Mike (3:26)

Google Workspace.

Tyler (3:27)

Google Workspace underrated search, YouTube, Android Cloud. They can deploy solutions all over the place. And so the flywheel should be spinning very, very quickly. The key question that investors are asking is does AI change the unit economics of search too quickly? Does AI do LLMs, do AI search overviews? Gemini generally, are they able to monetize those results fast enough to, to offset any potential declines in search ad revenue? And so people will be looking for how is search monetizing, how are the new AI disruptors monetizing? But there are tons of places to pick up growth even if growth does slow down in the core search business. Tons of opportunity in cloud. But the question again is AI overviews in Gemini, are they expanding search usage, are they increasing ad ROI or are they compressing the model, the financial model? Microsoft is also coming off a strong quarter. Honestly, everyone's coming off strong quarters. Everyone's doing very well. Revenue's up 17% at Microsoft with Cloud, which includes Azure M365, some LinkedIn stuff, it's a big bucket cloud. Microsoft cloud's growing at 26%. But if you dive in and you double click on Azure, Azure is growing at 39%. And of course Azure is a bigger lever on capex which is run rating around 150 billion. Not bad. The biggest number in the Microsoft earnings is RPO, remaining performance obligations. Last quarter it was listed at 625 billion, up 110%. That was the eye popping number of the last earnings. About 45% of that is coming from OpenAI. But they have lots of other partners that have signed on for really long compute contracts and that is starting to show up in the financials saying hey, we're spending all this CapEx, but we have this RPO and we have these deals signed where companies are. It's not Just us that we're forecasting some really high growth here. The entire industry is forecasting high growth. And so we have done deals to justify the capex that we're spending right now, even with depreciation, which seems like a less of an issue than people thought it was since H100 still seem to be monetizing just fine. But we can go into that. So Microsoft has the cleanest read on enterprise AI monetization, which I think is something people have been really looking for, looking for numbers. They know that, you know, subscription LLM chat apps, monetize at a decent rate, that the margins at a lot of these companies are okay, the token the APIs are working. But what does it actually mean to deploy AI into the American economy, into everyday businesses, into large scale businesses? All of those businesses are on Microsoft overwhelmingly. And so there are a ton of data points that can help you understand how how AI is flowing through the global economy, but also the American economy. So what are we talking about specifically Azure growth? How much cloud hosting is going on, gross margins for Microsoft cloud. That's very important. Are you seeing cloud compression? Because if you go to your Microsoft cloud provider and you say hey I'm going to this teams thing, I'm paying a lot of money for it, I actually vibe coded something, you got to give me a discount that would show up in cloud margins. Will it show up? I don't think it will, but we'll see. I think it's going to be fine. Copilot Adoption and arpu how much are they actually rolling these out? Are they actually getting incremental spend? Are companies willing to send more of their hard earned dollars to Microsoft for better AI services, better features, copilots then M365 seat growth, that's a really important one. Are people adding more seats? Are they hiring? Like we've seen some layoffs in big tech, but how is the overall economy doing? How many more seats are being rolled out? Again with the question of like does your AI agent need a seat and so you have more seats or does your AI agent replace 20 seats and then you only have one seat and you have 20 agents. They're all logging in through the same M365 seat. These are like more long term questions, but we're getting an early read today. GitHub copilot momentum. This will all paint a picture of what is happening with AI adoption in enterprises broadly. Interestingly, Copilot's at Microsoft, it hasn't been the Most hyped product. GitHub Copilot early, very, very early to the party. Huge run rate rocketed up to 500 million ARR very, very quickly. But the horse race has always been Windsurf Cognition and Cursor and Codex and Claude Code and the battle has been the startups for the most part. Gemini's been in there. GitHub Copilot has felt like it hasn't been dominating the narrative, but we're going to find out, is it still growing? Because the market is really, really big. It's possible that everything's growing. Even if there's, you know, a horse race back and forth between the leading labs, there will be a bunch of other questions answered around. You know, how nuanced is the diffusion adoption question. So Microsoft has an incredible go to market team, incredible go to market motion, enterprise sales motion. And so is there an advantage that they have that they can press GitHub copilot even if it's not the sexiest product next to whatever's hot this week? Can they get that into people? Same thing, yeah. Yeah. Slack was definitely like the hot one, the hyped one and teams wound up doing very well. And so we'll get a stronger read on what's going on there. And then of course that M365 seat growth will tell us a lot about what does the future look like for seat based enterprise software, the SaaS model, broadly. Because if all of a sudden that's falling off a cliff, well, it probably doesn't look good for other seat based SaaS companies. For Amazon, everyone wants to see strong AWS acceleration to justify the MAG7 topping capex numbers. They got it at 200 billion in capex in 2026. So expect a lot of focus on AWS revenue growth and margins. Q4 was healthy though. Net sales up 14% for Amazon, AWS growing at 24%. The sneakily huge ads business over at Amazon grew 23% to 21.3 billion DOL. They're almost making $100 billion a year just on ads. That's remarkable. And that's a lot of cash flow to fund capex and other AI initiatives. And so operating income overall was 25 billion for last quarter and they generated free cash flow of 11.2 billion. So still huge cash flows. They're obviously drawing down on those. And that 11.2 billion number was down because of increased AI spending. So if AWS accelerates, all the capex look like buying scarce capacity ahead of demand. Like they will be GPU rich or just compute rich generally at a Time when it's good to be GPU rich and compute rich and they will look like geniuses. So people are hoping for strong AWS acceleration. Consensus for AWS revenue is around 36.7 billion with growth in the mid 20% range. But the market's really hoping that it starts with a three. Everyone's hoping for 30%, something like that, at least this year. At some point, you know, re acceleration would be a treat for the market. Lastly, Meta. Meta's in an interesting spot. Super clean Q4. Nothing really to prove today, despite all the FUD, all the fear, uncertainty and doubt around the talent wars. New team members, the new lab, the sometimes clunky model releases they didn't get behemoth out. Different adoption of Meta Vibes, the video app. Like there's been all these questions about the AI strategy. All of that needs to be put to the side in the face of just AI is already working for Meta

Mike (11:09)

and their ads on reels.

Tyler (11:11)

Yeah, they're. I mean, they're absolutely crushing it. So 3.58 billion DAUs daily active users and they grew the ad business a ton. And so the Revenue overall grew 24% to almost 60 billion last quarter. Ad impressions rose 18%. Average price per ad rose 6%. Family of apps operating income was 30.8 billion, which makes losing 6 billion at Reality Labs like, quaint. It's just like, who cares? It's totally worth taking a side bet on the future of devices and maybe you get a platform out of that makes a ton of sense. And so capex was 72.2 billion last year. The guide this year is somewhere between 115, 135. I think we might see that tighten up today because it's a little bit wider than some of the other hyperscalers that are targeting, but clearly a near doubling, almost doubling of Capex. What are you laughing about?

Mike (12:06)

There's one possibility where he goes, you know, he blows it out.

Tyler (12:10)

250.

Mike (12:11)

We can't, we can't. You can't count that out. He can't count that out.

Jordy (12:14)

I mean, he's got.

Mike (12:15)

They came out with a. They came out with a solid space. They came out with a solid model. Yeah, he's putting mirrors in space. Yeah. He wants to be a player.

Tyler (12:22)

Yeah, yeah, yeah. I mean, a lot of focus is on the new meta models, but all of that just financially, at least in the quarterly earnings, like it will just take a backseat to what's going on with the AI in the ad placement ad monetization funnel because that's where Meta makes so much money. And so the question is, how much more juice will AI bring to the ad business? Expectations imply revenue growth of around 31%. And the question is always the same, is there enough incremental growth to justify the capex? An AI advancement delivers better ad performance basically immediately. And this is the good news for Meta. So improvements in AI for move the needle at Meta incredibly quickly, like a new model can come out and there can be some breakthrough in like, thinking, reasoning, coding, agents. And if you're in the enterprise software world, it can take time to do a deal, roll it out to different developers, different organizations, change management, understand the guardrails, the security. How does this actually flow through an enterprise to drive incremental demand? Not so at Meta. If there's a breakthrough and they have a model that is placing ads more effectively, they can quickly ab test that, run that across the entire family of apps, and you don't even notice it. As a consumer, you're just like, oh, I was shopping for a car and I saw an ad for a car. I was shopping for a shirt and I saw an ad for the perfect shirt and the ads just got a little bit better. And just a little bit better means like another $20 billion in profit. So it can be. So they just don't have a diffusion question. They don't have a diffusion problem. There's no, oh, we have this amazing model. If only we could get people that open Instagram to use it like there's nothing there because they use it when they scroll and they see an ad. And so that's an incredibly fortunate place to be in. So every company is trying to answer the same question. Can you turn AI Capex into proprietary distribution? Higher customer retention, measurable revenue growth before the depreciation catches up. It's the super bowl for big tech, so get your popcorn ready. Everyone's. Everyone's excited. There are, there are AI worries, AI jitters in the Wall Street Journal. AI worries have returned to Wall Street. Now come earnings. And so everyone is going back and forth on the OpenAI news. Shares of Oracle, Core Weave and SoftBank slumped. But Core Weave is up majorly today, 8.4%. They dropped at least 4% after hours yesterday, but then they're back up. That revived investors worries that technology g massive investments in artificial intelligence won't produce the blockbuster profits many expect. The report was particularly jarring, coming ahead of key earnings from major players Alphabet, Amazon, Microsoft, Meta, all scheduled to report Wednesday, with Apple following on Thursday. The ice is thin the leash is very tight, said Dan Morgan, portfolio analyst at Synovus Trust. Any evidence that would come out that would add doubt about OpenAI, Anthropic or any of these companies is obviously going to create a sell off. Morgan said he hadn't adjusted his positions on Tuesday and didn't think investor concern was broad based because companies including IBM, Texas Instruments and Intel had reported strong earnings in recent days. Instead, Tuesday's losses centered on the companies with biggest stakes in OpenAI's business. OpenAI had forged close ties with these companies to secure funding and gain access to computing resources, which are essential for training AI systems and providing answers to queries and executing user requests. And so Oracle and Core Weave, we talked about FEL. OpenAI has defended its financial footing and said its leaders are aligned on securing computing resources. The business is firing on all cylinders and the mood internally is incredibly positive, the company said in a response to the Journal's article on Tuesday. Colin Taddaard says my children might not eat tonight if this doesn't go well because he is excited for all four of these earnings on Robinhood. And we have Vlad from Robinhood coming on the show later today.

Mike (16:34)

Kramer says intel is such a horse.

Tyler (16:37)

I have no bear case.

Mike (16:39)

I have no bear case.

Tyler (16:41)

And intel is up another 10% today.

Jordy (16:43)

Yeah, up 10% today.

Mike (16:44)

Wow.

Jordy (16:46)

I mean 40% on the week so far.

Tyler (16:48)

40% on the week.

Mike (16:51)

Is that good?

Tyler (16:52)

Wow.

Mike (16:53)

Based on everything you've seen so far in your six month career, Tyler, is that good?

Jordy (16:57)

That seems pretty good to me so far.

Tyler (16:59)

Yeah. I mean there's like the idea of a CPU shortage generally is just being digested by the market right now. I think it took. I mean I remember Nat Friedman and Daniel Gross going on through Techery and talking about after ChatGPT saying like yeah, Nvidia seems like it could be important, like quadrupled in value. And this tends to happen as people digest the new reality of demand around certain pieces of the AI supply chain.

Mike (17:33)

And we have an interactive game set

Tyler (17:35)

up is that we do. So there has been a viral. I don't know what is it? A brain teaser?

Jordy (17:44)

It's like a poll.

Tyler (17:45)

A poll. But it's a thought experiment. It's a thought experiment. It's not purely a poll. It's. It's a brain teaser. It's a thought experiment. And did this, has this existed before? Did this start with this didn't start with Mr. Beast, right?

Jordy (18:02)

No. So it started with Tim Urban. Yeah, Tim Urban. I don't think Tim Urban like created this either. But I think his post was the one that first went, like, really big.

Tyler (18:09)

Okay.

Jordy (18:10)

I don't think this is new. I feel like I've heard about this before at some point.

Tyler (18:13)

Yeah.

Jordy (18:13)

But Tim Urban was the first one to make it, like, go viral. This.

Tyler (18:17)

So he got 24 million views on April 24, and then Mr. Beast came from behind four days later with 10 million views on a very similar question. Let's start with the original Tim Urban question, and we will ask everyone in the chat to participate and vote for what you would pick in this thought experiment. So here is the question posed by Tim Urban of. Wait, but why everyone in the world has to take a private vote by pressing a red button or a blue button? If more than 50% press the blue button, everyone survives. If more than 50% of people press the blue button, everyone survives. If less than 50% of people press the blue button, only the people who press the red button survived. Which button would you press? What do you. What are you pressing?

Mike (19:13)

So. So the sort of, like, normie answer is you immediately just go blue. Because it feels like a lot of people would go blue. But, like, the safe answer is you just. If you. If you're hyper rational, you'd be like, obviously you hit red. Because if everyone's just super rational, everyone hits red, and then everyone's all good. You don't hit over 50%, right?

Tyler (19:33)

Yes.

Jordy (19:33)

Yeah, because, like, no matter what. So if I press red, no matter what anyone else picks, like, I survive, right?

Tyler (19:39)

Yes, but there is a risk.

Jordy (19:42)

But. But, like, you know, if you want everyone to survive, then you need 100% of people to pick red, right?

Tyler (19:48)

Yes.

Jordy (19:49)

Yeah, but. Okay, so. Okay, so originally I was blue.

Tyler (19:52)

Yeah.

Jordy (19:52)

I think I was, like, complete normie. Right. And then I went to Jordy's Take.

Tyler (19:55)

Yes.

Jordy (19:56)

I was like, wait, no, that doesn't make sense. Like, even though, I mean, we'll see what happened in the poll, right? Yeah, but, you know, I was like, okay, if I'm thinking about the super rationally, I should just pick red, right. Then I save myself 100% of the time. Yeah, but then, like, if there's some people that pick blue, then, like, they're going to die for sure.

Tyler (20:11)

Yeah.

Jordy (20:11)

Like, I'm basically voting against them.

Tyler (20:13)

Yeah, you're.

Jordy (20:13)

You're sort of like, you know, you're complicit everyone to live. If you want everyone to live.

Tyler (20:17)

Yeah.

Jordy (20:17)

And you're. And you're going for red, you need 100% of people. But if you're going for blue and you Want everyone to live. You only need 51% of people, right?

Tyler (20:24)

Yes.

Jordy (20:24)

So you need to convince way less

Tyler (20:26)

people quickly jump in. Yeah. Let's tell the chat how to vote. Yeah. So one is for red. One is for red here.

Mike (20:32)

And two is for blue.

Tyler (20:33)

Two is for blue. So type a single character, just a one if you want to vote for red, and just a two if you want to vote for blue. Oh, do we have this up? Ooh, we are tilted towards red. This is crazy. This is not what happened with Tim urbans and with Mr. Beast. Because Tim Urban 58% said blue. Blue won. No one died. And with Mr. Beast's 55.7% went blue. No one died. It's not looking good for the Blue team here. 33% of the chat is. Is going to get cooked right now.

Mike (21:15)

It's possible a nation state is voting yes.

Tyler (21:19)

That would be very, very high risk. Mike Solana says, for what it's worth, and this is embarrassing, but I'm going to admit it, my instinct was blue, and I press blue. Then I thought about it for a moment, and the answer was clearly red. I can't make a rational case for blue, but understand where blues are coming from. Parentheses. They are wrong. So your final answer. You. You. You flipped. You think you're blue and blue, you're still going blue.

Jordy (21:44)

Because I think you have to assume that there's going to be some variance.

Tyler (21:46)

Yes.

Jordy (21:47)

Some. There's. Some people will just pick the wrong one.

Tyler (21:50)

Yes.

Jordy (21:51)

And so the correct one is red. If everyone is, you know, 100% logical, everyone should be picking red.

Tyler (21:58)

Yes. If 100% of people are rational, they will all pick red and no one will die.

Jordy (22:02)

Correct. But if clearly some people are not

Tyler (22:04)

going to do that.

Jordy (22:05)

If 90% of people are doing it, 90% of people are rational, then everyone should just be picking blue. Because you want everyone to live.

Tyler (22:11)

Yes, yes. And then the people that make the mistake, they go for the red. They are saved anyway. But there are some folks who are sharing different, different illustrations. Cremieux has one here. He says, if this was how the buttons looked, what portion of humanity would press blue? And he has two images pulled up. One is the red button. Nothing happens. And the other one is the ultimate death gamble. Press blue, you enter the ultimate death gamble. You. And everyone who presses this button dies unless more than 50% of people choose to press this button. And so that makes it pretty clear, I think this is the Mike Solano position as well. You gotta press red in this case because nothing happens. But that's not entirely true. And so people have sort of flipped this around because Pre Rat here has the opposite, which is instead of the ultimate death gamble, it's the ultimate murder gamble. So blue, if everyone presses blue, nothing happens. Red is the ultimate murder gamble because you initiate the ultimate murder gamble, everyone who pressed blue will die unless 50% of people choose red. And so it goes back and forth and you can see both of those. Do you want the blood on your hands from playing the ultimate murder gamble or do you want the risk of the ultimate death gamble? I think it's underrated to just be a little thrill seeking and want to press blue because you know you're bored and you want.

Jordy (23:41)

No, you can tell blue is the correct answer just because of the massive polls where over 50% of people picked blue.

Tyler (23:46)

That's true. That's true.

Jordy (23:47)

Pick blue because you don't want to kill.

Mike (23:49)

You know, once you're at Mr. B scale, this is like a real world simulation.

Tyler (23:53)

It is, it is. Well, we're still red cooked.

Mike (23:58)

Cooked.

Tyler (23:58)

Simone Syed says red button pushers will leave their wives and children to fend for themselves in disastrous situations because their kids can't run fast enough. Mike Solano says blue button pushers are literally leaving their wives and children behind to fend for themselves. They aren't guaranteed to push red. Yes, people are going back and forth. Red cells won't believe this, but some people make a distinction between nothing and mass J genocide. So they see pushing the red button as effectively committing mass genocide because you are potentially condemning the blue button pushers to death. In this scenario. Selfmaxer shares a version of the trolley problem where the red team is not on the rails, but the blue team is pushing the lever to save themselves. Is this an accurate description? Is this a fair. Is this a fair contextualization around this? It's obviously charitable to the red team, which of course the TVPN audience seems to be represented by standing next to the trolley lines and not standing on the rails. But you would be there, Tyler. You would be a blue button pusher pushing on the trolley.

Jordy (25:16)

Seems like I'm an idiot.

Tyler (25:17)

Seems a little risky in that scenario. It does. When you have the option just to stand there and, and watch the trolley go by. It's all about frame of mind here.

Jordy (25:26)

No, but you can tell that from the polls, from the big polls. You can just tell that blue is the correct option potentially.

Tyler (25:31)

Do you know that beforehand?

Jordy (25:33)

No, you don't. But those people who voted in it did not know it beforehand. And so if 10 million or how many hundreds of thousands of people voted? I think you can just assume that

Mike (25:42)

that's the question is if this actually was a real vote, would people spend a little bit more time thinking about the problem and would that influence their answer?

Tyler (25:52)

It is a real vote because the

Mike (25:53)

social media people are scrolling. They see Mr. Beast ask a question, they're just like curious. There's no real stakes and so they just answer quickly.

Tyler (26:02)

But the blue is very much. It's a faith in humanity restored moment. Right. If everyone works together, nobody dies at all in this hypothetical. David Shore says we asked this to

Mike (26:13)

a large hits the death gamble button together.

Tyler (26:17)

Yeah.

Mike (26:18)

Humanity wins.

Tyler (26:20)

There are analogies to that in real life. You know, national sacrifice, community sacrifice, Everyone pitching in for a greater good to save those who didn't even chime in to serve or save the world. You think about Armageddon, the sacrifice of going to the asteroid to destroy it. These are heroic stories. What's the chat saying?

Jordy (26:49)

They're not. I don't think they really aren't big fans of my position.

Tyler (26:53)

No. Well, you know who is. A large sample of nationally representative Americans. Blue won by a large margin, three to one margin. And everyone voted blue here. They asked a whole bunch of people to close out the blue red button discourse. They pulled 14,000 people cross tabbed survey responses by 204 commonly used psychrometric questions. The top four personality questions most predictive of button choice were displayed below. I tell the truth. The blue button pushers strongly agree. I tell the truth. People who don't tell the truth were still more likely to select blue, but a little bit more likely to select red on average. A very, very, very interesting social experiment. Have a great day, everyone. Leave us. Five stars on Apple Podcasts and Spotify. Sign up for our newsletter tbpn.com we'll see you tomorrow. Goodbye.

Mike (27:50)

Cheers.