Meta and Tesla Earnings Unpacked | Pivot

1. 0:00 – 1:36

   Meta Q1: Blowout results, but AI spend spooks the market

   1. KSKara Swisher0:00

      There's a lot of earnings news out there this week. Let's start with Meta's Q1. The company saw revenue increase 27%, uh, from $28.65, uh, billion in the same period last year. Net income more than doubled to $12.37 billion. This c- this company is making some money. But Meta's forecast of rising costs related to AI, they've replaced a, uh, you know, their, um, virtual reality stuff with AI (laughs) sent... which is very expensive, sent its share price down 15% in extended trading. It's gonna cost some money for them to get into this business. Mark Zuckerberg said on the earnings call that his immediate goal is getting millions or billions of people using Meta AI, with revenue coming down the line. They do not have revenue plans. M- m- that's one thing we need to stress. A lot of this AI doesn't have a business plan yet. Um, and, or there's a, there's a, it's a small business plan, um, and there's anticipation of huge profits in the future. So, he's doubling down on doing this, um, and i- i- at the same time, his current business is killing it, right? I mean, thoughts?

   2. SGScott Galloway1:03

      I think it's arguably... Unfortunately for our children, this is one of the best run companies in the world. It's just, uh, the amount of money here they're printing and he's... the m- what, what was... d- I thought the most interesting thing about their earnings call relative to Tesla, was Tesla's massive, uh, investment in AI. You know, uh, Musk was bragging about how many GPUs they'd order, ordered-

   3. KSKara Swisher1:28

      Yeah.

   4. SGScott Galloway1:28

      ... because he's trying to create a distraction from the fact (laughs) his core business is in decline.

   5. KSKara Swisher1:31

      Well, let me get... let me put those earnings. You can... let, let's talk about the Met- let's talk about Meta first, though.

   6. SGScott Galloway1:36

      Sure.

2. 1:36 – 2:10

   Is Zuckerberg repeating the metaverse mistake—or making a necessary AI pivot?

   1. KSKara Swisher1:36

      Should lotta p- should he be focusing on the other parts of the business? No, 'cause that's... he's gonna have... this is something... we were both making fun of his, uh, investments in virtual reality and, uh, Oculus. You know, all the Metaverse stuff.

   2. SGScott Galloway1:48

      Yeah.

   3. KSKara Swisher1:48

      You know, and changing the name. We thought that was ridiculous and a waste of money.

   4. SGScott Galloway1:51

      Yeah.

   5. KSKara Swisher1:51

      And throwing money down a sh- down a toilet essentially.

   6. SGScott Galloway1:55

      Mm-hmm.

   7. KSKara Swisher1:55

      In this case, do you think this spending, which is gonna be massive, is... he's gotta be in here, right? This is not a-

   8. SGScott Galloway2:01

      I, I-

   9. KSKara Swisher2:02

      ... choice.

   10. SGScott Galloway2:02

       So, I can't... I, I can't predict if these investments are gonna pay off, but I think-

   11. KSKara Swisher2:07

       Yeah.

   12. SGScott Galloway2:08

       ... they have to make them. I, I just-

   13. KSKara Swisher2:09

       Yeah.

3. 2:10 – 3:45

   Microsoft as the AI ROI benchmark—and why everyone is racing to keep up

   1. SGScott Galloway2:10

      When you have... when you have the premier technology eating the world and the market, the market seems to offer you a return on investment on that, the perception that you're investing here. I mean, to a certain extent, even des- st- despite the fact... let me back up. Microsoft has spent more money on AI than every other company and venture capitalist, I believe, combined. If you look at Microsoft and its affiliates and its proxies, it is inv-... Satya Nadella is now considered, in my opinion, the, probably the brightest mind in business. And, I mean, there's a lot of them, but his forward lean, his forward-leaning investments in AI have increased the market cap of that company probably one or... one to $1.4 trillion off of a huge investment, but relative to $1.4 trillion. It's the best corporate investment... it's probably arguably the best venture investment in history. And so everyone says, "We can't beat the company they got behind." I mean, quite frankly, Mark... uh, the, supposedly the brightest man in technology, Musk? He's way behind in AI. He talks about it a lot. He doesn't have a single real victory in AI. It's not... his, his known in AI for walking away from the most successful AI company ever-

   2. KSKara Swisher3:30

      Yeah.

   3. SGScott Galloway3:30

      ... without a single share-

   4. KSKara Swisher3:31

      That is correct.

   5. SGScott Galloway3:31

      ... or anything.

   6. KSKara Swisher3:32

      Right.

   7. SGScott Galloway3:33

      So, he's trying to play catch-up and everyone... so I, I think Mark Zuckerberg taking his forward-leaning investments, which he can afford, out of virtual reality into AI, that just feels right as rain to me.

4. 3:45 – 4:43

   Meta’s cash engine funds the future: ads are surging, capex will too

   1. KSKara Swisher3:45

      Yeah. Yeah, I agree. There... I mean, uh, look, his main business right now is gonna carry him through. Look at these increases. He owns the current business environment, right? It looks (laughs) like... uh, you know, th- these numbers are really impressive. Um, and it's sort of like Microsoft's owning Windows and leaning into the future, right? Like, where they wanted to lean and, uh, e- when they leaned into cloud, for example. The... it, it's a... but this is so much more expensive. It's just... they, uh, he has to do this. And I think people were thrilled when he was making cuts to employees, but this stuff is expensive. And it's also, we have to build new fabs, we... it's just, there's gonna be enormous investment here, um, for this, and, and as we get into quantum computing. And he just can't af- he cannot miss this turn or else another company will, will take over the, all... the next version of business. Even without a business plan that people can foresee at this moment. Um, but it's almost like shifting from horses to cars. That's what it... you know?

   2. SGScott Galloway4:42

      The other-

   3. KSKara Swisher4:42

      We're gonna have cars.

5. 4:43 – 5:36

   Meta becomes a video company: Reels and the reshaping of attention

   1. SGScott Galloway4:43

      The other big shift that just really blew me away. Meta is essentially a video company. Video now represents-

   2. KSKara Swisher4:50

      Yeah.

   3. SGScott Galloway4:50

      ... more than 60% of time-

   4. KSKara Swisher4:53

      Yeah.

   5. SGScott Galloway4:53

      ... on both Facebook and Instagram. On Instagram-

   6. KSKara Swisher4:56

      Isn't that your experience now with it? I think it's everyone's.

   7. SGScott Galloway4:58

      It's pretty much video. But it wasn't-

   8. KSKara Swisher5:00

      Mm-hmm.

   9. SGScott Galloway5:00

      ... that way just two or three years ago. I mean, if you think about just how-

   10. KSKara Swisher5:02

       Right.

   11. SGScott Galloway5:02

       ... fucked TV is. On Instagram-

   12. KSKara Swisher5:05

       Oh, yeah.

   13. SGScott Galloway5:05

       ... Reels-

   14. KSKara Swisher5:06

       Mm-hmm.

   15. SGScott Galloway5:06

       ... makes up-

   16. KSKara Swisher5:07

       Yeah.

   17. SGScott Galloway5:07

       ... 50% of the time that's spent on Instagram.

   18. KSKara Swisher5:11

       Mm-hmm.

   19. SGScott Galloway5:12

       And that's a new product and it's a video-based product. It's not images, it's not stills.

   20. KSKara Swisher5:16

       Mm-hmm.

   21. SGScott Galloway5:16

       It's video. I mean, people-

   22. KSKara Swisher5:17

       Yeah.

   23. SGScott Galloway5:17

       ... people constantly criticize, including myself, Meta for its inability to come up with new products.

   24. KSKara Swisher5:24

       Mm-hmm.

   25. SGScott Galloway5:24

       It's not good at hardware, but technically speaking, their-

   26. KSKara Swisher5:28

       Yeah.

   27. SGScott Galloway5:29

       ... Pivot or supplemental or their venture into video has been enormously successful.

6. 5:36 – 6:09

   TikTok ban bill ripple effects: a potential windfall for Meta

   1. KSKara Swisher5:36

      And also, they're getting a big bump this week from the, the, the, um, TikTok bill passing and Biden signing it. I mean, this has been... this is gonna, this is gonna sh- it's a waterfall to all the companies and especially Facebook. This is, this has been the greatest... there's a great story in The Washington Post as to how these legislators quietly got together to do this, but they got a lot of lift from Facebook. He's been talking about this. He talked about it with me in 2019. He's been aiming at TikTok and China for years, and now he's gotten his reward.

   2. SGScott Galloway6:06

      ... I, I do think we're just... but, but I don't think it's a fait accompli option.

7. 6:09 – 7:15

   Tesla Q1: Profit collapse and ‘jazz hands’ guidance on what’s next

   1. KSKara Swisher6:09

      Because let's talk about the Tesla's earnings. You were talking about them investing. Their profit fell 55% to $1.1 billion, quite a small company, from the first quarter of 2023, and the revenue fell, um, 9% to 23, uh, $21.3 billion, the biggest decline since 20, uh, 2012. The drop in sales was steeper than Tesla's last decline in 2020, which was due to disruptive production during COVID. Uh, Tesla put the focus on some of its other efforts. He used the jazziest hands of jazz hands on an earnings call, including accelerating the launch of more affordable models, which he didn't give any details about, cyber taxis, which he didn't really give any details about, um, and everything else. Um, he's been doing a number of things to try to jazz up the stock, and the one thing that did affect people is cuts, job cuts, which immediately... Someone asked me why the stock went up, and I said, "Because he's doing job cuts," and you can do the math, right? Essentially. Um, these numbers are rough numbers, but the stock has been going up in the last few days, largely, I think, because of cost savings that will, will- you'll see on the bottom line for the next earnings. Um, thoughts on, on this?

8. 7:15 – 8:16

   Galloway’s thesis: Tesla is an auto company using AI as misdirection

   1. SGScott Galloway7:15

      They're trying to create any sort of, uh, misdirect or weapon of mass distraction from the fact it's an automobile company that's attracted a lot of competition and will ultimately trade it, uh, like an automobile company. So, they went out of their way to talk about the fact that their energy storage business would grow at least 75% from 2023, but that's a pimple on the elephant of this company. And they're just trying... and, and then they're saying, "And we're spending all of this money on AI, and when Elon Musk goes into a new category, watch out." And people should pay attention 'cause he is a genius around, you know, innovation. But they're trying to talk about anything (laughs) but their core... Well, th- that's a d- that's a different talk show in the sense that, I mean, one of the reasons Meta is performing is Mark Zuckerberg is not launching rockets into space or, you know, buying, you know, buying Sky Media or whatever. He's not buying MySpace. Musk is very distracted with a lot of different things, and this is an automobile company.

9. 8:16 – 9:09

   Valuation showdown: Tesla multiples vs Big Tech and legacy automakers

   1. SGScott Galloway8:16

      So, they're trying to say, "Look over here, AI. Look over here, you know, our energy business." But here's the thing. If you look at, um, if you look at Tesla, Google trades at 20 times, enterprise value, but, uh, Google's 20, Meta's 21, Microsoft is 26. These are both, quite frankly, better businesses. Tesla, despite being the worst performing stock year to date in the S&P trades at 35 times. Now, let's compare that to auto companies. Ford is 16 times, GM is seven times, BYD, their biggest competitor, is- trades at six times. So, if Tesla just normalizes across big tech, it's gonna get cut in half again, and if Tesla, if people finally acknowledge, wake up from their hallucination and realize this is an automobile company, it's probably down 50 to 80% in the next year.

10. 9:09 – 10:46

    Musk’s reframing: ‘AI robotics company’ and the autonomy ultimatum

    1. KSKara Swisher9:09

       Yeah. Well, he, he does not want to be called a tech car 'cause he actually, in the call, very no- noted this. Um, uh, he said, "We should be thought of as an AI robotics company. If you value Tesla as an auto comp- just an auto company, just the wrong framework. If you ask the wrong question, then the right answer is impossible." He's really, he's really a clever piece of person.

    2. SGScott Galloway9:29

       AI robotics?

    3. KSKara Swisher9:31

       Yeah, that's what he said. Mm-hmm.

    4. SGScott Galloway9:33

       It's a car.

    5. KSKara Swisher9:33

       I mean, look... Uh, I get it, but he's, he's of course pushing the affordable car forward. They were tr- going to have a more affordable car, um, which they were delayed, and now he's gonna do them earlier. I, uh... He's gotta deliver. He's just got... he can't make these prom- you know, his g- his mouth is making a lot of promises he can't possibly deliver, but yes, he's an AI robotics company is what they're doing.

    6. SGScott Galloway9:54

       Hmm.

    7. KSKara Swisher9:54

       Um, and that's his line. That's his line. Okay, let's see it. Let's see. I- I, to me, I'm just like, "Show us the money. Show us the money," kind of thing. Um, he went on to encourage the autonomous non-believers to get lost. Of course.

    8. SGScott Galloway10:06

       Mm-hmm.

    9. KSKara Swisher10:06

       This is what he always does. He can't possibly make a statement without saying something obnoxious. "If somebody doesn't believe in- that Tesla is going to solve autonomy, I think they should not be an investor in this company, and we will, and we are." That is his bet. That is his thing. He's made a lot of promises he never k- kept. Um, he really feels that, uh, when the- when Tesla switches on full self-driving, he called- he's gonna say it's gonna be the b- the biggest asset value appreciation in history. Um, so, okay.

    10. SGScott Galloway10:38

        He sounds like Cathie Wood. He should get a-

    11. KSKara Swisher10:40

        Yeah. Well, her... She's got-

    12. SGScott Galloway10:41

        He should go through transition and wear chunky glasses and start a hedge fund that loses a lot of money.

11. 10:46 – 11:37

    China price war, Cybertruck optics, and Tesla’s product/service issues

    1. KSKara Swisher10:46

       (laughs) Well, you know what? I think if he could come out with more affordable cars, he'd be in a better position, but that...

    2. SGScott Galloway10:50

       He's-

    3. KSKara Swisher10:50

       The overall market's harder, and the China-

    4. SGScott Galloway10:53

       Here's the problem. That's-

    5. KSKara Swisher10:53

       ... competition, and the competition, competition, I just, I-

    6. SGScott Galloway10:56

       You wanna get into an affordability competition with China?

    7. KSKara Swisher10:59

       Yeah. Yeah, that's exactly-

    8. SGScott Galloway11:00

       You wanna get into an affordability race with the Ben Johnson of, of affordability?

    9. KSKara Swisher11:05

       Yeah.

    10. SGScott Galloway11:05

        See above China? Unless-

    11. KSKara Swisher11:07

        Also service. You know, if one more, one more picture of, of a Cybertruck getting hauled away because it got stuck in the mud. He's getting... Speaking of video and I, (laughs) he's getting killed by videos about these trucks, and they seemingly didn't sell very many either. So, for a car that only sold, it looks like a couple thousand, um, boy is it an outsized lemon, like... A- and you know, uh, again, he's getting killed on all ways. Look, good luck Elon. We hope you become an AI robotics company. That's great for you.

12. 11:37 – 13:26

    Personal backlash and brand consequences: why Scott dumped Tesla and X

    1. SGScott Galloway11:37

       Uh, but just as, just a... You know, I just feel like I gotta... I do think I've owned a Tesla.

    2. KSKara Swisher11:43

       Please.

    3. SGScott Galloway11:43

       It is a fantastic car. It's just-

    4. KSKara Swisher11:46

       It is.

    5. SGScott Galloway11:46

       It should trade at the upper range of automobile companies. It should be-

    6. KSKara Swisher11:49

       Mm-hmm.

    7. SGScott Galloway11:49

       ... the highest multiple on EBITDA of any auto company, which means it's gonna go down 60 to 70%.

    8. KSKara Swisher11:55

       And still, I would argue back, it doesn't ha- hasn't had a new thing in a while, and the service sucks, from what I understand.

    9. SGScott Galloway12:01

       Is that right? I've never had the c- I was amazed at-

    10. KSKara Swisher12:03

        Yeah, a lot of people, and... L- a lot of people.

    11. SGScott Galloway12:06

        Huh.

    12. KSKara Swisher12:06

        I've had this complaint from lots of Tesla owners. Um, service is not as good as the ones who are good at service.

    13. SGScott Galloway12:12

        Mm-hmm.

    14. KSKara Swisher12:12

        Which are the big car companies. Service is an important part of car ship. The other thing is new, fresh things. It's doesn't, it has not had a new fresh look except for the Cybertruck, which is not fresh.

    15. SGScott Galloway12:21

        I-

    16. KSKara Swisher12:21

        That's something else.

    17. SGScott Galloway12:22

        I can validate the problems around service. When he called me an insufferable numbskull, I put- took a big dump in the passenger seat, and no one came-

    18. KSKara Swisher12:28

        (laughs)

    19. SGScott Galloway12:29

        No one came to clean it up from Tesla.

    20. KSKara Swisher12:30

        Do you still have your Tesla?

    21. SGScott Galloway12:31

        Oh, no, I-

    22. KSKara Swisher12:31

        Me so-

    23. SGScott Galloway12:32

        The moment he, he-Uh, look, you taught me this, uh-

    24. ... the moment he started being mean, I'm gonna virtue signal now and feel masculine-

    25. KSKara Swisher12:37

        Mm-hmm.

    26. That's good.

    27. SGScott Galloway12:41

        When he called you-

    28. KSKara Swisher12:44

        Mm-hmm.

    29. SGScott Galloway12:44

        ... "the definition of pure evil"-

    30. KSKara Swisher12:46

        Mm-hmm.
13. 13:26 – 14:21

    Looking ahead: Microsoft and Alphabet earnings—and the ‘big tech always wins’ bet

    1. KSKara Swisher13:26

       Anyway, um, Microsoft and Alphabet earnings are coming out after we record. Any predictions?

    2. SGScott Galloway13:32

       Microsoft and who?

    3. KSKara Swisher13:34

       A- Alphabet. You've heard of them?

    4. SGScott Galloway13:35

       Well, my-

    5. KSKara Swisher13:35

       Google.

    6. SGScott Galloway13:36

       I, I don't know if you've heard this, uh, but big tech is just this great business. They, they're-

    7. KSKara Swisher13:41

       (laughs)

    8. SGScott Galloway13:42

       ... just, they've got this, they've got this thing, I think it's called SAM? S-

    9. KSKara Swisher13:46

       Yeah.

    10. SGScott Galloway13:46

        ... Siricha? Search.

    11. KSKara Swisher13:48

        (laughs) Yeah.

    12. SGScott Galloway13:48

        And it's a monopoly.

    13. KSKara Swisher13:50

        Yeah.

    14. SGScott Galloway13:50

        And it keeps printing money. Uh-

    15. KSKara Swisher13:53

        Yeah.

    16. SGScott Galloway13:53

        ... I, I, look-

    17. KSKara Swisher13:54

        Yeah.

    18. SGScott Galloway13:54

        ... uh, the answer is I don't know, but the good money is always (laughs) on big tech. So, so-

    19. KSKara Swisher14:00

        Yeah.

    20. SGScott Galloway14:00

        ... I'm gonna go out on-

    21. KSKara Swisher14:00

        Yeah.

    22. SGScott Galloway14:00

        ... a limb here and say that the numbers are gonna be amazing. Even with Meta-

    23. KSKara Swisher14:04

        Yeah.

    24. SGScott Galloway14:04

        ... their numbers were amazing, but their stock has accelerated-

    25. KSKara Swisher14:06

        Yeah.

    26. SGScott Galloway14:07

        ... so much, that the, the, I think people were hoping-

    27. KSKara Swisher14:09

        There was a pullback.

    28. SGScott Galloway14:10

        ... for another, like, "Oh, I fired half the staff and my revenues are still going up." (laughs)

    29. KSKara Swisher14:13

        Yeah. Yes, firing people gets you good stock hits, I'll tell you that.

Episode duration: 14:21