Alphabet-C and Meta Platforms, can they have the last laugh? | [Hard AI]

Recently, the earnings reports of Microsoft, Alphabet-C, and Meta Platforms have been released one after another. However, Microsoft, which has the advantage of being the first to report, is the weakest performer in this earnings season.

The reason behind this lies in the fact that the three companies have different business models, which in turn leads to completely different drivers of revenue change.

Alphabet-C and Meta Platforms rely mainly on digital advertising as their primary source of revenue, while Microsoft relies on product sales and services.

In general, the recovery of digital advertising has brought about impressive earnings performance for Alphabet-C and Meta Platforms, while Microsoft's price increase strategy for Microsoft Office has just been implemented and has not yet been reflected in the earnings report, so it may appear to be at a disadvantage in this quarter.

From a business perspective, short-term changes in digital advertising are generally influenced by the number of monthly active users and competitors' strategies.

Meta Platforms

In this earnings report, Meta Platforms has shown good growth in monthly active users, and the impact of user and advertiser loss caused by Apple's privacy restrictions has also subsided.

In the second quarter, advertising revenue from Facebook's Family of Apps (FoA) was $31.5 billion, a year-on-year increase of 12%.

The DAU/MAU ratio for Facebook is 68%.

The recently launched Threads application by Meta Platforms has also gained significant traction, achieving remarkable results in less than a week after its launch.

"Among them, content recommended by artificial intelligence is now the fastest-growing category in the Facebook Feed. Since the introduction of the AI recommendation system, it has driven a 7% increase in total user engagement time."

In addition, WhatsApp Business App's 200 million users can now create Click-to-WhatsApp ads on Facebook and Instagram without a Facebook account, which is a significant change.

How to maintain user stickiness is a question that Meta Platforms Platforms Platforms Platforms Platforms Platforms Platforms needs to consider after Meta Platforms Platforms Platforms Platforms Platforms Platforms Platforms faces user growth bottlenecks and the battle for short video users. Once the monthly active user count declines, it is easy to lose the favor of advertisers. Just like Threds, which reached its peak after going public, the number of active users has started to decline, and future advertising revenue will be a problem.

Alphabet-C-C

; Alphabet-C ads and Alphabet-C cloud revenue account for 77.93% and 10.76% of Alphabet-C-C's total revenue, respectively.

Alphabet-C's market share in search engines, although slightly declined compared to the previous quarter (by 0.52 percentage points), still firmly holds the market leader position. Alphabet-C's search and other related business revenue is 42.628 billion US dollars, a year-on-year increase of about 4.8%.

YouTube Shorts ad revenue reached 7.665 billion US dollars, a year-on-year increase of 4.4%;

Of course, there is also Alphabet-C cloud, which cannot be ignored in boosting Alphabet-C's parent company Alphabet-C-C's revenue; Alphabet-C cloud revenue in the second quarter was 8.031 billion US dollars, a year-on-year increase of about 28%.

Microsoft:

We released Microsoft Q4 earnings report yesterday: Although there were temporary setbacks, the way to break the deadlock is about to emerge|【Hard AI】, and we have conducted a detailed analysis there, so we won't go into it here.

What implications do the three giants' "bets" on AI have?

Earnings reports can only represent a company's past performance, while capital expenditure indicates the strategic direction that the company is optimistic about for the future. The extent of their "bets" also reflects the level of confidence each company has in the future.

META:

Capital expenditure of $6.354 billion, YoY -18%, MoM -10%. The company has lowered its capital expenditure forecast for FY2023.

This is mainly due to cost savings on non-AI servers and the postponement of some equipment and project deliveries to FY2024. Capital expenditure for FY2024 is expected to increase.

Alphabet-C:

Capital expenditure for the second quarter was $6.888 billion, YoY +0.9%, MoM +9.5%, lower than expected. (The largest component of second-quarter capital expenditure was servers.)

However, capital expenditure for the full year of 2023 is higher than that of 2022, with 2H2023 not less than $18.3 billion, a MoM growth of 40%.

Microsoft:

Capital expenditure for the second quarter was $10.7 billion (compared to $6.6 billion, $6.8 billion, and $7.8 billion in the previous three quarters), MoM +37%, in line with expectations.

Future investments will increase on a quarterly basis, with an annual growth rate of approximately 50%, reaching $45-50 billion (23Q3-24Q2).

As Alphabet-C CEO Ruth Porat said, "New AI technologies come at a cost."

Currently, although all three companies are investing in AI infrastructure, **Microsoft remains the most steadfast, while Meta Platforms' confidence in the future is clearly weaker than the other two companies.