Instant Reaction: Microsoft, Meta, Qualcomm Earnings Results

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This is a breaking news updated from Bloomberg instant reaction and analysis from our three thousand journalists and analysts around the world. We got a lot of companies that are reporting right now. Meta platform shares up by three point six percent. The company posted first quarter sales that beat Wall Street estimates. Signed the company's advertising businesses so far weathering the Trump Administration's ongoing trade war. We got with

Did it? No?

It did not end. Look, we knew one Q would be solid, but the fact that they gave us a two Q guide and that too was in line with almost in line with consensus, tells you they have more visibility about the impact of the pullback from Chinese advertisers their deminimus rule that everyone has been talking about, and they think it would have a very limited impact on the business. Obviously there'll be more details.

On their own. I mean, I'll pull back from like a Sian, that's right.

And so look, even though they have almost a ten percent revenue exposure, the fact that you know it's an auction model meant that they would have more of an impact on the ad pricing, and this guidance suggests that that ad pricing impact is fairly negligible.

What does this tell you about?

It's just interesting that we go into this earning season, right, and you have companies maybe in the traditional kind of economy, whether it's airlines and others, who are giving a couple of different scenarios, and then bam, you have something like a meta and we'll talk maybe Microsoft in just a moment.

These are strong numbers.

These are very strong.

Can they do?

Like?

How do we make sense of that?

Well? I think one these are the highest ROI ad platforms. So if you are an online business, you don't have a choice but to spend your ad dollars on Google and on meta platforms.

And if you're worried about the your economy or recession, this is where you're going to do.

This is where you are going to go to engage with your customers, to show and add to your customers, because every company is an online business and this is the highest ROI now, you're absolutely right that Snap last night didn't sound very confident about how to Q and that that was the reason why they didn't guide for

So explain that's what they don't.

Is it a meta platform story? I mean, you told us last week that Google is a very efficient way to advertise, so you weren't surprised to see the numbers that we saw from Alphabet last week. Is it the same thing when it comes to meta platforms, like this is just such a good way to advertise that even if small businesses see a pullback they still see value when it comes to spending money on this platform.

Yeah, so in terms of the pecking order, you are probably still gonna spend on Meta, but you may pull back on Reddit, on Pinterest, on Snapchat, and we don't know. We know snap didn't do very well. We don't know about the other two. But in terms of pecking order, Meta is the highest priority ad spend for any advertiser. And I'm surprised SMBs are still continuing because I would have.

Small and medium sized business.

Small and medium sized businesses because the tariffs would have caused a lot of uncertainty.

And look, that's why I'm asking you. I'm trying to understand an environment where so many companies are like, we're not even going to give you an outlok or we're going to give you two scenarios. And then you've got a company like this that's willing to commit but also plays to the small business community.

I'm just trying to understand it does.

And look, the advantage of having such a fragmented advertiser basis, even if a few advertisers do pull back, you have a majority of the other advertisers that may double down given they have favorable conditions. So it sounds like in this case, some retail advertisers may have pulled back, but then you know, you have other pockets within the economy,

You know.

I'm looking at the press release and one thing that I saw that kind of surprised me a little bit was Mark Zuckerberg at the top said we're making good progress on AI glasses and meta AI, which now has almost a billion monthly actives. We'll get to the number in a second, but that's what he chose to highlight at the top. He didn't choose to highlight the strength of the advertising business making a mistake. This is a company because he's raising the Kapex.

So the Capex guide ran from sixty to sixty five.

So what does that tell you.

Well, it tells me that they are really going big in terms of setting up this AI data center infrastructure for rolling out more AI on their family of apps, and they see a lot of ROI when it comes to the AI span.

What does it mean that it has a billion, almost a billion monthly actives? What's he talking about there?

Well, so Meta Platforms has three point five billion monthly actives across their family.

WhatsApp, Instagram, Facebook, Message.

So one billion of those, predominantly through WhatsApp, are using meta AI. I don't think there is a lot of Meta AI on Instagram or the Blue app yet, which I was surprised by given how much they tout Meta AI. But it's predominantly on WhatsApp.

Right now, what are they using it for? On WhatsApp? Are they using it like an LLM? Are they using it like a chat GPT?

Yeah, it is a form of search on WhatsApp where you can sift through your messages. You can actually do a lot of group kind of correspondences using METAA.

So it's basically an assistant for the app.

That's right.

But still I would say I see it more on WhatsApp than on their Instagram and Blue App.

Yeah, all right, so metas still up about three point four percent.

Should we talk Microsoft?

Let's talk at bit.

About Microsoft, because this one was just kind of off and running in a big way in the aftermarket. The stock is up about five point six percent. Here again some strong numbers.

Let me just pull it up.

Here, the company in terms of it posted strong revenue growth Cloud United expansion. This one also seemed really strong.

Yeah, so.

Azure thirty three percent when everyone was thinking, oh, Google had a slightly lower number on the cloud side, I mean, thirty three percent is a very impressive number cloud revenue right, cloud revenue. And again, this is the one company that has benefited the most when it comes to AI infrastructure and actually monetizing it. In the case of Meta, you still don't see the monetization on AI.

Meaning what specifically, so.

The AI inferencing revenue. So that is what shows up in the Azure growth number. And in that thirty three percent, your AI contribution is north of fifteen percent right now, So fifteen percent of that thirty three percent growth is all AI revenue.

Hold on, do we care about these numbers if we don't have the guidance yet? Oh, Vester certainly do after hours sending shares higher, but we're not going to get guidance until the call.

This is recurring revenue.

So when you think about as long as people keep paying.

Yeah, and enterprises don't really pull back, like.

If they had side I will say if they have fewer employees, they would pull back if they lay off employees, wouldn't.

They Still you need AI infrastructure, you do, Okay? I think of what they are doing with the AI infrastructure. They're rolling out chat bots, AI agents. So even if they are retrenching in terms of headcount, you still need more AI agents because.

Everything is awesome.

One last question, so same thing my question to Meta, like when I'm trying to understand what is going on in a lot of other companies, obviously they're not these big tech companies, Like, is this telling us a different story in terms of what's going on in the economy and the impact of some of the White House policies.

Well, so companies are clearly prioritizing AI initiatives right now, regardless of what is going on in the macroeconomy and the tariff situation. Everyone is concerned, but no one has pulled back on AI related projects, and clearly this is an illustration of that. We will wait for the guide. I mean these are one Q numbers, so we don't know how they guide to for two Q, but one QU numbers are strong from both companies.

Okay, Man, Deep, you got to go. We appreciate you sticking around and hang it with us. You appreciate it. Not just Microsoft and meta platforms reporting Qualcom. In the after hours, shares are bouncing around a little bit. The company did give a tepid revenue prediction for the current quarter. It underscored concerns about tariffs that will hurt demand for its products. As soon as these numbers crossed, we did see shares in the after hours move lower, down about

Not surprising to us. In fact, the results and the outlook turned out exactly how we had called in our preview. We thought that actual reported quarter might see a beat, likely due to strength in China Android and from the results VRC also seeing some better than expected IoT, which

They're also saying, the CEO, Christiano Aman, saying, as we navigate the current macroeconomic and trade environment, we remain focused on the critical factors we can control.

Our leading technology.

Roadmap, best in class product portfolio, strong customer relationships, and operational efficiencies. It sounds a little bit like c spe C sweet speak. But what you know they are saying that there's some navigating through this macroeconomic andronment is that in trade environment that's just all the stuff coming out of DC.

Well, yeah, and remember this smartphone market is sort of the most susceptible to any uncertainty or a recessionary scenario or a tariff impact given a totally consumer based and both the key regions where they sell right, US and China both are sort of directly or indirectly getting impacted by tariff. The second thing you remember is this is the year starting with even the spring iPhone launch, where Apple started sourcing their internal modem and swapping out Qualcom.

We'll hear from Apple tomorrow after the bell, but shares in the after hours down about two tenths of one percent. Can we get any sort of preview from these numbers? Given that Qualcomm does get twenty two percent of its revenue from Apple, not.

These specific numbers right the spring of phone launch. That's a very small volume, so we can't expect or predict anything. The real indication will come from the fall launch. Again, the numbers there are very difficult to predict at this point.

Okay, that's good to know. Anything else, Coonjohn, that you can glean from this?

Oh, go ahead, And I'm thinking, what's the number one question? I know I always like to throw this out, but what do you want to hear on the call? Or what would you be asking?

I'd be asking a very difficult question, is that. Look, we know that the Apple share loss is coming. Estimates have in build some of the loss, Like what is the offsetting catalyst here? Where can you grow or minimize this loss, especially in this current environment?

All right, got to leave it there, Love it, Love it Kunjohn Sabani. He is Bloomberg Intelligence Senior Semiconductor analys joining us from our bureau in San Francisco. Couonjohn, thank you so much. We'll look forward to his research hitting the Bloomberg a little bit later on.

We got to get to our other love.

Yeah, let's bring an ed Love though he's actually here in New York City. He's the co host of Bloomberg Technology with more on the tech earnings that just crossed. Microsoft posted strong revenue growth on cloud unit expansion, Meta revenue beat estimates on advertising stability. Meta coming out and giving a guide that please investors. Microsoft. We don't know what they're guiding yet. We'll find out on the call. Where do you want to start?

Let's go and Meta, you know, just because it's actually an easier story to understand. Meta makes money from advertising. Anyone that's been on Instagram or Facebook increasingly other apps will know that. And so the outlook for the current period shows that in everything that's going on right now, they're holding our own they're holding up. The ad market is basically conviction driven, so if there is economic uncertainty, advertisers are usually a little bit cautious and tepid. So

The sixty four to seventy two If they had seen sixty to sixty five billion, the estimate was just below sixty billion.

So what does that mean? They're going to put more money than they said they were into data centers, more data centers, cutting edge chips in those data centers. More likely they'll drive development in AI. But the single line in the statement that is so critically important is the majority will go into the core business. They will invest in the things that support ADS.

Well, that's okay, that's exactly where I wanted to go. Because Mark Zuckerberg called out Meta AI, he called out the hardware in the top of the press release, Mandy smartly pointing out, well, that's because there raise capex, so he wants to draw attention to the strength there look, look,

Yeah, it's a real quick We're making the distinction between hardware, which is a consumer electronic one wears on their person, and infrastructure, which is data status. And that's really important. So right now, Meta AI is a generative AI function that you can use through a standalone app as of this week.

Yeah, that's brand now, or you can use it.

Through Facebook, WhatsApp, and Instagram. I use it a lot through Instagram for whatever reason.

Yeah, more so than you'd use chat GPT.

But no, I use chat EPT more than any of the others. But it's ane.

So before I just want to pause you just to see so everybody understands, what are you using AI on Instagram for that you're not using ONGP.

I find it analogous, right, because one of the strengths of meta AI is you can say, meta AI, please take this photograph of me and turn it into an animated image where I am depicted amongst the team of my favorite football team. Something like that, right, And it's analogous with Instagram, but it does much of the same things that chat GPT does. It answers questions up until the date on which the data was trained. Now the

As much I mean as you have used them, I mean, is it a product that could be mass adopted.

In your view, yes, in so far as the sales have been surprising. They don't break out clear data, right, they don't say, oh, well they might actually maybe they're surprised uspect. They don't say, like, we have sold ten million of these, and that would be helpful if they did.

But as you play around with it, are you like I could see a.

Yes, but the sales, we know, the sales have invested and expected. Now here's the investor Wall Street bit. For a really long time, the unit that was responsible for us as humans, our engagement with the first the metaverse and our AI is Facebook Reality Labs. And for many quarters it would lose billions of dollars and investors would say, stop losing billions of dollars. And then they just stopped.

Okay, so let's stick on that AI theme here on the Let's say I'm an analyst. I want to know great, well and good that you're spending this money. It's all well and good that you've made these developments when it comes to hardware. Let's get back to ads. How does that make the ads better that are targeted ed on Instagram when he's using AI.

So some of the some of the metrics.

Certainly it's more engaging. You're spending more time on the platform, so that's a positive.

So people will look at metas mesas core data like the daily active users and add impressions that gives us a sense of how healthy and competitive that market is. Listen out on the call. I would wager that Mark Zuckerberg gives some different data to try and justify why metas ads are better in a tough economic environment because of the investments in AI. Go back to the earning statement, we will invest the majority of capex into core business.

This is what I feel like. We talked with man Deep about this.

What I do like, if you're going to spend money, you're going to go to where you get the biggest ROI right.

In terms of think of it as a sheer competition for eyeballs.

Hey, two things we want to get to before you have to run. Let's just talk Microsoft real quickly. I mean, off the chart still up about six percent here.

So analogous with Meta and Google is that if your core business performs and you are committing to spending on AI, investors will reward you. And that's very much the story here. Thirty three percent top line growth for cloud and that's what it comes down to, right Yep. I always have this line. Microsoft, which I've had a relationship with since I was a child and I learned to use a computer, was always good at getting people to pay for software

It did Mandy say that, actually, it's showing the monetization of AI that I think in that thirty three percent, almost half of it are close to half of it was the result of yeah, red.

Flip, and the criticism was they released Microsoft co Pilot, and many people thought that was prematurely. If you're in everyday tech worker, what am I going to use this for? Nonetheless, the numbers show that people are paying for it, and that's impressive.

Hey, Ed, we're going to hear from Microsoft on the call. We'll get some guidance there obviously, that will help people get informed about how the company is thinking about the current quarter, in the future, Apple tomorrow, Oh gosh.

Yeah.

Mark German said, I don't care about the numbers for the most recent quarter. I just want to hear the Q and A. I want to hear about tariffs. I want to hear about the supply chain. I want to hear Tim Cook's comments there you agree, Yeah.

Tim Cook famously says periodically I'm not an economist, but and then we'll give us something about.

He's not an economist, but he's a supply chain expert.

Yeah, like story is about totally the hardware companies can think people that make tangible physical stuff. They're built from components that move from A to B all over the world, and there are cost indications. And there is no better microcosm of what's happening right now in global trade than Apple. And I get what German saying, but remember that Apple

You know, Apple has Markerman has reported over and over again that Apple has struggled with AI, and we see that with what has happened with Siri. Do you think they should buy or would buy? Oh my goodness, standalone AI?

Come for those listening are radio only. I was smirking and nodding, going yeah, yeah, I mean Siri, you know has been a bit of a flop.

Oh say a bit of a flop, a huge flop.

Yeah, And you know I have covered some of his stories there. I lose track, but I think that there was some discussion by Alphabet about working with Apple and Gemini their model going forward, Apple's looking at third parties to provide the underlying model that powers all of this. And as Mark has reported, the consequence of the poor rollout is they've now restructured that company at the top,

Yeah.

Same.

Hey, before you go, we did talk Apple and Trump and tariffs. You've got a scoop when it comes to Vian and.

What they've been up to.

Yes, So, prior to the US election in November, Rivian arranged with a Chinese battery supply called Goshen to move a supply of LFP batteries from outside of the United States into the United States. And they paid for it upfront, which is unusual for an automaker to do. You know, you don't sort of say okay, I'm not going to use these for a while, but I'll pay for them anyway. And it did that to have a strategic stockpile as a hedge, an insurance against the election. Then more recently

This is why when we look through some of the economic numbers, kind of the pull through in advance of tariffs, you got to keep that in mind. Note in terms of economic activity.

Hey, yeah, real quick, we have it's been a while since we've gotten to talk to you and since you've been here in New York. On Rivian on everything happening in the administration. Given Elon Musk's close proximity to the president, has Rivian been a net gainer or a net loser? Given in the.

Story we just reported at and read the details, I put a lot of detail in the report, they made

Yeah, kind of a fascinating da where I think everybody's speculating. It did feel like a little bit of the present saying not necessarily goodbye to Elon, but kind of him wrapping up certainly his tenure.

Which data will reminded us. We all knew was coming, given his status as a special government employee.

Exactly right.

It was just a surprise time.

It was just a matter of time.

Yeah, pretty wild and tough questions top of mind in terms of the earnings that we've seen this dump.

Oh yeah today.

You know, like Alphabet, Google, they don't give guidance, they don't give detail, they don't tell you about anything in the economy. I would think that Meta and Microsoft would go a lot further, specifically like industries, geographies, and we would learn a lot about what they see in the world, and so not just Apple. Those other names will give us value, I think in the economic context.

All right, good stuff, as always, Ed Ludlow, thank you so much, so appreciated. Ed Ludlo, of course, his co host of Bloomberg Technology catch him and Caroline Hyde. They are on Bloomberg Television at eleven am Wall Street time Monday through Friday. So am I assuming this coverage will continue into tomorrow.

In the meantime, I do want to bring in James Chockmack. He's partner and chief investment officer at Clockwise Capital. He joins us from Miami. He's got the Clockwise Core Equity and Innovation ETF. It's down about eight percent so far this year. It does include Apple, Microsoft, Amazon, and Nvidia among its top holdings. And that's exactly James where I want to start. Given what we just heard from Microsoft.

Yeah, I think from a big pictures standpoint, you know, we went into tonight kind of ranking the mega cap earnings remaining as Microsoft as the least risky, moving to Meta and then finally to Amazon is the riskiest of the three, and I think so far as playing out as such, Microsoft, you know, the big number there that the Bogie wing he wanted to see was north of thirty percent Azure revenue. You know, we were looking like

Standards like listen to like the fact that they even give an outlook, isn't that positive. That's the environment we're in.

This is what we're trying to get our head around.

I mean, James, I'm looking at shares of Microsoft still up about six point two percent. If I look at Meta, it's up just shy of six percent. And I pulled up Amazon, which in twenty four hours we're going to be all over Amazon's earnings. It's up about two point eight percent here in the aftermarket.

But I'm trying to get my head around what these companies are.

Saying and doing versus kind of it feels like so much uncertainty in the rest of the you know, public universe, or so much uncertainty our companies not giving an outlook or companies giving two outlooks. So do we set these companies apart or does this say something more strongly about what's going on in the US economy and the global economy.

Yeah, we're not going to be too quick to judge, you know, how these companies are doing over the very short term about the broader macro implications. We still see US as at a fifty to fifty market at best. You know, yes, the results have been largely coming in on par maybe slightly better than expectations, but you know, we're not out of the woods by any means. You know, you still have reinflation risk, recession risk. The behavioral changes

James, one of the reasons we like talking to you is not just because you are an analyst or have an analyst background covering all of these companies, but also because you put your money where your mouth is. With the portfolio management of the ETF the clockwise core equity and innovation, Apple's your top holding. Dollar General is your second biggest holding. Explain that are you essentially trying to

Well, the way we look at it is, you know, a periods of maximum uncertainty require maximum adaptability. So what we're trying to do is in a fifty to fifty market play things down the middle. But that means is we're taking a Barbelle approach where for every dollar of beta of higher beta, you know, we're adding a dollar of much lower beta. And that's where the Apple and

Wish to remind everybody is a levered play on bitcoin.

Yes, I mean I we think that crypto single handle. It's the number one asset class that I have confidence and for twenty twenty five, I think it's Bitcoin is going to be the single largest contributor to returns in twenty twenty five. I can't say that the same about any other sector.

Is partial to really why.

Yes, institutional adoption, building awareness, there's going to be crypto related services. You had the fed, you know, remove barriers as to what banks can do as it relates to crypto. So I think that as the regulations come off, awareness builds, institutions build. You know, Black Croc says that it should be two percent of portfolios, you know, across the board. You know, we completely we agree with that. All our client portfolios have at least a two percent position in bitcoin.

Interesting.

So so it sounds like you have been putting money to work over the last month or two amid the volatility.

Yes, yes, and then yeah.

Yeah, yeah, we're putting money to work where when and where we can. You know, we've been selling a lot of the megacap names into any opportunity we have into strength, you know, just to give you a sense. You know, the top ten weights of the Nasdaq are about fifty percent of the total index. We're about forty percent of that.

But you did like I'm just looking. You've owned micro strategy, Are you out completely?

Oh no, we've been grossing it up every single time it pulls back.

Oh I'm sorry, so that one you've been moving it?

Yeah, yeah, yeah, it's the it's the megacap names, you know, the Microsoft's, Amazon's that as you know, those are all significantly underweight relative to the index. And we think it's proven to stay there until we have better clarity on business spending and the consumer. We just don't know exactly where we Amazon's going to be a big tail tomorrow.

So just going back meta reporting today, it's up about six percent here in the after market. We just talked about it. So revenue beating estimates on advertising stability. I'm looking at Microsoft up about six percent here in the after hours again, third quarter revenue topping estimates. Amazon has moved up ahead of its earnings tomorrow after the close, up about three and a half percent. Qual calms down about nine percent here in the after market following its numbers.

Yeah, I mean we we increase our Microsoft position the moment the numbers came out, we haven't we you know, we derisked it into the quarter. Now that the numbers are out, we got we've got it up a couple percent.

But does that story change potentially when we hear from the company on its earnings call and they talk about guidance or are you confidence and confident and guidance.

Microsoft was the only one of that group that you know, we liked into the quarter, which is why it was weighted slightly more than both Meta and Amazon, but we decided to take it back to where it was prior to the quarter, just because we believe it's the most insulated from all of the noise geopolitical and otherwise. While Meta and Amazon, you know, we would wait for the exact commentary on the call to be able to make that decision.

Okay, hey, how do you just a big picture? How do you think the economy is doing, how do you think the consumer is doing? How do you think they're going to weather these tariffs?

I don't know. I mean I can give you anecdotes, you know, like I went to you know, get my haircut yesterday and my barber was telling me that business has been slowing dramatically.

You know.

You know, you hear from companies like Visa and they'll tell you otherwise. But companies like Amazon come out and say, you know, Amazon Andy Jassical was saying that, you know, you're seeing trade down of purchases to lower ticket items. So it's a mixed message. And the thing about it is that we're really not going to get a sense of from the from an economic data standpoint, nor from a company standpoint. On the exact uh repercussions on the

Yeah, it's fascinating Bloomberg and I know other people talk about it, but it's something like the beauty salon index, but basically there Atwater.

Sent me a message on Twitter about this today on x It's William and Mary.

I love that you wrote that because it's it's kind of people's salons have been talking about how people are trading down on services, they're not doing as much, they're cutting back and so It's just kind of one of those unofficial indicators of maybe what people are doing, kind of conserving their spending because maybe they want to or maybe because they have to, uh and in anticipation of what's to come.

Top question for any.

Regardless of the economy. I had to I had to get on my haircut because I'm going to the Grand Prix this week.

So that's that's uh, well, yeah, that's a necessity. Is that a discretionary expense changer? Is that a business expense? How do you look at that.

I'm incredibly passionate about Formula one. Actually we own Formula one uh in the fund f wank. We think that that is a resilient business that's going to continue to grow. But it's discretionary. But it's also something I'm incredibly passionate about, passionate enough to actually own the underlying stock.

Love it pretty cool stuff.

Hey, just going back to the companies that have reported after the close, as we mentioned Microsoft, you know rallying soaring in the aftermarket, Meta is higher. We did talk Qualcom taking a big hit down about nine percent in the aftermarket. Pick a CEO, pick a company, what might you want to ask them? Go anywhere you want.

I mean, the biggest question mark we have is on the consumer. So I go straight to Amazon, to Andy Jesse and basically give us ask him to try to give us more color than what we got from Visa. You know, you know, what is the degree of trade down and purchases? You know what, how has the patterns changed from day to day, you know, over the course of airpril you know, just we need we just need more color on what's happening underneath the hood. And we're

So one of my questions, and one of my questions to you James before you go, is you know, you answered my question about the economy. What about when it comes to a long term trade war standoff with China sort of a stalemate here one ands, we've heard about factory activity possibly slowing down there. I know that some of the big box CEOs here are concerned about what happens if we start to see empty shelves, how do you look at that specifically?

Yeah, I mean the empty shelves thing is a big deal, you know. You know, in about two weeks time, you know, we may come to a situation where people can't get their goods. So that's a real risk, you know, when we think about the broader tariff risks and whatnot and the consequences of that. You know, we do think that the tail risks in the market are much more prevalent today than in many, many years. You know, we're looking at, you know, issues with our national debt, you know, issues

Great perspective on the specifics of these companies and so much more. James Chochmak, thank you so much, partner and chief investment officer at Clockwise Capital, joining us here to break down some of the earnings