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From the Heart where Innovation, money and power. Collie in Silicon Valley NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I met Ludlow in San Francisco. Caroline hides on assignment. This is Bloomberg Technology coming up. Meta says it will be the world's leading AI company, But investors don't like the roadmap to get their team coverage of a massive drop in Zuckerberg's stock and from earnings to IPOs.
We speak to the.
CEO of Service Now on their quarterly numbers, and Rubric's chief on listing day, and fourteen billion dollars goes to Micron from the Chips Act to boost America's.
Memory chip prowess.
But first, there is only one story that matters right now, and it is Meta. You see the share reaction. Zuckerberg outlining billions and billions of dollars are going to go into building out AI infrastructure. They're in investment mode, expenses range raised, capex raised. But the focus of the calls on the product cycle. How many years is it going to take for this investment in AI at Meta to materialize?
In sales growth, that's the question.
The stock on track for its biggest drop since October twenty twenty two. And given Meta's scale, remember how well it's performed year to date. It was up more than forty percent pre earnings. Look at the market cap. Look at the scale of this company, but also the market cap lost in this morning session alone. Let's get team coverage, the reporting from Bloomberg's Kirk Wagner and the analysis from Bloomberg Intelligence analysts man Deep sink kerk.
I'm going to start with you.
Mark Zuckerberg was on this call, but what he tried to do was say, trust me and bear with me. I've got a plan for AI to have an impact on the existing business.
Explain what we learned. Yeah, that's exactly right.
He was basically saying, Look, this is going to be a multi year investment. This is not the kind of thing that's going to return, you know, to shareholders very quickly. But be patient, right, he said, smart investors will see the benefits of this long term plan, right, sort of suggesting that hey, you know, anyone who's savvy, anyone who that sees the future like I do, they're going to be in this stock. Even though it's taken a little bit of a short term hit, and so you know,
it was a little bit, as you say, combative. It was one of those things that we don't necessarily always hear from him, which is sort of you know, pleading investors, Hey, be patient, hang tight, We're gonna get there eventually. But you got to weather a little bit of a turbulence in the meantime.
Mandy, when you look at the fundamentals of this company, you and I were discussing before the earnings print, where do we look to see if there is already avidence the AI is impacting the top or bottom line. I looked at the impressions growth. I looked at the pricing growth of ads, because this is an advertising based business.
What did you see in those numbers?
Yeah, I mean the impressions growth continues to be very impressive, you know, twenty percent, and that's driven by better feed recommendations. At targeting is better and at pricing. It was much better in the Europe region. If you part through the numbers, North America was lighter. Part of that could be explained from the pullback. You know that everyone is expecting from Chinese advertisers like Timu and Shane, but they didn't call
that out. So clearly that's a risk, and that's why that guidance that top line guide was wide when you look for two Q but look at the end of the day, when you look at the cost growth, the cost of revenue growth, that will be in double digits. So if that mid to high teens revenue doesn't pan out for some reason, and look, advertising is cyclic, that's when you will see margin compression. I mean, so for the story has been cost control and revenue grold. They're accelerating.
Now that story could change because the cost will grow double DIY did and if the revenue world doesn't match, that's when there is a risk.
We're showing you the markets right now. Meta is down twelve percent, but on a points basis, clearly it's dragging down the NAS that one hundred s and P five hundred, the Philadelphia Semiconductor Index or socks. I put that on there because there was knee jerk reaction in particular in video last night that fell.
It is now up three.
Percent, and I think the logic is Zuckerberg said three hundred and fifty thousand, h one hundred GPUs will come online this year as Meta trains its AI model and Kurt.
The other area of interest.
Is Zuckerberg's kind of fired up about things that surprised me.
Glasses.
He spent a lot of time talking about glasses. But there are still lots of confusion. Well, okay, wait, is the metaverse still a strategy?
Also? The Year of Efficiency? Is that still a thing?
Just try and clear up the muddy waters for us on what Zuckerberg's trying to do.
Yeah, I mean, there's so many things that they're working on at one time, it's understandable that someone might be a little bit confused. But he did bring up the glasses a lot, and what he basically said was these are progressing much faster than I anticipated. Right, So the glasses, for those who aren't familiar, this is the idea of wearing a pair of specs that look like maybe reading glasses or sunglasses, but that have all kinds of AI or AR features packed into them. They're working with ray
Band to produce these right now. And I think what Mark Zuckerberg was saying was that these have gotten so good so fast that it's encouraged me to continue to invest in AI, to continue to put money into Reality Labs, the group that's building this, and so you know, I think this has always been his long term vision. He thought that the glasses would sort of be the next iteration of a phone, you would wear it on your face.
But now he's saying he thinks they're getting their faster than he anticipated, which is why we're seeing this increase in.
Spand Okay, gentlemen, bear with me.
We've actually had a sort of breaking news headline since we've come on the air, and it relates to TikTok. Byte Dance has published on its Chinese website a statement basically saying it has no plan to sell TikTok. BikeE Dance has no plan to sell TikTok. I think we need to dig a bit deeper in the coming days to understand what they specifically.
Mean by that. Mandeep.
You've also published research your latest thinking on TikTok just this morning on the Bloomberg terminal.
Just explain the basics of it to us, please, Yeah.
I mean, look at TikTok has a lot of original content that goes to you know, snap, that goes through Instagram, YouTube, and so if TikTok has been a lot of those creators have to go to some other platform. Now, whether it's going to be YouTube shorts or Instagram reels, we don't know, but you can see that a lot of the original content creation happens on TikTok, and that's where
I think you will see Meta being a beneficiary. But I'm excited to look at, you know, the YouTube numbers tonight because to me, YouTube should be the fifteen percent consensus numbers handedly given the kind of you know, viewership gains that you have already seen, you know, with YouTube, and so I think that's the one aspect that people need to think about is the creators aren't going to
wait for nine months to move. They're already gonna start thinking about what's the alternative platform where they can move their followers. And I think that's going to determine gains for snap, YouTube and Meta in the coming months.
I think it's important we note that on the Earning School for Meta and analyst asked Mark Zuckerberg for reaction to TikTok. Susan Lee, the CFO, jumped in and said that they're monitoring that situation closely, but it was too early to tell the impact of a TikTok dive or ban on Meta's business. We're going to dig much deeper into Meta throughout the hour, but big thanks to the Bloomberg Kirk Wagner of Bloomberg News and man Deep Singh of Bloomberg Intelligence coming up on the program.
Service now is.
Sales forecast full short of all street expectations, but there is some positive outlook.
It's AI related.
We're going to speak to the CEO, Bill McDermott. There is a lot happening at once in the markets as well. Microsoft and Google our alphabet the parent at Google report after the bell. Those are pretty significant declines and the idea here is that we're worried on the back of Meta's earnings. We're worried that all of this spend on AI infrastructure is not bringing some big boom in generative AI driven sales growth, actual software products that people use
and those companies make money from. It's going to be such an interesting afternoon. This is Bloomberg Technology Service now out with first quarter results, but it's the outlook where the focus is projecting subscription sales will increase about twenty two two and a half billion dollars in the current period that was a little bit below what the street was expecting. But those are street expectations. What about the big expectations of the company's CEO. Bill McDermott, CEO of
Service Now, joins us. Now a Bill, good morning to you. Let's cover off the classic earning stuff. You have a strong quarter and then you give an outlook which, relative to consensus estimates, was a bit disappointing. What would your pushback to that market reaction be.
Well, first, I think you have to look at the triple play that we just pulled off ed. We had a beat on the top line, a beat on the bottom line, and we raised the full year guidance. So if the high class problem was solving for is we didn't raise the guidance enough. Everyone can really relax because over the last five years that I've been here, we always beat and we have every expectation of doing so again.
Bill, I actually want to invite you to give the basics of what Service Now does. I think a big portion of the audience know the name, they might appreciate, just an explanation of what it is you're out there in the world doing. And my summary basically is you're trying to capture it spend, you know, the budget for it spend from all kinds of companies.
Yeah.
I think the best way to sum it up is think of Service now as the AI platform for business transformation. If you look at companies today, they need a platform on an end to end basis, from it to the employee experience, the way they run their customer relationships, and the way they build new products. They need one place that can do all of that. And what's unique about ours We built it organically. There's no tech dead in it,
and it's pristine. It's a sheet of glass that lies above the mess that's been created for the last half century. And the big movement today is now, what is the new frontier. The new frontier is Jeni And people say, Jeni, what does that mean. It means the companies and the CEOs that are watching this program need to optimize their processes. Every business workflow in every enterprise will be engineered with Jeni. We are the first mover and the market leader in
that category in the enterprise. So the future glide path could not be brighter.
Build The stock is down almost six percent. I note that there is some pressure in the market this morning. Because of metas earned and we'll get to that in a bit, but let's talk about RPO because I think that gives some evidence of the backlog. RPO meaning remaining performance obligations. That's basically SAS speak for backlog. You've got a backlog. Why should the investor base be more positive about that backlog?
Well, they should feel really good that we have nearly eighteen billion dollars and remaining performance obligations. So that is business we have in the backlog that has yet to be fully recognized. So the backlog is there. We're beating on the revenue. Just think about this. We beat on the revenue by one hundred basis points, we beat on the margin by one hundred and fifty basis points. Our free cash flow is up forty seven percent, and our
gross profit was up eighty three percent. And we're talking about was the increase in the guide enough and you just mentioned it ed perfectly. There's eighteen billion in backlog. So the company is really on a tear. And one of the reasons it's on a taar is you have great companies like Microsoft and IBM as an example, that are transforming their employee experience with a digital first support model, freeing up all kinds of resources and fueling innovations on
Service now is Genai. Novartis is delivering new drugs and increasing operational efficiency by streamlining clinical trials, research and financial management with our Genai and countless other examples. So Jenai right now is a.
Small part of the overall total.
You know, we're a ten billion run recloud company. But the uptick in future sales and generative AI when companies re engineer the way they run on our platform, is that believable because there'll be half a trillion spent on it in twenty twenty seven alone. So this is a really big market. We're the leader, and we're teaming up with the best in the business like in Nvidio, Microsoft, IBM and others to create a bright future.
No that again, build The stock is down six percent, and there are reasons why for that in the short term. One of them is probably Meta. I know that you're the CEO of Service Now, but to extrapolate from Meta, part of the concern last night was all this investment is going into the underlying infrastructure that supports generative AI.
But Meta is a case study.
They're not yet seeing that investment in the infrastructure translate to top line growth in the form of software. Right, tangible evidence that they're selling AI as a product as a platform. In your case, you are only selling it as a software layer.
Just just explain that thesis.
Should we be as concerned that Corporate America has not yet worked out how to sell ai?
Absolutely, So let's differentiate. First of all, metas great company. They had very good results and their guide might have been a little muted in terms of the return on Genai. They're running large language models and that's very important for the future of the world, and they're doing a great job. We're running small language models, which basically means we run our platform with the customer's data in mind. So it's rocket fast, zero latency because we're using the customer's own data.
There is total accuracy and it is very inexpensive, and that's why customers are buying our Genai now because it's secure, it's inexpensive to run, and it's one hundred percent accurate based on the customer's data. So that is what they're
buying right now. We also have an open platform where we integrate with Meta and we integrate with Google and Microsoft and all the other market leading companies out there, should the customer want to reach into large language models, and we've teamed up with Nvidia where Nvidia probably our greatest partner in this category is running small language models for US and large language models with their compute power. Let me give you an example of it. Let's think
about employees and customers. Think about GENAI deflecting all the soul crushing work that people don't want to do anymore. So think of employee and customer deflection where virtual agents can actually do the work that people used to have to do. Think about software engineers increasing their productivity or their speed of innovation by nearly fifty percent by texting something in natural language and turning that into software codes.
And there's several other examples. But the point is small language models are selling today when a lot of money at it, and large language models are also available on our platform. But our customers are really teaming up with Microsoft for example on Copilot and service now on our virtual assist AI platform, and we got it together. Is better solution for the marketplace, and that's what's selling today.
Bill, I appreciate the debt for the answer. Bill McDermott, CEO of Service.
Now, thank you so much coming out Microsoft back, Rubik goes public mid arizing demand for data security. We do speak to the CEO people sing you next. This is Bloomberg Technology. Rubric, which focuses on data management, recovery from ransomware attacks, and accelerates cloud mobility, is officially going public.
And joining us.
Now is Rubrics CEO people Senior. The shares are indicated to open at thirty eight dollars a share. You price this IPO at thirty two. Just tell me what that means to you today.
Thank you Ed for this opportunity to speak with you. It's a very exciting day for Rubric employees, our customers, our partners, and everybody in our ecosystem around the world. Look, I will leave this stock price to the experts and the traders. Ultimately, we are a different kind of cybersecurity company, and we are helping our customers continue to run their business even in presence of cyber attacks and breaches, so
that hospitals are open, kids are going to school. When people swipe credit card, they get money out, irrespective of whether there's a successful cyber attack or not.
People, did you really need to go public for the visibility. Like your business seems to be doing quite well. Do you think this actually tangibly improves your sales?
Look, we are working with a number of customers around the world, having more visibility, having more brand name recognition, and more importantly, when you are as a public company, everybody can see your numbers and they understand the resilience
of the business. That's actually good for our customers, that's actually good for our ecosystem, and it also helps us be in front of more innovative companies, talk to them about our story and essentially help them against the ransomware attack and another cyber attack, to deliver cyber recovery and cyber resilience.
People.
I spent two years asking you if you'd go public. You finally and eventually are doing it. But I think there's a feeling that there's a hell of a premium on this IPO. A lot of people want to see evidence of revenue and profit that comes from this. But you resisted the temptation to talk endlessly about AI. You're saying you don't have a core AI story.
We do have a core AI story. Rubric has been building AI for last ten year, In fact, our data threat Engine is built on AI platform that delivers security intelligence directly from the data. And more recently, we announced a product Ruby, which is a generative AI based AI data defense and recovery that helps cyber defender fight fire with fire. Because you know attackers are applying AI in terms of how they are increasing the volume, variability and
velocity of attacks. We are allowing the defenders use AI in terms of rule Break and Ruby so that they can deliver cyber resilience and cyber recovery.
People very quickly.
Microsoft remains an important financial and technology partner to you. How will that relationship work now going forward?
We have a very strong relationship with Microsoft. In fact, we were Microsoft Partner of the Year in twenty twenty three, both both for US and UK. We continue to coinovate together, continue to help our joint customers get cyber resilience, make sure that they can withstand cyber attacks and continue to run their business, because, after all, digital trust starts with keeping the services up and running when you are attacked, even if the cyber beach has happened to you.
Rubric CEO people signor after two years of asking if you go public, you did thank you. Okay, Welcome back to Bloomberg Technology, Ed Ludlow here in San Francisco.
Let's talk about TikTok.
The clock is ticking for TikTok to avoid its behan in the US should it be unable to divest. Joining US now from DC is Bloomberg's Mike Shepard, and Mike basically leads our coverage of the intersection of politics and tech. We had that breaking news headline at the top of the am mic that Bite Dance saying through its Chinese website that it has no plan to divest or no plan to sell TikTok. That was the wording or translation.
I don't really feel like I understand what they mean by that they're digging in.
Basically, they are digging in, and the statement in a way is not that much of a surprise. They've made clear through this process. As the legislation started to take shape last month, that really started to look real, look like it was going to happen, that they had no intention of playing ball, and that in fact, they would try to fight it with every arrow in their quiver.
They really want to make sure that they are able to hold on to this valuable asset and resist what they see as and the Chinese government also sees as interference in valuable media property.
So there's a lot that's happening quite quickly. We'd reported that by Dance was thinking about a solution where it sold TikTok but without its sacred algorithm, and on the show yesterday we talked about why that algorithm is so important for content creators. The President signed this law, signed this into lawy yesterday, but as far as I'm aware, the President hasn't actually commented or specifically talked about his
view on TikTok. Just update us on the politics, I guess of the last twenty four hours.
This is a great question need because politics has really surrounded this, not only the geopolitics between the US and China, but even the domestic politics. And when it surfaced back in March, President Joe Biden said he would sign it. He would sign the measure, but he hasn't really expounded much more on it now. To be clear, the TikTok bill was attached to a much larger foreign aid package, which was a far greater priority for the President and
his administration. They wanted to see a to Ukraine get through above anything else, and in his remarks yesterday, he really devoted the lion's share of his commentary to that. At the same time, his spokesperson made clear yesterday after the President spoke that selling TikTok a full divestiture was something that they wanted. At the same time, they do
not want to see the apps shut down. They respect that many US users derive great enjoyment from it, and also for many it is also a source of business, and that is something that the administration does not want to see shut down.
Bloomberg's Mike Shepherd out of DC really appreciate the coverage and I think we're going to be talking about this quite a lot for at least two hundred and seventy days.
Thank you.
I'm going to keep a conversation going and get some kind of the market analysis. Jasmin Enberg is principal analysts at Insider Intelligence. We're wading through a lot of unknowns. But where is your head at, Jasmine? You look at TikTok from the point of view, well, this is a platform that almost fifty percent of Americans are using.
What do you think will happen?
Well, I think the announcement from Bytown today that they weren't going to sell was to be expected. I mean, TikTok has already said it's going to wage an intense legal battle. I think the question for me is what how weapons now with all of this uncertainty. I mean, TikTok obviously has a lot of loyal users. Many of them have already come out in full force to defend
the app, and I expect they'll do so again. I don't expect many of them to leave, And advertisers aren't going to leave as long as there's audiences to reach and content creators of courts, which are a really important part of the app, aren't going to leave if there is money to be made. But if there's one thing
that advertisers don't like, it's uncertainty. And if this uncertainty surrounding the legal battle and what happens to Tiktoks sends enough of them running for higher ground, that could eventually lead to creators starting to leave, and users will follow creators wherever they go, and that could end to or end up doing in an undoing of TikTok even before this matter is resolved in courts, or if it binds the buyer in wittance changes its mind.
So Jasmine coming into the show today before the head line crossed about Byte Dance having no plan to sell TikTok, what was your thesis before that moment on TikTok?
My thesis in terms of whether it was going to be sold or not.
I mean, what I was.
Thinking about mostly was in terms of the algorithm and how important a part of that would be in terms of whatever sale could potentially take place. I mean, the algorithm is part, a big part of.
What makes TikTok tick.
And not having it as part of the sale, but of course lessen the valuation potentially expand the potential list of buyers. But it still wouldn't be an easy task to find a buyer for TikTok, even if by Dance were willing to sell that app.
Okay, So last night during Meta's Earning School, an analyst asked Mark Zuckerberg for basically reaction to the TikTok situation. Susan Lee, who's the CFO, jumped in and answered the question and said, you know, we're monitoring it, looking at it closely, too early.
To tell what it means our business.
Do you have a clear winner in any scenario of who the main beneficiary of a TikTok divest or a TikTok ban might be in the meat social media landscape.
Yeah, well, Meta has been pretty silent on this issue, and for good reason. I mean, there could be ramifications and in other countries where Meta does business. Meta would be a clear winner if TikTok were to disappear from the US, mainly because of Instagram reels. It is one of the most natural fits for a displaced TikTok users. It's not exactly the same as TikTok, but I imagine that a large number of TikTok users would move there or to YouTube shorts, and it would also be a
winner in terms of AD dollars. Now, Meta is a massive player in the digital ad landscape. We're expecting it to bring in about sixty four billion dollars in US AD revenues this year. TikTok's AD business is smaller by no means small. It's about ten billion AD dollars to ten billion dollars in AD revenues, and so of course some of those dollars. A big chunk of those dollars would likely go to Meta as well.
Jasmine will Meta be the world's leading AI company.
It's a great question, and Meta certainly is in the AI race to win it. I do think it could be a dark horse in the race to AI if you think about the distribution potential alone. It has a built in audience through Facebook, through Instagram, through What's Up.
I was doing some calculations after it released Meta Ai into the search bars and Facebook Feed just last week, and Meta only needs forty three percent of US Facebook users to use Meta Ai on a monthly basis for its audience to be as big as chat GPT is here in the US, and that isn't unthinkable if you consider how prominently and permanently Meta Ai is displayed across the apps, and then in terms of monetization, you know that is going to be a big factor in determining
who wins the AI race, and Meta has a competitive advantage there. We don't really know how jenai is going to be monetized, but like pretty much everything Meta does, it's likely to be an ad play and this would be connected to its powerful ad ecosystem, and so I could see it emerging as an unexpected winner, though of course there is a lot of competition and the crowded market still to face.
Meta shares off session lows, but we're still down more than twelve percent. Jasmin Emberg of Insider Intelligence is always great to have you on the program.
Thank you.
I just broke this story with Bloomberg's Kurt Wagner. We just published it on the Bloomberg terminal. Elon Musk is going to be deposed on Monday as part of the first arbitration hearings in the legal process where former Twitter employees have basically brought a class action against Elon Musk. The former Twitter employees say they were cheated out of severance pay when Musk bought the social media company in
October of twenty twenty two. Law firm Lichten and Listen Order and will be representing almost two thousand former Twitter staff in individual arbitrations as well as more than a dozen class action lawsuits overall in the courts. That story just out on Bloomberg. I'm sure it will be online soon as well.
Stay with us.
We have so much more ahead on the program. This is Bloomberg Technology. Okay, it's time for talking tech and first up in the news Abudabi's startup G forty two is choosing sides. The company, known for a sprawling product portfolio in AI, is teaming up with American companies like Amazon, OpenAI,
and Microsoft and divesting from its Chinese partners. The move comes mid worries from US officials of open back doors from the Chinese government, with some members considering an intelligence briefing to discuss g latest partnership with Microsoft that is the Bloomberg Reporting, plus Chinese online tutoring platforms. Xiongbang has filed confidentially for a US IPO. That's according to sources. The filing adds to signs that Beijing's looking to boost
funds for its tech industry. The company is said to be working with advisors on the potential listing that could take place as early as this year. And semiconductor maker Skhinix says it expects a full recovery in the memory chip market, led by AI related demand. The company posting first quarter results that exceeded expectations, forecasting its fastest pace of revenue growth since twenty tenesk Heinix says it's entering a rebound phase and is preparing to expand capacity for
its leading edge chips. Okay Let's stick with chips that stick with memory. Micron is expected to receive nearly fourteen billion dollars in US grants and loans to help the company build new American babs or factories. We're also expecting Intel results after the bell. There is a lot happening in real time with the semiconductor industry joining us to discuss it bloombergsy and King, who leads our coverage of
semis Let's start with Micron. They are the number three maker of memory chips, the US leader of memory chips. Almost fourteen billion dollars in grants and loans crucially seems like a lot of money.
It's not really, is it.
Well, I mean for somebody like you or Micron, it really isn't. For me, it would be a lot of money. I mean six point one is guaranteed, right, But when you put that in context of the one hundred and twenty five billion that they're looking to put into a factory network that's going to be built over the next few years, clearly that's not. I mean, it will help even the cost base between building here versus building in Asia where they have most of their facilities right now.
But it's not a free v by any stretch.
The memory market's really interesting historically commoditized boom and bus site cause we're talking about principally d ram A nand or flash memory. The next generation of memory goes into data centers for AI and Micron is competing against those big names Samsung, sk Heinix. Why are they wanting to enshore this basically in America?
What's their kind of play here?
Yeah, I mean there are a number of things.
We had a conference call with the political leadership behind this bid and they're basically like, look, we can't afford to have all our eggs in one basket.
Look what happened during the pandemic.
We need production of this increasingly important technology in the United States. And as you just indicated, it isn't just a commodity or won't be just the commodity that it has been in the past. So we need this key technology in this country. Is the argument that is being made.
We're talking about HBM three or high bandwidth memory, and we've done a lot on the program. Our audience will know and we will continue I'm sure to talk about it in the moment. Intel. It is the next kind of big chip name to report after the bell. What are we expecting?
Yeah, expectations are very low. I mean this is a Stargglus down thirty percent this year, way below what you know, the socks index, the key semiconductrient done. We already know that their operations are struggling. We know that their manufacturing is poor. The key question that we're going to see answer today is our PC is getting a little bit better. Our companies and hyperscal as starting to spend on server chips.
Again, that's really what people want the answer to.
It's the same story every quarter, and we wonder if the story changes when it comes to earnings. We're looking forward to that one Ian King the Bloomberg Yes, thank you. Let's talk again about Meta. The stock is back down thirteen percent. It's off session lows. But there's a lot of anxiety in technology more broad based on what we had in metas earnings and basically the commentary on the
AI infrastructure spend that's going to happen. Jeffreys, Brent Till joins us now on Meta specifically, because I think we need to have a sort of bigger picture conversation. You cut your price target to five hundred and forty dollars I think from five hundred and eighty five. But are you actually anxious or worried about what you heard last night from from Zuckerberg?
Not at all.
I think this is a gift for investors. You know what, I think we've learned in AI you need three things. You need users, you need data, and you need money. And the list of vendors that are going to survive is very small, and Meta is going to be one of them. And so for long term shareholders, this is a great opportunity. They're going to do twenty five dollars
of earnings power. You can put a low twenty multiple, you know, to mid twenties, and you're going to get anywhere between you know, five hundred plus to six hundred plus in the stock. And so when you look at just back in the envelope on earnings, it has huge support with the stock training at sixteen seventeen times right now. I think in terms of the worry, I don't worry because I think they're doing the right thing.
These investments are.
Not going into the metaverse, they're going into AI. They're going back into the core platform where there are billions of users that are trying to have better engagement. It helps advertisers create campaigns faster. It's going to send more ad dollars into the platform because it's going to be so easy to create a pain and find a new user. For your travel company, for your apparel company, for your beauty company. They'll be able to find more users in
a more relevant way. So we think it pays off. So I'm not worried.
So let's push ahead to Alphabet and Microsoft. And if I draw a commonality and there is an anxiet anxiety of what happened with Meta, I guess it's the idea that for all the billions of dollars in data centers around the world that are being built, it doesn't yet translate tangibly to revenue growth. That is selling an AI product directly. Is that a thesis you share.
We are in the age of AI hype, we are not in the revenue cycle yet. At our private Internet conference last week we had many of the top AI leaders and everyone said that AI is in infrastructure, right, It's in in VideA, as you were talking about before the break, and you're dead right about this. It's in in Vidia and d Dell. You look at all the enabling infrastructure. It's there, it hasn't gotten to the application layer. And for all of our companies in software, it's a
single digital percent of revenue. Ninety five percent of these AI deployments are proofd for concept, less than five percent of them are live. I mean, how do you monetize when you're improved of concept? And so I think what we're seeing is this building interests. IBM talked about you know, a billion dollar backlog number last night on their call that was you know, a few hundred million just a
few quarters ago. Right, the interest is building, but in terms of the overall impact for the software ecosystem, it's still not there yet and it will be. Microsoft remains in the best position because they are the furthest ahead, They have the most vision, and they have the best management team of anyone in software with no questions asked. So they're going to be in a great spot. But
it's even for Microsoft, it's going to take time. And again we've said this, the AI revenue reality is kicking in later this year into twenty five, and that's why investors want to be overweight SEMIS or the SMH is massively outperforming that's where our clients are and that's why these stocks are all green today and all my stocks are red.
Hey, Brent, I'm not asking you to do my job for me, but I'm going to speak to Ruth Parat after the numbers hit this afternoon. What do you think I should ask her?
The number one question for Ruth is there's two. One is when is the new CFO coming on board?
It's been nine months and you haven't effectively.
Updated this do if you did simple things with investors, your stock would go up fifteen percent or your multiple go up fifteen percent. Google is the least shareholder friendly company of anyone. Attack and there's just simple blocking attacking they can do to get the stock. Hire, have an analyst day, bring people in, talk about what they're doing
in AI, put a financial framework. They're the only company intact that doesn't guide Meta, Amazon, Microsoft, go through the list, they all give some color.
There's no color.
So with no color and no inside and no handholding, arc lines are like I want to I want to be able to do the work, and I can.
I can do the work on these other.
Companies, and right now, I think investors are frustrated. They're frustrated with that, So one you know CFO and two would be you know. Do you realize how easy it is to get your sock hire if you follow the simple playbook.
Brent Thale, Jeffries. I appreciate the help. Thank you. Wow, I was not a nonswer. I was expecting I have to be honest.
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