00:00 Josh
Rohit, always great to see you and you’re just the man to talk to Rohit because you cover all these names. Let’s start with Meta. Uh the initial reaction here, Rohit, not great in the after hours. We’re in the red. Uh Meta, and here’s the issue, raising its spending outlook for the year, right? So they’re now forecasting full year capital expenditures between 125 and 145 billion. That far exceeds the analyst estimates tracked by by Bloomberg.
00:36 Josh
What do you make of that, Rohit? I just spoke to a meta shareholder, right? She was on the show. She likes this. She says, spend, spend, spend. But what do you think?
00:44 Rohit
Uh yes, I think uh so Meta is demonstrating good AI return in my opinion. A company of that size and scale, accelerating revenues at these levels is is something that only AI is capable of doing. And Meta is has been investing last 12 to 18 months and they are harvesting returns. So they see uh kind of a pattern where even if they spend more, they’ll probably harvest even more next year.
01:21 Rohit
So we are supportive of this, but I feel kind of just this stock reaction, I think it is a case of very elevated expectations coming into the print. I think 2Q guide is something that we could have, we would have loved a slightly higher growth rate touching 30% for the high end. So, but all in, I think fundamentals are solid. Um how and what they’re going to spend on capex and how they frame the ROI is what we’ll uh wait for the call to uh hear on.
01:43 Josh
Yeah, on that Rohit, I guess if I was a shareholder and investor, I I’d want to see, okay, all this spending, you know, it’s what impact is it having on on user engagement and ad targeting? That’s what I would want to know. I mean, do we see that in the in the numbers, Rohit?
02:02 Rohit
I think the the balance of growth, which Meta is demonstrating, by balance is in the the uh they at the end of the day, they provide two metrics, right? They provide a pricing metric for price per ad, they provide a volume metric in terms of number of impressions. I think the balanced way in which the company is growing right now, which we haven’t seen for many, many quarters in the past, that is very encouraging.
02:29 Rohit
Uh in the past there have been periods when pricing went up, but volume didn’t go as much. uh and there have been uh the opposite cases as well. But I think the way the company is operating the levers behind both P times Q. I think Josh, that that makes it more healthy, more sustainable and more indicative of that perhaps this is a direct indication of both underlying kind of the machin machinations behind both of them are AI driven.
02:50 Josh
You know what, the other the other headline with Meta, they’ve been making staff cuts. Most recently announced plans to cut about 8,000 workers. That’s roughly 10% of of the workforce. As a financial analyst, what did you make of those headlines? And do you think that’s just a that’s a trend, Rohit, we’re going to keep seeing with Big Tech as they sort of right size their labor forces, their workforces for this new AI era?
03:20 Rohit
So I think I think in my opinion, all these companies have uh have a lot of uh different projects that they deploy uh tons and tons of uh resources on. I think as they are more fine tuning those resources on the projects that are more directly linked to their AI kind of aspirations. I feel it’s an output of that.
03:51 Rohit
On top of it, uh more and more engineers, uh the costly resources are getting extremely efficient. Uh Companies like Amazon was telling you that almost 50% of new code is coming from uh AI related uh engines. So I feel these companies are looking ahead 12 months, fine tuning the resources and plus uh making room for more AI spend. So it’s it’s a combination of all three. I feel this is just the tip of the iceberg next 18 months, probably there’s going to be much more uh fine tuning as we speak.
04:22 Josh
All right, Meta, at least initially down the after hours, Alphabet’s in the green. I want you take on that too. I know that’s another name you like, Rohit. It looks like revenue beats, profit beats, looks like solid growth in the cloud computing business. What’d you make of that print?
04:40 Rohit
I think um so I would say the bogies for all three companies, Meta, Google and Amazon were quite high heading into the print. People wanted clear revenue beats for them to be able to sustain the capex outlook that these companies had provided at the beginning of the year. I think the only company that cleared those high hurdles is Google today. Um hurdles were high for Google Cloud, more than 60%, they came at 63.
05:11 Rohit
Uh YouTube was expected to have more than 10%, they came at 11%. Search was very high bar, 18% growth was expected, they came at 19. So if you think of all three key pillars to revenue growth are accelerating and I think uh that that deserves a much more bigger of a positive reaction and perhaps uh we’ll wait on the call and see if they are going to uh raise capex guidance. I would be very surprised on that at this call, but uh that’s something that will remain uh on the back of people’s minds here.
05:51 Josh
The company did recently Rohit, announce those new AI chips. What is their chip strategy, Rohit? I ask because some of your colleagues on the street who also cover the name, they think that chip opportunity for Google actually isn’t priced into the stock here.
06:10 Rohit
Yeah, absolutely. I think I think uh Google has uh probably uh one of the single biggest reasons why Google Cloud uh today has more than $400 billion in backlog. They just reported that uh that uh as compared to how the backlog in uh leaders like Amazon and uh Microsoft has grown, Google has added absolutely greater amount of dollars in backlog to the cloud and the single biggest driver to that is their chip strategy.
06:47 Rohit
They have been working on their TPUs for the last eight years, longer than any other company out there uh in terms of uh hyperscalers. And I feel they have demonstrated that TPUs are, I would say good enough for a certain set of people as far as replacement for Nvidia’s GPUs are concerned and on top of it, you get a better price performance. So I feel what Google is demonstrating is there is a very solid cohort of AI customers that they are very attractive to and they are gaining share.
07:30 Rohit
Probably going from number three in internet cloud era, uh to be honest, Josh, probably they’re a very close number one right now based on what we’re seeing last six months.
07:44 Josh
Finally, Rohit, your thoughts on Amazon. Uh in the after hours we’re kind of edging lower here. On the one hand, Rohit, I see sales uh by AWS, 37.6 billion, that was up nearly 30%. Uh strong growth there. Uh capital spending we should note that that that did it looks like jumped to about 44 billion. That looks like it exceeded uh what analysts had penciled in. What do you make of that report, Rohit?
08:15 Rohit
I think exactly the same kind of I thought uh Amazon’s reports were, I would say four out of five stars, if I give Google five out of five stars and Meta three out of five stars, uh simply because they cleanly beat expectations, they raised the guidance for 2Q. The only one small yellow flag is uh kind of the high end bogey that we had for AWS, close to 30% uh or maybe above 30%.
08:44 Rohit
It’s a very large business, so perhaps expectations got out of hand. But I think I think uh Amazon is the one we would clearly buy on weakness tomorrow uh if this weakness lingers in after hours. Overall, I thought it was a very solid print and recent developments with Anthropic, recent developments with Open AI, kind of have Amazon does have wind in its sales.
