Techmeme Ride Home: Thu. 01/30 – Everyone Reports Earnings But Wall Street Only Wants Capex Answers

Release Date: January 30, 2025

In this episode of Techmeme Ride Home, host Brian McCullough delves into the latest developments in the tech industry, focusing on the recent earnings reports from major players like Microsoft and Meta, advancements in autonomous vehicles with Waymo, significant investment moves involving OpenAI, and critical updates on AI's relationship with copyright law.

Microsoft Reports Strong Earnings Amid Capex Scrutiny

Microsoft unveiled robust second-quarter earnings, showcasing a 12% year-over-year revenue increase to $69.6 billion and a 10% rise in net income to $24.1 billion (00:04). Key segments performed exceptionally well:

• Microsoft 365 Commercial Products and Cloud Services grew by 15%.
• Intelligent Cloud revenues surged 19%, with Azure up by 31%, although slightly below the anticipated 33% growth.

Despite these impressive figures, Microsoft's capital expenditures (capex) became the focal point for Wall Street analysts. The company reported capex of $22.6 billion, surpassing the $20.95 billion estimate. Investors are keenly interested in how Microsoft's substantial investments in data centers and AI will translate into future profitability.

Brian Mul, a portfolio manager at Zacks Investment Management, expressed investor concerns:

“We really want to start to see a clear roadmap to what that monetization model looks like for all of the capital that's been invested.” (00:04)

CEO Satya Nadella addressed these concerns during the investor call, highlighting improvements in AI efficiency:

“As Microsoft irons out the algorithms, as AI becomes more efficient and accessible, we will see exponentially more demand.” (00:04)

Microsoft's AI business has impressively surpassed an annual revenue run rate of $13 billion, marking a 175% year-over-year increase. Additionally, the company expanded its AI offerings by adding DeepSeek R1 to Azure AI Foundry and GitHub, boosting commercial bookings by 67% thanks in part to new commitments from OpenAI.

Meta Sees Revenue Growth but Faces Capex Expectations

Meta reported a 21% year-over-year increase in Q4 revenue to $48.4 billion and a substantial 49% rise in net income to $20.8 billion. The platform's family daily active users grew by 5%, reaching 3.35 billion on average for December 2024. Notably, Threads, Meta’s popular app, now boasts 320 million monthly active users, up from 275 million in November 2024, with over 1 million daily signups.

However, similar to Microsoft, Meta's heavy capital expenditures overshadowed its earnings. Reality Labs, the division responsible for Meta's Metaverse initiatives, reported a 1% revenue increase to $1.1 billion with an operating loss of $4.97 billion, better than the estimated $5.4 billion loss.

Mark Zuckerberg emphasized AI's pivotal role in Meta's future:

“Spending heavily on AI infrastructure is a strategic advantage... our goal with llama4 is to lead.” (00:04)

Meta has committed to investing between $60 and $65 billion in 2025 for expanding its computing infrastructure, primarily focused on AI and Metaverse-related technologies. This massive investment underlines Zuckerberg's vision of AI being central to Meta's long-term strategy, including the development of advanced models like Llama 4 aimed at outperforming competitors like ChatGPT.

In a significant legal development, Meta agreed to pay approximately $25 million to settle former President Trump's 2021 lawsuit. The settlement includes $22 million allocated to a fund for Trump's presidential library, with the remainder covering legal fees and other plaintiffs involved in the case.

Waymo Expands Autonomous Vehicle Testing to New U.S. Cities

Waymo announced its plans to test autonomous vehicles (AVs) in ten new U.S. cities in 2025, starting with Las Vegas and San Diego. The initiative aims to evaluate how Waymo's self-driving systems adapt to diverse environments, including varying weather conditions and unique regional driving behaviors.

Nick Rose, Waymo's product manager for expansion efforts, highlighted the strategic selection of cities:

“Las Vegas is pretty interesting... it's pretty unique... the street layout is often derided as an absolute mess.” (00:04)

Las Vegas presents a challenging environment with dense traffic and unconventional road markings, while San Diego serves as a testbed similar to Waymo's existing operational cities like San Francisco, Phoenix, and Los Angeles. The company's goal is to achieve generalizability, ensuring that their AVs can seamlessly operate in new cities with minimal adjustments.

SoftBank Eyes Major Investment in OpenAI Amid Microsoft Tensions

Sources reveal that SoftBank is negotiating a substantial investment of $15 to $25 billion in OpenAI, potentially making SoftBank the largest backer of the AI research company. This move signals a possible shift in the dynamics between OpenAI and its long-time partner, Microsoft.

The Japanese conglomerate, led by visionary Masa San, is positioning itself as a pivotal ally for OpenAI, especially as tensions rise over compute resource control. OpenAI's desire for greater autonomy over its compute resources appears to clash with Microsoft's strategic interests in owning and branding AI technologies.

Industry insiders suggest that a parting of ways between OpenAI and Microsoft might be on the horizon, although it may not necessarily be hostile. SoftBank's investment could provide OpenAI with the financial backing needed to pursue its ambitious AI projects independently.

“Ultimately, the Japanese company could spend more than $40 billion on its partnership with OpenAI.” (00:04)

This potential investment underscores SoftBank's commitment to advancing AI technologies and Masa San's mission to achieve superintelligence surpassing human cognitive abilities.

U.S. Copyright Office Clarifies AI's Role in Creative Processes

In a significant policy update, the U.S. Copyright Office affirmed that using AI tools to assist in creative endeavors does not undermine copyright protections, provided there is substantial human authorship involved. This clarification is pivotal for industries reliant on AI-enhanced creativity, such as media production and publishing.

The Office emphasized that:

“A work is eligible for copyright protection if the author creatively selects and arranges AI-generated elements.” (00:04)

This stance allows creators to leverage AI for tasks like enhancing dialogue or conducting research without forfeiting their rights over the original content. The policy aligns with the Office's previous positions, providing greater assurance for the legitimacy of AI-assisted creative processes.

In related news, the Authors Guild launched a Human Authored verification system to help writers certify their books as predominantly human-created. This initiative aims to differentiate human-authored works from the increasing volume of AI-generated publications, ensuring transparency and preserving the unique human element in storytelling.

Conclusion

Today's episode of Techmeme Ride Home highlighted the intricate balance between rapid technological advancements and investor expectations, especially concerning capital expenditures in AI and cloud infrastructure. With industry giants like Microsoft and Meta making significant strides while facing scrutiny over their spending strategies, the future landscape of tech innovation remains both promising and challenging. Additionally, strategic investments and policy clarifications continue to shape the evolving relationship between AI development, corporate partnerships, and creative industries.

Stay tuned for more in-depth analyses and updates in tomorrow's episode of Techmeme Ride Home.