00:00I think it's a combination of what you just mentioned, which is that CapEx number going up by about 10
00:06billion, at least the range has shifted up about 10 billion, which was already a very high record breaking range
00:12for Meta to begin with.
00:13So we're talking even more after the first three months of the year. I think you combine that with what
00:19I saw in the Q2 revenue guidance, which was just so-so. It was in line.
00:24And I think usually Meta tends to deliver these results that kind of blow everybody out of the water.
00:30And so when they're saying, hey, we're going to spend a lot more and we're making right about what we
00:36said or what you expected us to make, I'm just not sure if that combo really wowed people, which is
00:41probably why you're seeing the stock down a little bit here.
00:46So, yeah, it's kind of interesting to see the pressure here.
00:50You know, it's always a balance, right? Because you want to see these guys taking the actions here.
00:57What do you think they're going to be pressed on on the call with analysts here, Kurt? Is it just
01:03that?
01:04What we have seen from the questions the last several quarters is really a challenge to Meta.
01:10How is all of this AI spending going to pay off?
01:14And the company has done a pretty good job over the last year or so of essentially saying, look, the
01:20payoff is happening right now.
01:22It's making our ads business better.
01:24While a lot of the other AI companies are saying, hey, someday we'll charge subscriptions or we'll get people to
01:30pay for the API.
01:31Meta is saying, no, no, no, our ads business is improving every single day as a result of AI.
01:36Those other things may come later.
01:37But I do wonder, now that they have their new LLM that they released about a month ago, if they're
01:43going to start talking about the other types of ways they can make money from AI.
01:47So it's not just improving ads, but will they charge for an API?
01:51Will they charge consumer subscriptions to use the Meta AI chatbot, for example, at some point?
01:57It seems like they have set these dominoes up to ultimately have other revenue streams come in that are not
02:05just ads, but we haven't really heard a whole lot about them just yet.
02:09He has a comment that came up yesterday on a sort of a big tech roundup that the AI that
02:14we're getting from Meta platforms is just helping us or helping Meta platforms attract more spending for ads.
02:23That's certainly its business, but it's not exactly moving the needle when it comes to that promise of AI and
02:32what it will do for society.
02:34I want to bring back in Anurag Rana.
02:36He's Bloomberg Intelligence Senior Technology Analyst.
02:38He covers Microsoft, but he covers these broader questions as well.
02:42What do you make of what Kurt said and the fact that Meta platforms could potentially start to open up
02:48their AI as maybe an API to make more money from different business segments or not move away from advertising,
02:58but just use that AI to bring in additional revenue?
03:01I mean, to be very honest, they have to because this is the only way they can showcase the monetization
03:06of the CapEx that's going in.
03:08So far, that was coming from the acceleration of the top line, but if today's guidance is very much in
03:14line with what Street was expecting, and on top of that, they are going to spend more, then people want
03:20to know where is the ROI of that, because clearly we can see the ROI when it comes to Google.
03:25We can also see that in the case of Amazon Web Services and now a little bit from Microsoft as
03:31well, but the big question is, how are you going to show it, Meta, if you don't have a cloud
03:35business?
03:36All right, we're going to leave it there.
03:37Hey, listen, Anurag, thank you so much.
03:39Looking forward to your research tomorrow.
03:42You know, going back to Meta, I know, Kurt, we just want to get you in for one more question.
03:49You know, it's got a lot of moving pieces and, you know, this stock has been doing, it's been a
03:56little bit under pressure.
03:57Yeah, I guess the regulatory overhang is something I want you to end with, Kurt, and the idea of these
04:01social media trials and sort of this bellwether social media trial and to what extent regulatory pressures here in the
04:07U.S., but also in the European Union and around the world are a headwind to the company at a
04:12time where that's getting more and more attention.
04:15It's a headwind in sort of two ways.
04:17I mean, there's the obvious financial issue here, which is that if they keep losing these trials, they lost sort
04:24of the main addiction trial that we covered very closely in California earlier this year.
04:29It was a small payout by Meta standards, a couple million dollars, but there are thousands of those cases coming
04:36against the company.
04:37And, you know, if they start to lose the second, the third, the fourth, you start to add those up
04:42and extrapolate that out.
04:44It can be a financial thing, but there's also reputational damage here.
04:47And when you're constantly in the news because your products are being accused of being addicting or bad for mental
04:54health or bad for teens, you can imagine that is not the best, you know, type of narrative that Meta
05:00wants when they are an advertising business, right?
05:02Do brands ever shy away?
05:05Will they ever shy away from these products if everyone starts to think they are bad for mental health?
05:10Perhaps, right?
05:11So I think it's a risk financially.
05:12It's a risk reputationally.
05:14Those things are tied certainly together in the long term.
05:16And they mentioned that as a headwind in their press release.
05:19But, you know, it's one of those long tail things that we're going to be talking about potentially for the
05:23next couple of years.
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