From the heart of where innovation, money, and power collide in Silicon Valley and beyond, this is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Live from New York and San Francisco, this is Bloomberg Technology. Microsoft and Meta results drive the market lower. We will look at how the AI story is playing out for them.
DoorDash posted its first operating profit since the pandemic as it grows outside restaurant deliveries. We speak to the CFO.
We will sit down with LinkedIn co-founder Reid Hoffman to discuss the impact of the election on Silicon Valley. First, we check in on markets that are to the downside. Nasdaq off by more than 2%. This is as the earnings come thick and fast. I highlight Uber, one of the latest ones, down the most in two years. Why? Gross bookings not as high as the market wanted to see. $41 billion for the quarter just reported. The market wanted to see higher and develop a forecast as well. We are seeing California, New Jersey perhaps pushing back a little bit by the cost of insurance, but also there is an FX headwind that is happening. What else are you watching on a micro basis?
Emphasis on forecast when it comes to the mega caps and members of the Mag 7. Meta narrowly beating the quarter on the advertising business, but it is warning of greater losses on Reality Labs as it invests in AI and finishes growth into 2025. Microsoft is a similar story. On track to be dropped by the most since October 2022. As your growth of the next three-month period will be 31 to 32%, that is a decline sequentially. Unbelievably, they are saying the supply constraint, capacity constraint on the data center side, in other words, they don't have compute capacity to meet demand out there for AI, which is a really fascinating predicament to be in, but also record spending. The themes are quite consistent.
The themes are, and so is the movement across most of the market. Let's bring in just mentioned, who helps us, Jess Menton. All eyes have been on a high-cap AI spending.
Especially with Microsoft because they ramped up so much spending. You cover the data center focus as well because that is not something a company like Microsoft would have done before 2020, but especially when you think about utility stocks, those types, that is where it is when you think of spending, capex spending. Say you are looking at Meta, Mark Zuckerberg made it clear they will keep spending on AI, even as you see not quite as much of a boost tied to AI losses there. Still a few weeks away, November 20. When you think about the key clients when it comes to AI spending, we heard from Alphabet. We had Microsoft and Meta and Amazon after the bell. With them ramping up spending, that will bode well for NVIDIA. When you think of half of the revenue growth...
Jess, let me jump in, really interesting. NVIDIA's down 4%, more than. Second-biggest points drag on the Nasdaq 100. Maybe the logic here is Microsoft, one of the biggest buyers of NVIDIA's chips, the growth outlooks are disappointing. Even though they're both saying we are committed to spending on AI, if they can't sustain the growth that investors want to see in response to that, maybe those plans change. I think that is so interesting to see that name down significantly despite the biggest customer saying we will spend money, no worries.
A lot of it has to do with the lingering concerns. When you think of product delays and long-term growth prospects, a lot of that is tied, to your point, as far as what that means and how long these companies can ramp up this spending because we normally haven't seen that when it comes to something like Microsoft.
Astonishing gains going into earnings. Amazing and interesting market session and we have just mentioned Jess Menton. Let's bring in Shweta Khajuria, Managing Director for Global Internet at Wolfe Research. We have to start with Meta. It's an interesting company to understand because beating the quarter gone, the advertising-supported business. Reality Labs will see greater losses. Capital expenditures continue to grow. Got a big sense of déjà vu. I don't know about you, Shweta. What was your take away from that?
Yeah, first of all, thanks for having me, good to be here. My take away was there are a lot of good things going on for Meta. We think about at a high level, yes, the negative side, capex remains unclear, they will spend $50 billion to $60 billion on capex next year. The losses in Reality Labs is a concern. But on the upside, what they are doing in terms of how they are leveraging Llama, stroke of genius on their part, to their own advantage is amazing, especially as we think about engagement and monetization. Video recommendations alone are driving growth on time spent, impression growth are high single digits, pricing is improving 11%. Meta AI already has 500 million MAUs. Engagement on the platform is remarkable. We expect revenue growth to be sustained at mid-teen growth rates at current levels. They are one of the biggest beneficiaries of deploying AI for their own advantage.
Half a billion monthly users of Meta AI was arresting. But what arrested the market was the 2025 promise to spend. Take a listen to what Mark Zuckerberg said on the call.
It's clear there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years. For the second, we should invest more there. Second, our AI investments continue to require serious infrastructure and expect to continue investing significantly there, too.
In your notes, Shweta, you talk about the new opportunities, the new revenue avenues we are going to see. What are they? Articulate that for the market.
Sure. In the near to midterm it is leveraging the AI models to their own advantage around engagement and monetization. They are making recommendations better. An example would be unified video, full-screen video on their platforms across apps. That will drive engagement because it is short-form videos, differentiated videos on one platform on a full-screen. That has an opportunity to increase impressions in that format. In addition to that, using AI to make the recommendations more targeted. They have not untapped the opportunity as much. In 2025, is most likely going to be video recommendation platforms in the video feed driving advertising growth. In the mid to long term, there are other revenue sources they've never had. Business-to-business messaging on WhatsApp, that is two years out but they are already monetizing that. Beyond two years, Meta AI, in terms of adding advertising to the search feeds, in addition to subscription, just like ChatGPT or Gemini, are completely new revenue sources for them.
And they continue to see early surprise success with Ray-Ban Metas, the glasses. You do not cover Microsoft, but you follow Alphabet, the parent of Google, and Amazon, that reports after the bell. In the context of cloud, I look at what Alphabet said and Microsoft, both seeming to suggest that the number three and two players took market share from AWS, the number one player. Do you go into Amazon's earnings tonight with that analysis as well?
Absolutely. The top three players in the market are Amazon's AWS, Azure and Google Cloud. What we saw with Google Cloud is 35% cloud growth rate, in part driven by not only gaining share, but expanding market through the AI services and products driving that growth. Even the backlog, the demand trends they are seeing are pretty amazing. Going into Amazon, our expectation is Amazon's AWS cloud revenue likely grew 20-21% and the street is looking for a percent growth rate. We expect that to accelerate in the fourth quarter.
You have outperform rating on Amazon. Shweta Khajuria, great to have you, Wolfe Research. DoorDash marks a major milestone since launching its IPO. CFO Ravi Inukonda joins us next. This is Bloomberg Technology.
Time for Talking Tech. It's official, the EU is investigating an e-commerce platform for potentially violating the Digital Services Act. The commission says the company is not doing enough to combat sales of illegal products on its site. Elon Musk was sued by the Philadelphia District Attorney for his political action committee's sweepstakes targeting swing state voters. The DA is asking a court to stop Musk from engaging in what they call an unlawful lottery. Peloton has tapped Ford executive as its new CEO. It hired Stern last year to run a new technology-focused division of the automaker.
DoorDash has topped Wall Street expectations in nearly every key metric this earnings season, seeing its first quarterly operating profit since the start of the pandemic, generating $107 million in operating income. It's a story about a platform that is shifting from restaurant deliveries to so much more. The DoorDash CFO, Ravi Inukonda, is with us in San Francisco. Let's focus on the future. That was the story, what is happening in success in business lines, but so many interested about the long-term future of DoorDash. You hinted there would be long-term investments in new areas. What are they?
Sure. We started our business with restaurants as the core focus, we are so much more than restaurants. More consumers are ordering for more categories. It is grocery, retail, Halloween costumes. We are partnering with every single store in your local neighborhood. Our goal is to be your local neighborhood superstore.
Which areas are the most profitable business lines for the app?
The overall business has been profitable for the first time as a company. In our business, scale is the most important thing because scale drives efficiency, which drives profit. If you look at the restaurant business, it has been profitable for a few years. We are building our new categories business and our international business.
Let's talk about international, because you made acquisitions there. I'm curious how the consumers stack up, U.S. versus international.
Internationally seeing very good and strong growth. Growth has been substantially faster. We are gaining share in every country we operate in. All of that is driven by the underlying product innovation. Frequency is growing because we launched our subscription program in international markets and that is off to a flying start.
What is interesting is you are doing partnerships. In the U.S. it is with Lyft. How integral is that partnership for growing your user base? Your CEO is saying it is only a fraction of the overall restaurant industry.
We are excited about the partnership with Lyft. We think it is an opportunity to make DashPass even more viable. 60 million-plus subscribers have saved $10 million globally. It helps consumers save even more. The core focus continues to be to improve the platform, that is where we see the majority of the growth.
Ravi, combining ride-hailing with delivery of food and groceries sounds a lot like what Uber does. There is interesting analysis to be done of what you are thriving but Uber printed results that show the consumer is tepid in the ride-hailing context. In the gig economy world, why is it you are succeeding?
There is so much more than restaurants. Just a couple months ago we were running for back-to-school and we used DoorDash for back-to-school supplies for both of our kids. We wanted to take away the worry of having a to-do list. We want DoorDash to be your local commerce to-do list. Local commerce is a large opportunity, deliveries is the most frequent use case. People order from local stores more than any other activity, and we are the leaders in that space. We are bringing the best of local neighborhoods to your doorstep.
Let's talk a little bit more about the geography of where you want to be expanding. Is it about spending power or geography when it comes to a deal like the one we see with Lyft? How do you extrapolate that to potentially international geography growth as well?
We operate in over 30 countries. An interesting thing is even in all the countries, we are not in all the cities. Our focus continues to be to build the best product possible not just for consumers, for merchants as well as Dashers. We announced a commerce platform for merchants that continues to do well. We are the fastest growing from a grocery perspective. We are getting share compared to peers. Our goal is to expand to all things within local commerce.
You are a technology company and you talk about your business. Give me one reason why it helps you stand out, what you are very good at that others aren't.
There are three legs to the stool. It is selection, quality, affordability. It is not one or the other. It is a combination of all three things that consumers are asking for and driving same-store sales growth for merchants. Over 7 million Dashers have dashed with us the last year. We are the fastest growing from the consumer's perspective as well.
We want to thank you for coming in and spelling out the earnings of a potential DoorDash CFO Ravi Inukonda. We will be speaking with the Twilio CEO on the heels of the company's quarterly earnings report. Ed, what are you looking at?
Quick check on eBay. The stock down more than 8%. The full cost of the key holiday period was lackluster. I think it is an interesting one because we talked about DoorDash and Uber in their final three months of the year. There is signals about consumer behavior that investors do not like what eBay is saying. This is Bloomberg Technology.
Cloud communications player Twilio's third-quarter earnings beat estimates, and the company has raised its full-year revenue outlook. Here with Twilio CEO Khozema Shipchandler. There has been this restructuring since you came in as CEO, or jumped to CEO. Which is working best?
I wouldn't call it restructuring. It is steady progress, very good financial discipline, operating rigor, a lot of innovation focus. What you are starting to see is that show up in terms of accelerated growth. We are starting to become a beneficiary of the AI wave.
Let's expand on the innovation part. The back story with Twilio was investors wanted to see discipline and a growth plan. What you are doing things in the world of technology that matter.
I think you are starting to see margins really improve over the last several years, which is exciting for investors, certainly exciting for us. On top of that, we have seen a real return to innovation. We are making some really focused bets in terms of where the innovation lies, and for us it is about delivering for consumers vis-à-vis our customers personalization at scale. What that really means is how do we combine communications plus contextual data plus AI to deliver these amazing consumer experiences through digital interaction.
Through the magic of television your RFB has popped out. Feel free to pop it back in and I will point out that analysts see a clearer future. Do you think that is fair, a longer-term path for you?
I think so. We feel optimistic about our long-term ambitions. We want to balance the ability to grow the company as well as drive ongoing profitability and free cash flow. Finding the balance is the trick. As I look out and see what is happening in this age of AI, we will be one of the beneficiaries.
Let's talk about monetizing the AI. Morgan Stanley says it is encouraging with the AI product integration, but they want to see monetization. How do you turn that on?
