Meta, Google, Amazon all post Q1 results - Analysis and market reaction

Welcome to the media and filtered podcast. We've had a week break. I was actually in the UK for a couple of work things, which was lovely. We didn't get chance to record, but we thought we'd wait anyway because we knew this was results weeks for the major platforms and some unsurprising news, really. As you can see or as you probably already read across the internet, the platforms have had a spectacular year. There's been some really interesting announcements around their investment in AI as a result of that growth and then some knock on effects on stock market valuations. To go through all that, Ian's obviously gone through the numbers and had a look at the feedback from the financial world. We're going to talk about that and reflect also on the advertising and media industry and what implications these results may have. Ian, let's start with – when we start with Google's results and then we'll look at matters. Tell me what's the word from the street, what's your view on what Google posted and the response from Wall Street and the markets? Well, I mean, look, you look at Google's results. They're very, very good. The core of the business still remains search. Obviously, if you look at the sort of object you didn't know, the view is often around YouTube, but YouTube is still minority of the business, the core business for Google, after it is called now is search and that was up 19% in terms of ad revenues year on year. So some very strong certain numbers, YouTube is up 11%. What was really impressive was that cloud revenues up 63%. And I think this is, if we look in terms of – let's call it the investment that's coming through in AI. One of the features that you notice across all the platforms is that you are starting to see that capex having a meaningful impact on the growth rates when it comes to cloud in particular. So as I said, you've got Google, you know, up 63%, you have AWS, which is 28%, and that was as fast as growth in 15/4. So you have a zero that was up 40% on here. These are not small numbers, small growth rates, especially when you consider the large basis they're coming through. So market's reacted very well and that's not surprised where the markets have been particularly concerned about with AI for Alphabet is around its search revenues. It is bread and butter business, the driver of the majority of its profits. And if you look at what's happening in its results, what you would say is not only is AI not impacting its revenues at the moment, but there's a case for arguing that it could actually be accelerating them. Yeah, we're seeing we're seeing that a little bit with with meta with increase in available impressions. That's content, probably, you know, AI based content and then AI based planning in execution. But before we get to meta, search up 19% the talk of Cann last year in the year before was all about the introduction of AI and the impact that might have on search revenues didn't seem to happen. Up 19% compared to 17% in the previous year, which is absolutely crazy. YouTube up 11%. Total ad growth was 13. I know a big portion of their growth is from their cloud services. But if you look at it, how it breaks down the US up 23% compared to 17% previous year, European markets or EMIA is 12 APAC, 22%. So when you look at it, from a product placement, from the things that they offer to where they're growing around the world, do you see any sort of interesting insights around that? Well, I'd say, I mean, one of the things has always been a one question was always when the Minimists' Tower Fools were changed. What impact that would have, for example, Chinese exporters exporting into the US market, whether that would have an impact on the major platforms. So far, that has not showed up in any of the numbers, whether it sounds as a matter or indeed Google search. It is interesting that differential between a mere and certainly North America. There's nothing sort of, it'd be interesting to see whether this is one quarter or whether it's continuous. This sort of gap, haven't really seen that might have gap in quite a while sort of certainly on my recollection of results. So three have to keep an eye on that and what's happening particularly in a mere with things. But I think across the board, what you'd say is these are strong set numbers. If you did want to also point out another, what you could say is interesting fact, is just a differential in advertising growth rates between search and YouTube. Yeah, there was a time, of course, when YouTube actually was growing ahead of search and was seen as the part of the business that was growing sort of accelerating the advertising growth rate, whereas now, in its been the case for the past few quarters, it's actually trended below search. So again, is that a permanent pattern or is it something that we see in later sets of results tends to reverse itself out? Yeah, it's incredible that they continue to grow search just such a level and it just shows the dominance that they have and it's basically a monopoly business. What's also interesting is the investment that they announced in their earnings was about 200 billion in AI, just short of it. And the markets didn't even blink. Did they, that seems like an acceptable figure. Well, I think what you've got here with the market. So there's a couple of things that they're looking at. I think one is, yeah, the markets don't necessarily not companies for spending per se. It's when they don't feel comfortable that they'll see a meaningful return on that spending. Now, if you're, you know, the thing with our fact is again, to point out, it's cloud revenues so that the year or year growth really accelerated search, which is the Corbis business again accelerated and he's still doing extremely well. So the market's perspective, the way they're looking at things is to say, they're spending and we can translate it into growth. I think the other thing that you've got here as well, and this is why I think, for example, meta was somewhat impacted. I think part of the shooting guidance, which may have been seen as slightly disappointing to some people, but there's a question mark whether that was intentionally conservative. Yeah. Amazon, Microsoft and Alphabet. If you look at their revenue streams, they've got several different revenue streams. They are diversified. So the risk is spread across different units. I think with meta is where again, it's sort of increased its spending, but bear in mind, it's only really got one engine of growth. Yeah. And that's the sanitizing revenue business. And that's doing extremely well at the moment. But again, if we take the point of view that the market's what they really are concerned about is not necessarily growth, but actually reducing risk, then they're looking at meta and saying it's doing extremely well now. And you would argue that in terms of AI, certainly helping to accelerate some of the growth rate, but it is relying on this one pillar. And I think you have got an element of that, which is it makes the market's more sensitive. If there are any areas where they're particularly concerned about. So the Q2 guidance, as I say, was a sort of, if certainly would have impacted the share price, but I think that reflected a more fundamental concern, which is, you know, with mastery is, yeah, we're really relying on this one area to drive the growth. And if at some point, AI doesn't work out, that's going to be an issue. And that's what it really reflects. Yeah, the point that you were trying that you were making there is the market's reaction to meta's results, which were incredibly strong, I think, growth of 23%. But advertising revenues contribute to 98% of their total revenues. So when you look at the other businesses, they're well diversified. You know, they don't just have advertising products, they have all sorts of products. Whereas meta, 98% of their revenues are obviously from advertising. WhatsApp is obviously a product of theirs that's growing, it's like 10 million conversations each week, up from one million at the beginning of the year. So they're growing that asset too. But they're also, they're leaning a lot more into AI and they're actually able to up their pricing, as well, by about 12% and increase their impressions by about 19%. I'd say they're doing that using AI, which you call it AI slot, but they're providing a lot more content on their platforms. And that's the way they're growing. So it's quite interesting now. We've done a little bit of analysis here because we believe that most of their growth is coming from the SMB side of the industry where they rely on 88% of their market to grow their business. We actually look at, I'm using some guideline data here, and they look at the major whole cost plus large indies globally. And actually from 2023 to 2024, huge growth in meta. You know, you're looking at United States 27% UK 15% Canada close to 10. But from 24 to 25, that's actually come down a bit 14% in the US 10% in the UK. Canada down to 4.5. So do you think, you know, that whole narrative you've seen all the news and you've seen some of this negative stuff The game the EU now come out saying that they're in breach of the Digital Rights Act Do you think that's having the impact on major brands that they started to think twice about their meta spend? Yeah, I think there's possibly a government of that. There's also as well I think you know 23 in growing into 24 Yeah, you were still getting many brands who who quite frankly was still benefiting from the price increases that come through from the global inflation crisis so so there's probably a natural sort of Decelebration of growth that came to you came to you probably have a realignment of spend I think in To some degree, I mean it's yeah, it's natural that that growth rate would come down I think you probably right probably has been I think at the margins There's probably been some advertisers who I thought maybe it's time to actually rewrite I mean the question is whether actually it is going it's now going to more brand traditional avatar It's traditional media platforms. You're not seeing too much of that. I'd argue in terms of the numbers Coming through from those platforms or is it going what's happening is it's been diversified Into different you know, maybe different online platforms is more money going to TikTok for example I mean you look to the Bloomberg reports. Yeah, yeah, yeah, you know number months back talking about TikToks growth It was talking you know, you were looking there at around 60% revenue growth expected for 2025 So you know, which is a meaningful number and that growth has to come from somewhere else So I I think probably at the margins it might do I think the thing is though it is that Yeah, all businesses at the end of the day what they really concerned about is their results and Yeah, for the moral aspects of things well, I think yeah, some of them may feel as though there's a need to do something What they're really going to be concerned about is what works and that's really what's going to drive where then goes to the oh Did the platforms actually work in delivering the result that they want? If you do see Celebrating in the platforms from large advertisers that will be the driver it will be a change in the belief that what they can offer Actually ties in with what businesses need But the general point that you said before is also absolutely fine You look at the growth rates from large advertisers compare them with the four-year advertising growth rate Somebody like it matter and it's pretty clear that in terms of better means they are really fueling they and probably an element Or so as well of advertisers from China a fuel in the growth Yeah, when you look at the total spend across those markets it is down from is 23% growth between 23 and 24 down to 12.8% for those markets so It's it's it's a fairly significant decline and I do disagree with you about you know advertisers wouldn't do if it wasn't working for their business and all that sort of stuff I just I just think it's always the feedback loops I think it's the data that they're getting and I actually think this pressure Morally that they're having is making advertisers Actually dig a little bit deeper to see if they are getting the results and What I was speaking with and working with plenty of advertisers were we're seeing a lot of them do geo testing and switching off Certain aspects of their media spend to see if it's actually delivering anything and I think which I think you see a lot more of that. I'm quite yeah, I was just about to say I think that's it That's a different element of it. I think it there you know They're geos switching off and saying we don't see any impacts and it's exactly what I have with added as number Years ago with Google in Latin America then there is a clear case for saying actually to spend isn't delivering results He's which it off. I just think on the moral case is that for many companies. They're slightly wary of You know, where does the a public commentary they have to make? You know that they they turn to be slightly sort of an easier getting into Get them in these conversations around sort of of is it morally right or not? Yeah, and I think when you look at Google's results and I know what you're saying you're saying yeah, where's that money going? And you're you're looking at Bloomberg data. I think you're right. I think I think they switch it off But the the performance bucket keeps the money. I don't think it's going to brand advertising I don't have any data to support it, but when you look at Google's results, it's probably shifting between the two Maybe go to TikTok as well. So I can I'm completely on board with that Why don't we have a quick reflection on Amazon? 22% growth Huge that I didn't really dip in too much to what it is that their DSP is is growing their ad business is growing We know from talking to advertisers. They're growing their their their sort of global deals as well with advertisers What views have you got from from Amazon's results? Well again, I mean like yeah, it's The digital view around as the is it's a it's a retailer with all the AWS and advertising on the side I mean certainly from a profitability standpoint. I'd argue that That's inverted. I mean really you'd you'd say that it advertising the AWS That are really driving the operating profit of the business and actually the retail commerce side You could argue depending on how you select the numbers is actually you know potentially losing money So I think you know both from AWS and an advertising the growth was strong to mean advertising if you stripped out the effect of currency was up to 22% Mentally for in terms of AWS acceleration in the 30% growth In in the quarter and they're going to be vital Firm as it because again comes back to this point before those are the businesses that drive the profit within the within the company So they continue to be strong then particularly with advertising that has a very high drop-through rate when it comes from revenues down to profit Then that will provide the profit and also the cash flows in order for Amazon to make its investment now You look at if you were to annualize the numbers for Amazon in terms of a ice band and it's again, you know doesn't necessarily mean That's what the land ups spending in 2026 you're looking at a figure in the you know you close to $200 billion or together So you know there is a They're definitely spending You're definitely seeing it in the results you would argue Certainly on the on the AWS side I think again from an investor standpoint Amazon sits in one of those sort of buckets that investors go well they're delivering yes they're spending a lot of money But we can see it coming through in the numbers and again because the businesses diversified we feel a little bit more comfortable So about it and You know, I think the shares Amazon shares were around 4% Sort of post market closed after the results so that tells you Tells you something about what investors feel. Yeah, that's that's interesting Annie's It's a great roundup of the the results that we've seen over the over the course of the day Appreciate that We've got you don't know this but we've got a couple of guests coming up on the podcast in the next next few weeks We're going to be actually talking to guideline and I think we need to do a proper proper measurement discussion as well Ian as always this one particularly today as we're talking a lot about Returns shares market valuations and all the rest of it. This is most definitely not investment advice. Is it in? It's definitely not invested advice Okay, mate. We'll we'll post all this and thank you guys for listening and in once again, thanks for your time Yeah, not at all Justin great to be here and goodbye to everyone