Earnings – Page 2 – Product Management Confabulation

August 23, 2023

Nvidia’s Q2 earnings prove it’s the big winner in the generative AI boom

Nvidia’s second-quarter earnings, which were reported Wednesday after markets closed, prove there is money to be made — and lots of it — selling the picks and shovels of the generative AI boom.

“A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” Nvidia founder and CEO Jensen Huang said in a statement.

Huang isn’t wrong. Nvidia has become the main supplier of the generative AI industry. The company’s A100 and H100 AI chips are used to build and run AI applications, notably OpenAI’s ChatGPT. Demand for these demanding applications has grown steadily over the last year, and infrastructure is shifting to support them.

A number of cloud service providers recently announced plans to adopt Nvidia H100 AI hardware in their data centers, according to Huang, who added that enterprise IT system and software providers also announced partnerships to bring Nvidia AI to every industry.

“The race is on to adopt generative AI,” he said.

Nvidia reported revenue of $13.51 billion in the second quarter, a figure that crushed Wall Street expectations and was double the $6.7 billion it generated in the same period last year. Analysts polled by Yahoo Finance forecast Q2 revenue of $11.22 billion.

Nvidia reported GAAP net income of $6.18 billion compared to $656 million it earned in the same year-ago period — upwards of a ninefold gain. Nvidia’s net income skyrocketed even from the first quarter when it reported earnings of $2.04 billion. Its earnings per diluted share for the quarter were $2.48, up 854% from same period last year. Analysts polled by Yahoo finance expected earnings per diluted share of $2.09.

The results show how dramatically its business has changed. The company’s gaming unit was once the main driver of revenue. And while gaming is growing — its Q2 revenue was $2.49 billion, up 22% from last year — it’s now overshadowed by its data center unit. Nvidia’s data center business generated $10.32 billion in revenue, up 141% from the previous quarter and up 171% from a year ago.

Huang said earlier this month during a keynote at SIGGRAPH in Los Angeles that the company made an existential business decision in 2018 to embrace AI-powered image image processing in the form of ray tracing and intelligent upscaling: RTX and DLSS.

Nvidia CEO: We bet the farm on AI and no one knew it

That bet has paid off. And Nvidia has forecast even more growth.

The company forecast revenue of $16 billion for the third quarter, plus or minus 2%.

“The world has something along the lines of about a trillion dollars worth of data centers installed in the cloud,” Huang said during the company’s earnings call Wednesday. “And that trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI. We’re seeing two simultaneous platform shifts at the same time.”

He said accelerated computing is the most cost effective, most energy effective and the most performant way of doing computing now. Now, computing, enabled by generative AI, has come along.

“This incredible application now gives every everyone two reasons to transition to do a platform shift from general purpose computing — the classical way of doing computing — to this new way of doing computing accelerated computing,” he said.

August 3, 2023

Apple services growth continues to counter iPhone sales slide in Q3

Apple’s Q3 earnings presented a mixed bag for the company, as iPhone revenue continued to slide. The handset brought in $39.67 billion for the quarter, down from $40.66 this time last year. The drop certainly isn’t an anomaly amid an overall declining smartphone market. Once again, however, the hardware slowdown was blunted by the company’s continued success in services, as revenue increased from $19.6 billion to $21.2 billion, year-over-year, beating analyst expectations.

Apple naturally led with the services win when announcing those earnings today.

“We are happy to report that we had an all-time revenue record in Services during the June quarter, driven by over 1 billion paid subscriptions, and we saw continued strength in emerging markets thanks to robust sales of iPhone,” CEO Tim Cook said in a release. “From education to the environment, we are continuing to advance our values, while championing innovation that enriches the lives of our customers and leaves the world better than we found it.”

It’s bad all over for smartphone makers — and has been for a few years now, owing to slowed upgrade cycles, rising prices, supply chain constraints and various economic headwinds, among others. Apple’s play was, however, bolstered by growth in China. Sales in Greater China were up 8% y-o-y, as Apple says it managed to grow in market share in the world’s largest smartphone market.

Meanwhile, in an interview with CNBC, Cook said the company has been quietly working on generative AI for years.

“We view AI and ML as fundamental core technologies. And they are virtually embedded in every product that we build,” the executive explained. “On a research basis, we’ve been doing research on AI and machine learning, including generative AI, for years.”

The statement comes as chief competitors like Microsoft and Google have garnered headlines for the work being done in the extremely buzzy category. Cook also highlighted plans to demo its Vision Pro headset in stores. The “spatial computing” device announced at WWDC in June is set for release some time early next year.

August 3, 2023

Coinbase Q2 earnings exceed estimates, signaling potential market recovery

Coinbase reported its second quarter earnings Thursday afternoon after the bell, beating market estimates.

During Q2, the second largest crypto exchange by trading volume generated total revenues of $707.9 million, down from $772.5 in the previous quarter and $808.3 million in the year-ago quarter. It also had a $97 million net loss and generated a positive adjusted EBITDA of $194 million during the quarter.

It was a mixed bag of estimates from analysts prior to the earnings report. Some expected lower results, while others were optimistic. But now crypto bulls and company shareholders alike can breathe a sigh of relief.

“One year ago in Q2 2022, we started reducing our expense base to operate more efficiently. One year later, we’re proud to say that our quarterly recurring operating expenses have dropped nearly 50% Y/Y,” the company said in its Q2 2023 shareholder letter.

In after-hours trading, shares of Coinbase rose 7% to about $96.70 after its earnings were posted, but retracted 2% to around $89 at the time of publication. Coinbase’s stock is up about 170% year-to-date.

As of June 30, 2023, Coinbase had $92 billion in quarterly volume traded, $128 billion assets on its platform, according to its website. The firm’s Q1 earnings reported in May posted $773 million in revenue.

August 3, 2023

Coinbase Q2 earnings exceed estimates, signaling potential market recovery

Coinbase reported its second quarter earnings Thursday afternoon after the bell, beating market estimates.

August 3, 2023

Pinterest touts Amazon partnership progress, AI in Q2 earnings beat

Popular image pinboarding and shopping inspiration site Pinterest provided an update on its recently announced Amazon partnership and its other efforts around AI during its Q2 2023 earnings this week. The company in April announced a multi-year deal with Amazon that saw the e-commerce giant become Pinterest’s first partner on third-party ads. Those efforts are now progressing faster than expected, Pinterest suggested in a call with investors. It additionally stressed how its AI investments were aiding across the site in areas like engagement, relevance, and ads.

With the Amazon deal underway, when Pinterest users click on an Amazon ad on Pinterest, they’ll be taken directly to Amazon to make the purchase. Investors naturally were keen to get a better understanding of how well those efforts were helping the company now boost its bottom line.

Pinterest, however, stressed that this partnership involves a multi-quarter implementation where meaningful revenue impacts won’t likely be seen until early 2024.

But CEO Bill Ready noted the company had already been testing live traffic with Amazon ads and was “very pleased” with the pace of implementation and the early results. He added that the company believes Amazon will bring more shoppable content to the site.

While the company declined to share the results of the early tests in detail, noting it would share more at its investor day on September 19th, Ready noted the efforts were already paying off.

“One of the biggest things we’re happy about is that we’re seeing improvement and relevancy even beyond what were already very optimistic expectations on our side,” the CEO said. “And so, as we see that it’s contributing to more relevant shopping content that further bolsters our view that we can take ad load much higher.”

The company doesn’t break out its ad load specifically but said it had already been growing at 30% plus year-over-year in terms of overall monetizable supply while also increasing engagement. This, explained Ready, is proving that “we can grow ad load while also making it relevant engagement driving content for our users.”

The exec also told investors the partnership was “pacing ahead of expectations,” but Pinterest was now working to make sure that it got the relevancy right for the user.

AI may help in that regard.

Pinterest said that it’s now using “next-generation AI technologies” to surface more relevant and personalized content and improve ad relevance, drive more intent to action, and focus its content strategy to bring more actionable content from sources like users, creators, publishers, and retailers.

That includes using AI combined with other first-party signals to recommend brands and products that aligned with the individual user’s preferences.

As one example, it launched a new “shop-to-look” module for home decor and fashion Pins that uses AI to recommend shoppable products from merchants.

The company also cited AI as aiding with its 8% global monthly active user growth to 465 million and increased user engagement.

Pinterest had begun moving to next-gen AI a year ago, it told investors, allowing it to use recommender models that were 100x larger than before, which it then combined with its own first-party proprietary data and AI computer vision and search technologies. As a result, perceived relevance has increased 10 points year-over-year to 94%, the company said.

This year, it’s begun recommending content that users are likely to share to improve the retention of core users and grow visits from dormant users.

Pinterest is also leveraging next-gen AI in advertising, resulting in a 5% reduction in cost per action and a 10% lift in click-through rates, it claims.

In response to an investor question that bigger companies like Google, Meta, and Apple would dominate in AI, Ready pointed out that not only are the big players externalizing those capabilities through cloud compute, the open source community is also advancing rapidly.

Pinterest beat on earnings in the quarter with revenue up 6% to $708 million, which topped analysts’ expectations for $696 million, per FactSet. Adjusted earnings per share grew from $0.11 to $0.21, exceeding analysts’ expectations for EPS of $0.12.

However, the stock dropped post-earnings as Wall Street reacted to Q3 guidance that missed the mark.

July 27, 2023

Peacock lags behind competitors, gains just 2M subs for Q2

Compared to streaming rivals, Peacock has been slow to spread its wings. The streaming service reported its second quarterly results on Thursday, revealing an addition of only two million subscribers, bringing its total to 24 million—an increase of 9% compared to the 22 million from the previous quarter.

When we look at competitors — like Netflix’s significant gain of 5.9 million subs during the same quarter — Peacock is at the rear end of the flock. And although Disney+ lost four million subscribers in Q2 2023, its total continues to be astronomically ahead at 157.8 million. To be fair, Peacock nearly doubled its subscriber base from the year prior, when it had 13 million users, which is adequate growth for a three-year-old streamer. The recent incline in new users was mainly thanks to free customers converting into paying subs, according to the company.

As of January, Peacock no longer offers its free tier to new customers. Last month, Peacock stopped including its ad-supported plan, Peacock Premium, at no additional cost for Xfinity customers.

Additionally, Peacock revenue jumped 85% year to year to $820 million. However, the company also reported streaming losses. Peacock lost $651 million in Q2, compared to a loss of $704 million in Q1, and $467 million in the second quarter of 2022.

With this in mind, Comcast has a long way to go before its streaming business will be profitable. But we’re curious to see how successful its slow and steady approach will be in the long run.

NBCUniversal reports higher Peacock losses as it shows CEO the door

Last week, Peacock notified existing customers that it’s getting a price hike on August 17, marking the first time the streamer has increased its subscription prices since its 2020 launch. Peacock’s Premium plan will go from $4.99 to $5.99 per month, whereas the ad-free Premium Plus tier will get a $2 increase to come in at $11.99 per month.

The company believes that its content lineup is strong enough to justify the price increase. Peacock touts over 5,000 hours of live sports content, including Big Ten games, the Women’s World Cup, Sunday Night Football, Premier League, as well as an exclusive NFL playoff game that will air next year.

Notably, Comcast President Michael J. Cavanagh said during the earnings call that the company would consider looking at NBA rights.

“Obviously the NBA’s coming up, that’s a fantastic property,” Cavanagh said. “We don’t necessarily need it, given the portfolio we have, but given its strength and our historical involvement in the sport, it’s something I’d like to see us take a look at.”

Peacock also touts its slate of original titles, such as “Poker Face,” “Mrs. Davis,” “The Continental,” “Bel-Air” and “Bupkis,” among many others. It will also be the streaming home of the highly popular “The Super Mario Bros. Movie” starting on August 3.

Peacock to raise its subscription prices on August 17

July 27, 2023

Samsung extends cut in memory chip production, will focus on high-end AI chips instead

Samsung Electronics continues to cut back its memory chip production, including NAND flash used in smartphones and PCs, after reporting a $3.4 billion (4.36 trillion won) operating loss in the second quarter of this year in its memory chip unit. The world’s biggest memory chip maker posted a roughly $7 billion operating loss in its semiconductor business for the last six months.

The move comes after Samsung slashed its memory chip production in April after hitting the worst quarterly profits since 2009 as demand for consumer devices remained weak.

The tech giant, however, is aiming to generate a brighter AI picture for the future: it said that it plans to double down on producing high-performance memory chips like high bandwidth memory (HBM) by 2024 due to robust AI demand. HBM, used in AI, 5G, the Internet of Things (IoT) and graphic processing applications, provides faster data processing and lower power consumption compared to the traditional NAND.

“Server demand remained weak as customers continued to adjust inventories, but demand for high-density/high-performance products stayed strong, driven by increased investments focusing on AI by major hyperscalers,” the company said.

On an earnings call today, the executive vice president of Samsung’s memory division Jaejune Kim said it would continue its memory chip production cuts, adjust for specific products, but will double its capacities of high-performance memory chips, including HBM, as the demand for those advanced memory chips is expected to grow continually, Kim said.

Two main memory chips — DRAM and NAND — are used in devices from smartphones to servers at data centers. For example, DRAM memory enables large language models, including Open AI’s ChatGPT, to perform more advanced functions. DRAM also helps speed up process data for multitasking and building complex AI applications. NAND helps store data.

Samsung laid out its plan for the foundry business to introduce 2-nanometer production for mobile phone parts by 2025.

The firm reported Thursday its companywide operating profits of 670 billion won (approximately $524 million) in the second quarter of 2023, down from 14.1 trillion won a year earlier. The figure is better than expected than Samsung’s preliminary report issued earlier this month, estimating its Q2 operating profits would likely be a 96% plunge, 600 billion won ($459 million).

Despite operating profits dropping 95% in the second quarter, Samsung expects global demand for memory chips to rebound gradually in the second half of this year.

“Global demand is expected to gradually recover in the second half of the year, which should lead to an improvement in earnings driven by the component business, ” Samsung said in a statement. “However, continued macroeconomic risks could prove to be a challenge in such recovery in demand.”

Just yesterday, Samsung unveiled its latest device models — Galaxy Z fold 5, flip 5, Galaxy Tap S9 and Galaxy Watch 6/ Watch 6 Classic — at the “Unpacked” international product launch event in its home country for the first time.

July 26, 2023

Meta reports 11% revenue growth, but the metaverse still suffers

Meta had one of its best quarters since before it changed its name from Facebook. The company reported 11% year-over-year revenue growth, which is a sigh of relief for investors, because this time last year, Mark Zuckerberg’s company posted its first ever quarterly revenue decline. Meta’s stock price reflects this — while the stock took a nose dive through 2022, it’s now climbing back up again, trading at around $298 per share after markets closed today.

Part of why Meta is making more money is because it’s laid off more than 20,000 employees, which makes personnel costs much lower. Though this correction for over-hiring has serious implications for those who lost their jobs, investors seem to be pleased. Meta calls this downsizing “The Year of Efficiency,” which is a much more palatable way to say “mass layoffs” on an earnings call.

The revenue growth isn’t just a result of lower costs, though. Zuckerberg says that Reels have hit 200 billion daily plays across Instagram and Facebook, and its monetization revenue run rate has increased to more than $10 billion, up from $3 billion in the fall. And though Meta hasn’t started monetizing Threads yet, the new competitor to Twitter (or are we saying X now?) is off to a solid start, according to Zuckerberg.

Though much at Meta is looking up, Reality Labs continues to struggle. Meta’s VR and AR products brought in just $276 million, while Reality Labs lost $3.7 billion this quarter. Across all of 2022, Reality Labs lost Meta $13.7 billion.

Meta CFO Susan Li writes in the Q2 2023 earnings report that the company anticipates Reality Labs’ operating losses to get even larger. But the general public still seems uninterested in Meta’s vision for a metaverse. Apple also entered the AR/VR ring this quarter, announcing its $3,499 Vision Pro AR headset. This long-awaited product is not quite within financial reach for the average consumer, but Meta is gearing up for the fall, when it will compete with Apple and release its Quest 3 headset. The Quest 3, a mixed reality headset, will retail for $499. That’s not chump change, but it’s a lot more accessible than $3,499.

Despite Reality Labs’ massive costs, Zuckerberg remains optimistic (at least when speaking publicly with investors, who remain skeptical that these investments will pay off).

“We’re here to build awesome experiences that help people connect,” he said. “I think helping to shape the next platform is going to unlock that in a profound way for decades to come.”

It’s reminiscent of early last year, when he unabashedly told investors that even though Reality Labs is bleeding money, the 2030s will be exciting.

“I can’t guarantee you that I will be right about this, but I do think this is the direction that the world is going in,” Zuckerberg said.

Meta’s $499 Quest 3 headset arrives this fall

Meta conducts yet another round of layoffs

July 25, 2023

Spotify reports strong user growth as it is raising subscription price

Spotify just reported its second-quarter earnings and the two most impressive metrics are the number of subscribers and the total number of Spotify users. There are currently 220 million people who pay for a Spotify subscription around the world — that number is up 17% year over year.

Overall, Spotify now has 551 million monthly active users. That means that 331 million users are currently using the service every month with a free, ad-supported account. Spotify has never added as many users in a single quarter — 36 million new active users.

In other words, Spotify is growing nicely, but the company is attracting more free users than paid users. Of course, there is some porosity between these two buckets as some users start with a free account and then become paid subscriber while others stop paying for a premium subscription for one reason or another.

Spotify’s premium subscribers now represent 39.9% of its overall user base. That ratio has been going down over time (but remember that the total user base is growing). This is an important metric as it is much easier to monetize paid users than ad-supported users.

When it comes to gross margin, Spotify currently generates 28.4% in gross margins for premium users. The gross margin on free users is currently negative at -5.7%. But the company has made some write-off charges on content assets and contract termination this quarter. Its adjusted ad-supported margin is at +5.7%.

But let’s be honest, Spotify’s overall gross margin is not as good as expected. With a gross margin of 24.1%, it’s less than estimates of 25.5% according to Yahoo Finance.

The company reported nearly €3.2 billion in revenue for the most recent quarter ($3.5 billion at today’s exchange rate). Revenue is up 11% year over year. However, Spotify also reported €247 million in operating loss ($274 million).

If you take into account the company’s recent layoffs and related charges, Spotify claims that it registered €112 million in adjusted operating losses ($124 million). Unless the company conducts another wave of layoffs, operating losses shouldn’t be as bad next quarter.

However, as losses are much higher than expected, Spotify shares are currently trading down 9.30% in pre-market trading at $148.50 per share.

After resisting raising its prices for months, Spotify finally announced a price hike for its premium plans yesterday. In the U.S., an individual premium plan will now cost $10.99 per month instead of $9.99. Similarly, the duo plan will cost $14.99 instead of $12.99 and the family plan will be priced at $16.99 instead of $15.99.

The company is also reflecting these price hikes in other markets, including much the of the European Union, the U.K., and several other countries in South and Central America, Asia and Oceania. These changes should have a great impact on Spotify’s bottom line going forward.