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00:00 Speaker A
I would like to kick things off here with Meta and Microsoft. We’re expecting to hear from them. What exactly do you want to hear from Microsoft when it comes to AI related CAPEX spending in order for you to feel confident about confident here about the returns on spending.
00:23 Speaker B
Well, I think there’s a couple of things. I mean, first and foremost, we’re going to want to watch their margins to see if they’re starting to realize the benefits internally of of uh adopting AI, but we’re also going to want to hear about these capacity constraints because if you remember Brooke, that’s really been one of the big things that has kind of the it’s kind of restrained the growth that we’ve seen in their cloud business as they continue to add more and more capacity uh for both AI and data center. And and with that in mind, it’s really going to be paying, I would say very, very close attention
01:00 Speaker B
to what they have to say about their uh remaining uh performance obligations or or backlog uh to the extent we see this continue to climb higher like we saw in the September quarter. I think that can give us uh some comfort and it is more likely or not to be just a time between when the business that is in this big backlog number is booked as revenue as that capacity comes on stream.
01:21 Speaker A
Now Chris, we’re getting these results this week at a time where investors are a bit fearful about the AI bubble risk here. What what difference differentiates here when you’re set to hear from Meta? What should you be listening for in that earnings call?
01:46 Speaker B
Well, there too, it it’s going to be what is their capX level. But but to me when we think about um meta, there’s really two things we have to focus in on. You know, first and foremost is what is the trend in advertising? Are they continuing to outperform the market? And remember Brooke, they’re on the cusp of really spreading that business model of advertising across Threads and WhatsApp. tells us that they should be able to pick up more advertising dollars. But the second thing to focus in on here too is going to be their margins.
02:27 Speaker B
We have seen them continue to lean in to AI to really drive not only a better mix of um advertising, but also help automate. So that could give them greater productivity. We should see that flow through their margins. That’s what I’ll be watching for.
02:49 Speaker A
Chris, anything you’re listening for when it comes to that sort of backup, that reversal of their initiatives around the Metaverse?
03:02 Speaker B
You know, I have to say, I’ve always been a little skeptical about the about that. Um to the extent that they’re leaning a little more into wearables with the glasses, smart glasses, I I think that is smart, but I want to hear how are they going to expand that array and bring the price down so it’s even more affordable, Brooke.