|
The Information is hosting an event on the impact of AI on the IPO market in San Francisco on November 14th, with speakers from NYSE, Citi and J.P. Morgan. How is the IPO market shaping up for tech and what will AI’s impact be? More details & request an invite here. Greetings! Google may have calmed some nerves on Wall Street on Tuesday. It delivered a third-quarter result showing a sharp acceleration in Google Cloud’s growth rate, to a bumper 35%, from 29% in the second quarter. CEO Sundar Pichai credited that performance in part to the company’s AI portfolio, which he said was helping it win new customers as well as lift usage by existing customers. Pichai didn’t quantify the impact of AI, however, which likely would help convince skeptics on Wall Street. Still, the cloud unit’s performance helped increase Google parent Alphabet’s overall top-line growth rate to 15%, a little higher than analysts were projecting. That underwrote a 5% lift in Alphabet’s out-of-favor stock in after-hours trading. But on the key issue worrying investors about Google—the future of its search business—we got no clear signal. Yes, search ad growth slowed to 12% from 14% in the second quarter. However, that seems to be more of a return to the business’s long-term growth rate after it experienced some volatility in the past 18 months, caused in part by the huge spending of Asian shopping sites like Temu last year. The big worry—that artificial intelligence chatbots will pull consumers away from search—hasn’t yet manifested itself in the company’s results. And Google executives did their best to reassure investors they’re on top of the issue, repeatedly mentioning new AI-powered search formats the company has introduced, such as “circle to search,” which lets people search for a product by circling an image of it in a photograph. “AI really supercharges search,” said Google’s business chief, Philipp Schindler—a comment the U.S. government is sure to cite, as it wants to restrain Google from using AI to strengthen its dominance in search. Meanwhile, the company’s new chief financial officer, Anat Ashkenazi, made her debut earnings call appearance, with some good news and bad news. The good news is that she plans to bring a fresh pair of eyes to the company’s operations in hopes of squeezing more “efficiencies” (code for cutting more cost) out of them, even though her predecessor, Ruth Porat, was not exactly a slouch in that department (as Ashkenazi acknowledged). The bad news is that, as Ashkenazi forecast, Alphabet’s capital expenditures will increase further in 2025, after a big boost this year caused by spending on new servers and related equipment to handle work on AI services. The past two quarters have shown capex is now running at a quarterly rate of just above $13 billion, compared to between $6 billion and $8 billion for most of last year, and Ashkenazi said it would run at the same $13 billion rate in the fourth quarter. Ashkenazi said the growth in 2025 wouldn’t be quite as big as what we saw in 2024, which investors will likely take as small consolation. Elon Musk may not have managed to turn X into a subscription machine (although as X is private, we don’t really know). But Snap is certainly making headway. The parent of Snapchat reported its third-quarter earnings today, showing it now has 12 million subscribers to its Snapchat+ product, which offers experimental features and exclusive features for just $3.99 a month. That’s producing enough revenue to lift Snap’s overall growth rate by a decent amount—Snap reported 15% top-line growth, even though its main business of advertising only grew 10%. • Shares of chip designer Advanced Micro Devices fell more than 7% in after-hours trading on Tuesday despite the company’s decision to raise its sales forecast for AI chips that compete with Nvidia’s. Sales of AMD’s data center server chips rose 122% to $3.5 billion compared to last year, or 7 percentage points faster growth than in the second quarter. • Social media company Reddit posted its first profit as a public company in the third quarter, along with much higher revenue and adjusted earnings before interest, taxes, depreciation and amortization than executives had projected. Shares soared more than 20% in after-hours trading. • Elon Musk’s xAI, developer of the Grok chatbot, is in talks to raise more money at a $40 billion valuation, according to a person with direct knowledge of the fundraising efforts. • PayPal’s revenue growth slowed to 6% in the third quarter, the payments firm reported on Tuesday, as growth in payment volume also slowed. Profit was unchanged at about $1 billion. More than 100,000 readers rely on The Information's Creator Economy newsletter for coverage of the creator startups making waves, big tech companies' social media playbooks, and scoops on the sector's biggest hires. Start receiving the free newsletter here.
| 
