Bloomberg Audio Studios, Podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Coarcklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
And one of the bigger I think stock news stories today Kurt Wagner Bloomberg News breaking the story that the folks at Meta cutting back some of their spending on the Metaverse, in particular by as much as thirty percent, which is a big number because remember, folks, this company pivoted, pivoted hard to the metaverse several years ago, to the point where they changed their name from Facebook to Metaverse.
This was a big, big pivot for Mark Zuckerberg and now kind of dialing it back a little bit.
So we want to get some more reporting on that.
We turned to Caroline I'd she joins us here in study Bloomberg Tech co anchor.
So this is kind of a big I think from mister Zuckerberg, don't you, Carolyn.
It's a signal.
And what's interesting about it is, as usual as they think about the budget for twenty twenty six, they're going to make layoffs.
They're going to cut about ten percent across the entire business. That tends to be what happens at this time of year.
But he gathered his top executives in his house in Hawaii to discuss, Okay, where should most of the resources be coming from, because remember they're spending a ton on AI and people have been worried about that.
How can he offset that?
Well, thirty percent more cuts therefore going to this particular part of reality labs. Now, Reality Labs are still going to be making your ray bound meta glasses. They've seen real interest in the AI use in augmented reality, but virtual reality, we're not living in it yet. He really thought we'd all be doing our workouts there, would be working there, and it just hasn't caught on in the
way that was expected. So of course, pull out resources from there, reallocate them, and I do think that it's interesting. Of course they rebranded under this name for now it's becoming sort of a metaverse of AI and augmented reality rather than virtual reality right here right now.
So was meta just to earlier? Were not ready for a virtual reality?
Or we are?
Okay, I mean, are you using it.
I'm I mean, my husband loved getting He got the one of the original sort of Ocunus versions of the headset, and yeah, he was doing workouts.
And then he sold it in a Gara set.
Because I think and it got to a point where it's like, what are the applications of this. I love the idea of when I'm in working abroad and I need to not have I need access to lots of screens, but I can't have just lots of screens. It was great to see how that could have been used, but I wasn't going to spend that many thousands on the.
Piece of hardware.
They've really got to understand the integration here. That's kind of why it's so interesting. It comes at that time. We've also understand Aland from Apple. One of the key interface design team leads the person who's been behind the iPhone X and behind the operating system, behind the applications of Apple.
He's jumping ship to Meta.
This is a huge coup. He's going to be thinking about the design of these things in the future.
You bring that up about the Apple thing I seen.
That's not the first person we've seen Leu the Apple AI stream going on there.
Yeah, they've really been shutting people in many ways.
This is tied more back to Johnny I's departure back in twenty nineteen and they lost a lot of their design prowess people. Then this is also turning of the guard. A lot of these people have in an Apple for a very long time. And we think about Tim Cook himself coming to an age where he might be retiring.
Many are wondering how executives shift. But you're right, the real deluge, the real loss has been in the AI area, particularly in the large language model department, where they've just taken so many hits in terms of morale because look, they might have been turning to Google for its large language model rather than building in house, and they've been recently losing out or sort of waving goodbye to John Jian Andrea.
That's the main lead of the.
Issuers at the assumption that they're going to farm this their AI out to Google. Perhaps, And that's perhaps. And I think we'll talk to Anna k Gran in just a moment. He'll say, from a stock perspective, that's what investors kind of want. Yeah, I mean it's well, why spend a good jillion dollars to be just what you do a search.
And it's been self limiting for Apple in many ways because they're all about safety on the phone.
This is all about edjai. It's not about.
Therefore sending all your data into the cloud and doing enormous amounts of data analysis and therefore feeding it through large language models.
There they want.
To be secure. That means you have to only be able to really do the compute on your own phone. That's very limiting at the moment. So you're just not getting the parameters that you need to have a really effective large language model. So therefore maybe they do have to shift to a part third party at least while they get their ducks in a row.
So how are we thinking about how Meta is scaling against a lot of its competitors right now as we think about this AI race.
Why isn't it interesting all dogtails together in the same way. For many Meta is showing that it's putting AI first. And we've understand the impact because everyone loves these ray band metaglasses.
They've been selling very well.
We've seen that people have really seen the revenue streams galvanize the advertising offering. The market is loving how they've used generator of AI within the product. We're all getting fed a content more specific to us that's going to be the help of Generator AI. But are we really downloading Meta AI's own individual AI app.
I haven't. I'm using it more in WhatsApp.
But then we've also got the EU worrying about how they're fending off competition in WhatsApp because they're saying, look, chatchbt even though you can put your chatchybut within your meta and WhatsApp at the moment, they're making it too difficult.
They don't want to be straining their own APIs.
Yeah, they don't want to be basically marketing Open AI's chatchibt. They're only marketing well co pilot for Microsoft. They want you to use Meta AI. So I think they've still got to show that they're the place that you're going to use large aguage models. They're the place you're going to come from a chatbot, and I think more broadly, they're the place that all of this ends up working
from a capital EXPENDITSHI perspective. So I think for many over at BI they love the idea that they're going to maybe use Google's TPUs because that's a cost saving Yeah.
Absolutely, Carolin, Hi, thank you so much for joinings. Caroline Hyde, b Tech co anchor along with Ed Ludlow Bloomberg News. They are on top of everything happening out there in the world of technology in a Silicon valley. You appreciate getting a few minutes of Caroline's time here.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Piece of news coming out of the tech space is meta you know, stepping back a little bit from their investments in the metaverse, and as Lisa Mitaylo's just reporting, that's pushing a stock up four percent today, which is a pretty big move here there's talks only a bit about thirteen percent year to day. Let's check in with Honor rog Ran and we'll talk about a lot of tech issues out there. Honor rog Ron is a senior
technology annls from Bloomberg Intelligence out there in Chicago. Honra, what do you make of this announcement or this report from Bloomberg News, Kurt Wagner's reporting that Meta may cut back investments on its metaverse by as much as thirty percent.
What do you make of that?
See, when you have to invest billions in the EI sight of it, you gotta find that money somewhere. I know they have good cash flow, but you know, right now everything is going towards building your AI infrastructure, So I think it makes sense for them to cut in other regions or areas to fund this particular project.
It seems as though investors are clearly celebrating this. I mean we're seeing it up more than three point eight percent right now, and earlier a lot higher. What do you think about next steps from here? I mean, clearly they're trying to redistribute their funds into AI development. What are investors looking for from that?
So the same way they were looking at you know, metaverse a few years ago, they want to see an ROI. They will ask, you know, the management team as to you're investing all these billions to create new data center super intelligence team. What do I have to c ine terms of the return on the core business? And I think that those questions are not just for meta but the entire ecosystem as to what is the net effect addition to your revenue or reduction to your expenses down
the road. And I think that is not going to end anytime soon, all right.
So I don't know, I'm just I think most shareholders are like, I don't really get the whole metaverse thing. So to the extent you can scale back investment there and put it anywhere else, that's probably a good thing.
All right.
We also had the salesforce reporting results. Talk to us about that name because that name's been under pressure I think, maybe potential threats from AI in general.
Yeah, there's say the results did come in, I mean almost in line with how we were looking at it in terms of that the core business is still struggling, but when it comes to some of their AI products that has started to do well, they've gained momentum. But when you look at somebody like a Salesforce, when you have a revenue base of forty one billion dollars, it
takes a lot to move the needle. So even though these products are very small and you know, growing triple digits, but they are not you know, right there in order to take down what is happening on the core business, which is a decline in seat growth or the less addition of seats because of macro it spending, and that is probably going to be the story at least for the near term.
So it seems as though analysts are still generally positive on in terms of AI adoption trends when we think about this company though.
Yes, absolutely, and that's you know, one of the things. We saw really good numbers on both the data cloud side of Fate and also the agent force. But when you look at the stock reaction last night, you know, it was up five six percent. And finally people have when you really scrape the numbers and see that their commercial remaining performance obligations, which is the order book for next quarter, which they expect to grow about thirteen percent
in constant currency. Four percentage of point of that is informatica. So when you strip that out, you will see that that particular backlock number goes from eleven percent this quarter to let's say nine or ten percent. So the core is still declining or the core is still under pressure.
So the stock down twenty seven percent year to date on a rock is that does that reflect the fact that it's just it budgets are tight, or that AI poses an existential threat to certain providers like a Salesforce.
I don't think that's the case, because it's going to be very difficult for an established Fortune two thousand company to get rid of their core system of record, you know, whether that's an HR sales customer service and just deploy a model in there. At least, we are not there yet. Maybe you know, five years down the road, we may see a scenario like this, but that's not really why
Salesforce is struggling. It is basically, we are the largest provider of sales automation tool and customer service tool to Fortune two thousand companies. It's those companies that are not hiring at that same rate that they used to because outside of AI and AI infrastructure, everything else is still weak at this point.
All right, Dona our good stuff as always, Honor Agrana. He is our senior technology analyst, Bloomberg Intelligence from the burgeoning tech hub of Chicago, Illinois. We appreciate gtting a few minutes of your time stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business Up. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Dick Sporting Goods reported some numbers here the stocks off about one percent, but.
Boy they put up I thought they were some pretty decent numbers. But what do I know about this stuff?
Lindsay Dutch Consumer Hardline senior analy She's the expert, and she's a Bloomberg Intelligence.
She joins us here.
Lindsay, talk to us about Dick's Sporting Goods.
What did you learn with their earnings release?
Positive?
I think that there's, you know, continued strength in the legacy business, and sometimes that that's being overshadowed by their Footlocker acquisition, which close in early September. But there's certainly pressure on this retailer to execute a very quick turnaround at Footlocker, and they are already planning to aggressively offload some stale inventory and close some stores. And we even saw some of that change is already over the Black Friday and Cyber Monday shopping weekend.
What's really in the focus, They were with foot Locker would have been the issues at play.
So Footlocker is a little bit of a different animal for Dix. They have a lifestyle focus. They also have to be more on trend with their assortment and they really have to carry sort of the top of the line items, you know, across a variety of brands running shoes have been in lately. Dix does have expertise sort of in that more sports focused arena. And so you know, Dix is looking to bring its strong partnerships with a Nike for example, and other brands like that to elevate
the assortment, which should help. They're also looking to bring in more apparel to the stores and I saw that when I was out on Black Friday.
You know, my.
Footlocker had a lot more apparel this year. They also had lots of other brands that were being highlighted, Crocs, Timberland, so all more doing a lot more than just Nike.
Dick's calls the World Cup quote the biggest sports moment the US has ever had. What are they telling us about the World Cup and maybe how it might impact their company.
Yeah, so they mentioned that at the Morgan Stanley conference yesterday. All of these sports moments have been really big for their legacy business. People are really leaning into sport. They saw over the shopping weekend interest in their products that were marketed for the World Cup, and that could be a key event to dry sales going forward. But they touch lots of aspect of sport. Their golf business is
doing excellent this year. They also do very well in just team sports when you think about getting your NFL gear for your favorite teams and things like that. They're really seeing success across the board. But those big events just give them an opportunity to advertise and bring people into their store.
Who are their main competitors right now? Who do you see within this landscape?
Yeah?
Yeah, So that's a very difficult question, given that I think that they've done a really good job sort of breaking out of lifestyle and really focused on athletes, and that's what makes them different than a foot locker, than a JD Sport. I think one of their closer competitors
could be Academy Sports and Outdoors. They're much smaller in size, but that retailer Academy, you know, does compete with Dix and is looking to more focus on athletes and bringing sort of that athletic assortment to their customer as well.
Linda, what is Dix telling you?
What are some of the other consumer hardlines companies telling you about the consumer right now?
So Dix is also unique in that they typically cater to a higher income consumer, so you know, they have seen resilient demand. They have seen both ticket and transactions continue to rise, which is rather unique. A lot of other retailers are only seeing the transaction front rather than the ticket front. So it tells me that the demand from that higher income consumer you know, is steadied to strong. We do also see that demand for new products that's
being rolled out. People are willing to pay a high price point for that. We also see that in footwear right like On has a very high price point they haven't discounted. Dix is also not discounting on those premium products and so that consumer is willing to splurge on those items. There is a little bit more pressure on the lower income consumer this year. I think that affects
footlocker a little bit more. But the way Dix is approaching sort of the turnaround and offering greater discounts, it might be an opportunity, you know, to continue to cater to that customer this holiday season.
How are you thinking about the discretionary space. I mean, I know Alta is reporting after the bell today.
I assume maybe the beauty space.
Can we call it discretionary?
Some people might call it A said, yeah, I would agree.
I think, you know ALTA is.
There are a lot of connections I can draw between Alta and Dix. You know, both of them had you know, very conservative outlooks for the back half of the year, you know, baking in a lot of uncertainty about you know, where demand would go. So Alta, you know, better than expected results in the first half, very similar to Dicks. We get third quarter results later today, but that outlook again is very low, so there's a low bar for
them to hit, at least on the top line. And they're coming off a two year best same store sales comp of almost seven percent growth in the second quarter, So I'm optimistic for some strong top line numbers there. But I do think the number to watch for Alta today is going to be on the profit line. They already have some pressure on profit within reinvesting in the business, and we've seen some of the retailer stocks even if
you know the quarter was good. If that profit line is missing, you know, investors aren't really liking that.
Lindsay, we're not hearing a whole lot about tariffs this quarter.
What are your companies saying?
So, most of my companies have low direct exposure, meaning they weren't directly importing a lot of goods, so the direct impact on them is low. They're working with suppliers and raising prices where they need to to manage that. You know, the biggest company in MySpace that that's most exposed would be elf Beauty, so also in the beauty space, seventy five percent of their product, at least their namesake product is made in China, so highly exposed there to
the China tariffs. But we'll have to wait and see because you know, there are some legal action out there, you know, looking to get those costs back on the retailer side. But you're right, earnings calls have sort of left that topic mostly out of the third quarter commentary.
What are the top major trends that you're keeping an eye on as we head into the next year.
So I do think costs in general, you know, still are facing some upward pressure going into next year and discretionary as a whole. You know, demand has been quite soft since the back half of twenty two, so you know we're looking to see, you know, when is that going to turn. When are we going to see stronger discretionary demand across the board. And that will help a lot of these, you know, more secondary retailers in the space, someone like an academy who's sort of struggling to see growth.
We can see a lot stronger of a year, you know, with a pickup in that discretionary spend.
All right, Lindsay, thanks so much, appreciate it. Lindsay Dutch Consumer Hardlines. She's a senior analyst at Bloomberg Intelligence down there in our Princeton office talking to us about Dick Sporting Goods has some pretty decent numbers.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am easterne on Apple, Cocklay and Android Auto with the Bloomberg Business Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Well, there's a lot going on in the world of media. I mean, we're waiting for a big m and a trade to happen. We've also got a lot of streaming services jocking for competitive position relative to Netflix. We've got Ai impacting advertising, a lot going on in there. So let's check with somebody who does this stuff for living.
Mark Douglas, President and CEO of Mountain. He's zooming in from one of my favorite towns in this country, San Antonio, Texas, home of my former biggest client, Clear Channel Communications.
That was a good company back back in the day.
Mark, how do you think you talked a lot of advertisers, You talked a lot of agencies, You talked to a lot of folks in the media business. How do you think this Warner Brothers Discovery thing is going to go down? Do you think anybody's got the inner track here?
Well, I mean we're literal word on the street is Netflix kind of has the inside track. But it's some pretty serious bidders, you know, kind of the Ellison family who I us work for, Larry Ellison, Netflix. I mean a lot of people with resources and who seem to have a lot of vision and really are in building modes. So I think it's like exciting times watching this go down.
I mean, as we're thinking about this potential deal. If Netflix were to actually come out on the winning end, what does this mean potentially about antitrust concerns. Have you been hearing any conversation about that.
I don't think so. I mean, there are somewhat around two hundred streaming networks, almost all of whom are billion dollar companies. I think it's pretty hard even to look at this from a trust perspective, even if it's two of the largest. I think the library that and honestly, you know, some of those companies are hurting, and so you know, having some consolidation I think is a healthy thing. And Warner Brothers Discovery, I think it's just a fantastic asset.
I think in terms of acquisitions or mergers in the media space, I think it's kind of being number one our list. I think the way people are responding to the opportunity is kind of validating that.
Yeah, with Terry Quadra back of Salmas Smith Brothers, Salmas Smith Barney, he was the first one to treade this asset when he represented AOL buying Time Warner back in the day. So this is not the first go round for these Time Warner people.
And look and look at the program they have Harry Potter, Game of Thrones, White Loaded. I mean, it's it's in a lot of ways. HBO was kind of the original Netflix. You know, it wasn't obviously on net, but it had like this incredible original content, which it continues to still have along with just this broad library of content and we all watched it on cable. Netflix kind of brought that formula to the Internet and obviously it's you know, kind of been become this massive company as a result
of that. But I think that's why that library of content and that ability to kind of keep doing it. Like they haven't really lost meaning Warner Brothers, Discovery, I haven't really lost their mojo in terms of creating content like that. And I think Discovery is under underappreciated in terms of the value you know that that it brings.
Shark Yeah, Shark Week and kind of like like documentary style and and they turned kind of showing and they turned that also into like reality TV with with what's the show up in Alaska?
The fishing shows. Yeah, I mean it's a lot to watch.
It's a lot to watch, and I think that's why people want the essence.
I've forgotten about Shark Week.
Yes, that's a big.
Just imagine any of these players, especially on Netflix, who has you know, the resource to do it, bringing back Game of Thrones, bringing back a lot of program I think it's still going to play really, really well, and and it might also play really well outside the United States, so you know where a lot of these company need to expand to.
So we talked about Netflix, what about Paramount's guidance. How big of a deal could this be for them?
I think it makes a lot of sense. I mean, the Paramount is a good asset. I think this is kind of meaning there's a lot of programming there and obviously they pick up CBS and things like that. But adding Warner Brothers Discovery, I kind of think puts them in a much stronger position to challenge a Netflix and
challenge a Disney. And that may be one of the reasons Netflix is interested is more is somewhat as a you know, kind of to hold their ground, hold their turf by not allowing someone to put together a library of content that is put you know, potentially as in the range or strength as theirs is, so that you know, this could be as much of a defensive move as a defensive move, but I think it makes a lot
of sense for Paramoun. I mean, once they committed to to getting Paramount, I think, you know, the acquisitions can't stop. They have to kind of double down. And so you know, we'll see how this plays out.
Mark for twenty twenty six.
In the streaming business, you mentioned there's you know, a couple hundred streamers out there.
Are there too many? Does there need to be consolidation or bundling or how do.
You think the streaming landscape is going to evolve mature?
Yeah, I mean it has to consolidate. I've always thought, I mean kind of one of the things I've always said on this topic is we can play a game. If I name a streaming network and you can't tell me immediately why why you will watch it, then it probably should not exist in a network. And so and we played that game. You know, if I say Discovery, you would say documentary. If I say Netflix, you would say, you know, new shows every Tuesday, and there'd be a
range of things you want to watch. If I say ESPN and you'd say sports, and so you know, when you get into sum of the names, you can clearly say that then I think there has to be a consolidation both in terms of the health of those businesses as well as just what consumers are willing to spend and tolerate. We've gotten to this point where pre much, you know, we went back to the future in terms
of ad supporting content. At this point, I think every streaming network except for Apple TV Plus now has adds, so you can you can do an ad model and do well. You're not as relying on subscriptions, but you still have to have a reason for people to come and watch you, and that's the key.
What are your major themes for twenty twenty six as you're looking at the media landscape?
The I mean, this is the year where like it's kind of the official death of cable in a sense. I mean, obviously it's a legacy business, but like there's nothing like live sports is moving on the streaming as fast as it possibly can. It's a topic of the day, it's what everyone wants. We got the I think Netflix continues to expand in terms of their ad supported business, which is great for advertisers and great for consumers. But it's kind of that, like all content consumption is streaming.
I think with the live live sports in particular.
Yeah, and.
One of the things that's really interesting about streaming is you can turn content that's not the NBA and not the NFL into content consumers want to watch and.
Just work to the NFL reopens its contract with its media partners, that's gonna be seismic.
Mark Douglas, President CEO of Mountain.
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal