Transcript
A (0:00)
Foreign of the Magnificent Seven earnings were in the past 24 hours. So you know we're covering it. This is Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe and today I'm joined by longtime fool contributors Matt Frankel and John Quast. We are neck deep in earnings this week. About 875 companies are reporting in this week alone. And you know, we're not going to get to all of them this week, but we did want to zero in a few. We'll hit restaurant earnings from Chipotle and Starbucks, maybe a little bit of who's doing best with Brian Niccol or without. And three of the MAG7 stocks that reported yesterday, Microsoft, Alphabet, and we'll kick it off with Meta. Now, since the three of the seven reported today, we kind of divvied up the assignment. So each of us is going to give our knee jerk reactions to what we saw for each quarter. And we're going to start with Meta because, John, considering the market's reactions, I think we need to start here. The Stock's down about 10%. As we're taping and looking through the numbers, they were all fine. But what was it either in the earnings or the commentary that has everyone so bearish, I guess you could say, compared to Alphabet and Microsoft?
B (1:25)
Yeah, Tyler, I think that the commentary was what was more surprising. And I think we should talk about surprises because when you see a market reaction of this magnitude, clearly investors didn't expect something. So what exactly was it? Investors, I think are reacting to how much Meta said it's going to spend on AI in the next year or in 2026. Now investors knew that Meta was going to spe spend money and that expenses were going to go up. I don't think that that is the surprise. I think the surprise or what spooked them is the magnitude of what we're talking about. So Mark Zuckerberg basically said that he would rather overshoot when it comes to spending on AI than undershoot. So if you look at their capital expenditures for 2025, obviously not all of it is AI, but a large percentage of it is going to spend around 70 billion this year compared to 39 billion in 2024. Okay, that's an 80% year over year increase as it builds Data Centers, buys GPUs. But in 2026, Meta says it plans to increase spending by a quotation notably larger amount. So essentially the company is saying it doesn't have enough computing capacity to do what it wants to do in AI and so whether that's improving the core advertising business or building out Meta superintelligence labs. So it would rather aggressively over build now its compute than underbuilt. And it doesn't think it's going to overbuild. It thinks it's going to use it all. But worst case scenario, it's going to overbuild and maybe wait for its business to catch up or maybe provide cloud services to other companies. I think that was kind of surprising. But the fact that Meta is spending as much as it is and it's still not enough, that's surprising and that is, I think, what the market is reacting to.
