Latest news with #MarkShmulik
Mint
6 days ago
- Business
- Mint
As AI changes internet search, Reddit lies in a sweet spot
Artificial-intelligence chatbots are leaning more and more on Reddit these days. The company once called the 'Front Page of the Internet" has only begun to cash in on that. That wouldn't seem the case from Reddit's latest earnings report. Revenue surged 78% year over year to just under $500 million in the second quarter, marking the company's best growth rate since early 2022—two years before it went public. But most of that came from advertising, which accounts for the vast bulk of the company's business and grew 84% from a year earlier. Reddit's 'other revenue," which is comprised mostly of licensing deals it has struck with OpenAI and Google, accounted for only 7% of total revenue during the quarter. Clearly, Reddit's near- and midterm future relies on advertising, which means it needs human users visiting its site. But ad revenue has been a bit unpredictable as queries to AI chatbots begin to replace some traditional internet search traffic. Reddit reported a surprise decline in U.S.-based daily active users in its fourth-quarter report six months ago, which was blamed on a 'periodic algorithm change" by Google. That happened to coincide with the widening deployment of Google's 'AI Overviews," which offer up chatbot-like replies to traditional search queries. It was a small decline—a 0.4% drop from the previous quarter. But for a heavily-shorted stock that had surged sixfold from its IPO price, that was bad enough. Reddit shed more than half its market value over the following two months. The stock has since clawed back most of that lost ground, thanks in part to data from third-party providers showing Reddit as a top-cited source for queries from ChatGPT, Perplexity and Google Gemini. Reddit was the top source for Google and Perplexity from August of 2024 though last month, according to a June 5 report from search analytics firm Profound. Another report last month from search analytics firm Ahrefs showed Reddit appearing in 5.5% of Google's AI Overviews responses, the most of any source. Reddit's position as a repository of knowledge shared and curated by actual people is a big part of the appeal. 'Human conversation is not being replaced by AI, instead, it's becoming more important," Reddit Chief Executive Steve Huffman said on the company's earnings call. Indeed, people are still key. Along with the surging growth in ad revenue, Reddit's U.S.-based daily active users rose a bit to 50.3 million during the quarter, surprising analysts who had expected another decline. Reddit's stock price has jumped 24% since its earnings report last week. 'Someone asked us how fast revenues would need to grow to overcome the user story, and we guess that answer is 78%!" Bernstein analyst Mark Shmulik wrote in a report after the earnings. With the stock coming back to its post-IPO peak, Reddit will need to keep the momentum going. There is a good chance it can. Its platform is proving to be a more attractive draw for advertisers looking for an engaged audience that is often focused on commercial subjects—such as users seeking opinions on what products to buy. Dan Salmon of New Street Research estimates that around 40% of all conversations on Reddit have commercial relevance, creating a sweet spot for the company in the 'consideration" phase of shopping. Reddit's popularity as a source for AI-powered search engines is also an asset, which should lead to more licensing deals in the future. Revenue from those deals won't likely displace advertising as Reddit's main source of income, but it adds high-margin dollars to a business already commanding industry-leading gross margins of 91%. Reddit's AI story is only in the early chapters.
Yahoo
02-08-2025
- Business
- Yahoo
Meta Platforms (META) Price Target Raised by Bernstein on AI and Ad Growth
Meta Platforms Inc. (NASDAQ:META) ranks among the . Bernstein analyst Mark Shmulik maintained his Outperform rating on Meta Platforms Inc. (NASDAQ:META) and increased the stock's price target from $700 to $775 on July 22. According to Bernstein's research report, the price target hike highlights Meta's status as 'a clear AI winner,' with positive advertising checks bolstering the company's claims of increasing ad success. The introduction of WhatsApp ads and the ongoing robust increase in Threads adoption have supported Meta's prospects for revenue growth, allaying earlier worries about declining returns on time spent growth. Though it acknowledged the existence of short-term concerns regarding the company's capacity to finance AI infrastructure while preserving free cash flow and earnings per share, Bernstein identified a number of long-term growth drivers for Meta Platforms, Inc. (NASDAQ:META) beyond 2025, including wearables, business messaging, generative AI ad creative, and Meta AI. Meta Platforms, Inc. (NASDAQ:META) is a renowned technology company known primarily for its flagship platforms Facebook, Instagram, and WhatsApp, as well as its revolutionary advances in augmented reality (AR) and virtual reality (VR). While we acknowledge the potential of META as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. Read More: and Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-08-2025
- Business
- Yahoo
Meta Platforms (META) Price Target Raised by Bernstein on AI and Ad Growth
Meta Platforms Inc. (NASDAQ:META) ranks among the . Bernstein analyst Mark Shmulik maintained his Outperform rating on Meta Platforms Inc. (NASDAQ:META) and increased the stock's price target from $700 to $775 on July 22. According to Bernstein's research report, the price target hike highlights Meta's status as 'a clear AI winner,' with positive advertising checks bolstering the company's claims of increasing ad success. The introduction of WhatsApp ads and the ongoing robust increase in Threads adoption have supported Meta's prospects for revenue growth, allaying earlier worries about declining returns on time spent growth. Though it acknowledged the existence of short-term concerns regarding the company's capacity to finance AI infrastructure while preserving free cash flow and earnings per share, Bernstein identified a number of long-term growth drivers for Meta Platforms, Inc. (NASDAQ:META) beyond 2025, including wearables, business messaging, generative AI ad creative, and Meta AI. Meta Platforms, Inc. (NASDAQ:META) is a renowned technology company known primarily for its flagship platforms Facebook, Instagram, and WhatsApp, as well as its revolutionary advances in augmented reality (AR) and virtual reality (VR). While we acknowledge the potential of META as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. Read More: and Disclosure: None. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Business Insider
01-08-2025
- Business
- Business Insider
Big Tech's data center spending spree shows no signs of slowing
Big Tech's AI spending bonanza isn't slowing down anytime soon. On quarterly earnings calls with investors this week, Amazon, Microsoft, Google, and Meta all raised capex guidance for the year as the AI race intensifies. The level of investment represents a dramatic spike in spending in a short period of time. Amazon spent $48.4 billion on capital investments in 2023. The cloud giant is tracking to spend over $100 billion this year. Google stunned investors with a $10 billion increase — out of character for what Wall Street considers the most measured of the cloud giants. Amazon signaled that it plans to fly right past its initial capex target of $100 billion for the year. Meta raised its forecast slightly. Microsoft, which briefly hit $4 trillion in market value this week after a blowout earnings call, also said it was continuing full-steam ahead on capital investments for the year. Even Apple, a typically austere and restrained spender when compared to its Big Tech peers, has jumped aboard the " AI crazy train," as Bernstein analyst Mark Shmulik dubbed Big Tech's race to build more data centers. Apple spent $9.5 billion in capital expenditures in the first three quarters of its fiscal year, up nearly 50% from the same period last year. CEO Tim Cook attributed the jump to AI investments, including data centers. Amazon spent $31.4 billion on capex in its second quarter, up from $24.3 billion in the first. On the company's earnings call, CFO Brian Olsavsky told investors that quarterly capital investments for the rest of the year are expected to mirror second-quarter spending. Bernstein's Shmulik adjusted his guidance to $117 billion in capex for the year. The company's stock was down 7% after hours, with investors disappointed by the company's profit guidance and sluggish growth compared to its rivals. For now, Amazon has "more demand than we have supply," said CEO Andy Jassy, with power being the biggest constraint. Microsoft expects to spend $30 billion in capex in its current quarter, driven by "strong demand signals," CFO Amy Hood said on the company's earnings call earlier this week. It spent $24.2 billion in the first quarter. The revised guidance represents a turnaround from the company's comments earlier this year, when it said it was expecting capex to start growing at a slower pace. On the call, Microsoft disclosed Azure revenue — it grew 34% to $75 million — for the first time ever. Google surprised investors by raising its capex forecast by $10 billion for the year to $85 billion. The massive expenditures are unusual for Alphabet-owned Google, Bernstein's Shmulik said. The company is hoping to keep its edge in the AI race after a strong quarter for cloud sales, which surged 32% in the most recent quarter. Meta adjusted the bottom of its capex range to $66 million, up from $64 million, and kept the top of the range at $72 million. CEO Mark Zuckerberg said on the company's earnings call this week that ad sales were up 20% in the most recent quarter thanks to AI. The company has been on an aggressive — and expensive — AI hiring spree, including a $15 billion investment in Scale AI.
Business Insider
25-07-2025
- Business
- Business Insider
Welcome aboard the 'AI crazy train'
Big Tech is in an AI arms race, each company trying to outspend the others on data centers, GPUs, networking gear, and talent. Engineers can be let go. But the infrastructure? That's permanent. If the AGI dream fades, you're stuck with massive, costly assets. So when Google announced it would hike capex by $10 billion to $85 billion in 2025 eyebrows went up. Most of it is for things you can't walk back: chips, data centers, and networking. Google is "jumping aboard the AI crazy train," Bernstein analyst Mark Shmulik wrote, referencing a song by the late bat biter Ozzy Osbourne. Meta's Mark Zuckerberg brags about Manhattan-sized data centers. And Elon Musk keeps hoarding GPUs. While Sam Altman is building mega-data centers with partners. JPMorgan dubbed this " vibe spending," warning OpenAI might burn $46 billion in four years. It's no shock when Elon, Zuck, and Sam flex on capex. But Google? That's surprising. "Google doesn't do this," Shmulik said. The company has been viewed as measured in recent years, prioritizing investment intensity with care. Not anymore. Now investors want to know: Will these swelling bets pay off? There are promising signs. Since May, Google's monthly token processing (the currency of generative AI) has doubled from 480 trillion to nearly a quadrillion. Search grew 12% in Q2, beating forecasts. Cloud sales surged 32%. CEO Sundar Pichai said Google is ramping up capex to support all this growth. But it's still a huge gamble. "Does the current return on invested capital seen in both Search and Cloud hold up at higher [capex] intensity levels," Shmulik asked, "or is the spend a very expensive piece of gum trying to plug an AI-sized hole?" He leans optimistic.
