0:02:45.840 --> 0:02:46.200 out to you? 0:02:47.520 --> 0:02:50.880 Just tim that Mark Zuckerberg and Metas seem to have 0:02:50.919 --> 0:02:51.919 the script down. 0:02:51.720 --> 0:02:53.079 Pretty cold at this point. 0:02:53.120 --> 0:02:55.880 I mean, building on everything you've said, here's a company 0:02:55.960 --> 0:02:58.400 that over the last couple of years, has learned its 0:02:58.520 --> 0:03:03.200 lessons when it comes to what starts to make Wall 0:03:03.240 --> 0:03:06.680 Street uncomfortable on the spending front. And I think that 0:03:07.000 --> 0:03:11.040 the fact that the as you guys highlighted earlier, that 0:03:11.120 --> 0:03:14.480 they can make the case that the revenue that came 0:03:14.520 --> 0:03:19.280 in stronger than expected gets assistance from the investment that's 0:03:19.360 --> 0:03:21.440 coming from all this AI focus. 0:03:22.080 --> 0:03:24.520 That seems to be a helping hand here. 0:03:24.760 --> 0:03:26.840 I would add though, that if you go back to 0:03:26.840 --> 0:03:29.919 the last quarter, remember and by the way, this stock 0:03:29.960 --> 0:03:33.520 always moves a lot. Generally, it moves a lot after earnings, 0:03:33.600 --> 0:03:36.560 either up or down. But the shares got crushed because 0:03:36.720 --> 0:03:41.160 investors had to do another reassessment on this AI spending. 0:03:41.240 --> 0:03:43.680 So arguably we've had some time to fit with this 0:03:44.160 --> 0:03:45.880 and even the stock price. I know it's up a 0:03:45.880 --> 0:03:49.640 lot this year, but at last check it was coming 0:03:49.680 --> 0:03:50.800 into this earnings. 0:03:50.480 --> 0:03:52.440 Report a little bit lower than where it. 0:03:52.440 --> 0:03:55.600 Was heading into the last quarter. So I don't think 0:03:55.640 --> 0:03:58.040 anyone would have been surprised to see a big spending bill. 0:03:58.200 --> 0:04:01.680 But you have stronger than expect did numbers. And remember 0:04:01.680 --> 0:04:04.240 this is also the company that's starting to find shareholder 0:04:04.280 --> 0:04:07.200 friendly tricks and it's playbook. They issued their first dividend 0:04:07.800 --> 0:04:09.760 and they're buying back a lot of stocks, so they've 0:04:09.760 --> 0:04:12.280 got the levers they can pull. But we still have 0:04:12.320 --> 0:04:14.160 to see how all this AI spending nets out in 0:04:14.200 --> 0:04:16.160 the long term. We don't quite know, but they're trying 0:04:16.200 --> 0:04:17.479 to paint a good picture so far. 0:04:17.640 --> 0:04:20.040 Yeah, and for a stock that bopped up I think 0:04:20.040 --> 0:04:22.039 about ten percent here in the aftermarket, we're now just 0:04:22.080 --> 0:04:25.400 up about three point six percent, still higher, but it 0:04:25.680 --> 0:04:28.240 continues as I think investors and analysts continue to go 0:04:28.240 --> 0:04:29.880 through the report and we'll wait to see what comes 0:04:29.880 --> 0:04:32.880 out on the call. Having said that, John, how does 0:04:32.960 --> 0:04:36.159 Meta square with some of the other companies that we 0:04:36.240 --> 0:04:40.800 are so intently focused on their AI spending and their 0:04:40.839 --> 0:04:43.200 AI ROI return on investment? 0:04:44.560 --> 0:04:46.760 You know, everybody is in an arms race here, and 0:04:46.839 --> 0:04:48.400 I think at the end of the day, Carol, you 0:04:48.400 --> 0:04:52.040 could make an argument that because Alphabet came first and 0:04:52.200 --> 0:04:55.800 investors got a little jittery on the roadmap for the 0:04:55.839 --> 0:04:59.880 spending on AI and the return on investment. Remember that 0:05:00.160 --> 0:05:03.080 to coming into this week, tech had been pretty roughed up, 0:05:03.440 --> 0:05:06.960 So it almost dare I say, set the bar lower 0:05:07.360 --> 0:05:10.480 for the tech giants that would be putting out numbers 0:05:10.520 --> 0:05:13.800 this week. I think that at the end of the day, 0:05:14.480 --> 0:05:18.000 longer term, and Mark Zuckerberg said it himself in his 0:05:18.040 --> 0:05:20.359 interview with Emily Chang not that long ago, there is 0:05:20.400 --> 0:05:23.239 a possibility that all the spending they are doing today 0:05:23.880 --> 0:05:28.280 might be an overshoot, but they're right now trying to 0:05:28.400 --> 0:05:32.480 build a future where engagement can be increased through AI, 0:05:33.360 --> 0:05:37.200 that advertisers can have better, more targeted ads through AI, 0:05:37.320 --> 0:05:42.520 that they can have a much cleaner thread between software 0:05:42.560 --> 0:05:44.960 and hardware, like the glasses you're talking about. 0:05:45.480 --> 0:05:47.640 I think they really like where this story is going. 0:05:47.720 --> 0:05:51.000 Over the long term, they're probably getting a boost as well, 0:05:51.520 --> 0:05:54.040 just because there's a lot of eyeballs on big events 0:05:54.160 --> 0:05:56.800 right now like the Olympics, and so they can benefit 0:05:56.839 --> 0:05:57.240 from that. 0:05:58.360 --> 0:06:00.839 But there's the other side of that we don't know 0:06:00.880 --> 0:06:01.400 a lot about. 0:06:01.440 --> 0:06:03.560 Mark Zuckerbergs spent a lot of time in front of 0:06:03.880 --> 0:06:05.520 lawmakers in Washington over. 0:06:05.320 --> 0:06:06.200 The last decade. 0:06:06.320 --> 0:06:09.240 People are still a little concerned, maybe more than a 0:06:09.240 --> 0:06:14.599 little concerned about the ramifications of all this AI technology 0:06:14.640 --> 0:06:18.159 that they're weaving into the Meta ecosystem. But you know, 0:06:18.200 --> 0:06:19.680 at the end of the day, if they can keep 0:06:19.720 --> 0:06:24.400 the bottom line in a relatively clean manner and keep 0:06:24.440 --> 0:06:27.159 growing the revenue story, you know, Meta is in a 0:06:27.160 --> 0:06:30.640 position to have a arguably a cleaner quarterly story than 0:06:30.680 --> 0:06:31.640 some of its peers. 0:06:31.880 --> 0:06:33.400 Hey, so can you talk a little bit about the 0:06:33.839 --> 0:06:39.320 integration of LAMA and AI into meta platforms family of apps. 0:06:39.440 --> 0:06:41.800 You know, Carol and I were joking about the idea 0:06:41.839 --> 0:06:45.080 of the result of all this investment in AI is 0:06:45.120 --> 0:06:46.279 just better targeted ads. 0:06:47.920 --> 0:06:50.240 It's funny because Metta is one of those companies where 0:06:50.279 --> 0:06:53.560 the AI is all behind the scenes, right. So obviously 0:06:53.560 --> 0:06:56.880 they've been using AI for years, per decades to recommend 0:06:56.920 --> 0:06:59.960 content on your feed, whether that's on Instagram or Facebook, 0:07:00.240 --> 0:07:02.760 whether that's posts and images or videos, and so a 0:07:02.760 --> 0:07:05.240 lot of it goes towards that. But then they've also 0:07:05.279 --> 0:07:08.720 released new products like AI chatbot that you could talk to, right, 0:07:08.800 --> 0:07:11.000 So meta AI, if you go on Instagram or Facebook, 0:07:11.040 --> 0:07:12.920 it'll pop up and you can ask it questions and 0:07:13.200 --> 0:07:16.680 things like that, so you see some product experiences. They 0:07:16.720 --> 0:07:19.400 also had rolled out some things like celebrity chatbots, so 0:07:19.480 --> 0:07:23.240 you could chat with a chatbot that looked and sounded like, 0:07:23.760 --> 0:07:25.560 you know, Tom Brady, for example. 0:07:25.240 --> 0:07:29.200 I knew you were gonna say Tom Brady, Yeah, I 0:07:29.200 --> 0:07:30.400 remember he showed that off. 0:07:30.280 --> 0:07:33.480 Right, Yes, yeah, they showed that off. But then they 0:07:33.560 --> 0:07:37.200 shuddered it recently, and so it's like, how much are 0:07:37.240 --> 0:07:39.440 those products and services really moving the needle for them 0:07:39.520 --> 0:07:41.440 or is it really just again like you're saying, going 0:07:41.480 --> 0:07:44.680 back to the core advertising business, going back to the feed, 0:07:44.720 --> 0:07:46.960 and how do they recommend content that users actually want 0:07:46.960 --> 0:07:47.520 to watch the view? 0:07:47.800 --> 0:07:50.160 Can I help me out here? Is there something in 0:07:50.200 --> 0:07:53.600 this release that sells specifically shows specifically is there a 0:07:53.760 --> 0:07:57.400 number or something that says, Yep, here's our AI investing 0:07:57.560 --> 0:07:59.720 and here's how it paid off? I mean, or John, 0:07:59.720 --> 0:08:03.760 do we just assume that if the revenue is beating 0:08:03.960 --> 0:08:06.720 that it's because of AI spending? You know what I mean? 0:08:07.840 --> 0:08:10.480 Yeah, I absolutely know what you mean. 0:08:10.560 --> 0:08:13.000 I mean, the first line in the press release itself 0:08:13.120 --> 0:08:15.760 was really trying to talk more about how AI is 0:08:15.840 --> 0:08:17.640 complementing the hardware that they've got. 0:08:17.840 --> 0:08:19.840 Yeah, and that might just speak to the fact that 0:08:20.080 --> 0:08:21.440 go back a couple of years. 0:08:21.240 --> 0:08:26.840 Ago, as we were just highlighting like AI is technically 0:08:26.840 --> 0:08:29.280 not a new thing for the company, but it is 0:08:29.320 --> 0:08:31.160 the hot thing for the world to talk about. So 0:08:31.240 --> 0:08:32.800 it is front and center right now. But a couple 0:08:32.800 --> 0:08:35.080 of years ago what was front and center was quite 0:08:35.080 --> 0:08:37.640 literally changing the name from Facebook to Meta and talking 0:08:37.679 --> 0:08:40.480 about the metaverse and talking about you know, other VR 0:08:40.559 --> 0:08:43.040 and AR opportunities. And so I think that there is 0:08:43.080 --> 0:08:47.400 still because of the explosive spending in that area. You know, 0:08:47.520 --> 0:08:50.720 maybe this is Mark Zuckerberg just wanted to put a 0:08:50.760 --> 0:08:53.640 pin in the fact that they can actually make all 0:08:53.679 --> 0:08:56.400 of this thing together. I would imagine, Carol, you get 0:08:56.480 --> 0:08:59.959 more color on how they're connecting the advertising dots on 0:09:00.120 --> 0:09:04.040 the quarterly conference call. But the revenue growing. I think 0:09:04.280 --> 0:09:08.079 already analysts, in reaction to this as Bloomberg is reporting, 0:09:08.240 --> 0:09:09.400 are suggesting that as the case. 0:09:09.520 --> 0:09:11.439 Listen, both of you. Thank you so much. Bloomberg News 0:09:11.480 --> 0:09:14.360 contributor John Arlokman out there in Toronto. Bloomberg News social 0:09:14.360 --> 0:09:17.560 media reporter Asha Counts in Chicago shares a mediciin right 0:09:17.559 --> 0:09:18.960 now up five point four percent,