2025-05-09 20:02:16
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Q1 2025 was the worst start to the year since 1996 (excluding COVID), though hits like A Minecraft Movie, Sinners, and Marvel’s Thunderbolts are fueling a much-needed rebound in Q2.
Direct-to-consumer (DTC) streaming has redefined success. Instead of box office sales, engagement metrics now take center stage. Platforms like Netflix drop content overnight, leveraging their reach to pull in millions of eyeballs.
Streaming platforms are going global, with Korean dramas and Spanish horror finding new audiences — genres that might have been overlooked in the theater-first era.
President Trump just announced plans for a 100% tariff on movies produced outside the US, calling America’s movie industry "a very fast death." According to FilmLA, movie and TV production in Los Angeles has fallen by nearly 40% over the last decade. With tax incentives drawing filmmakers away, the impact could ripple across Hollywood.
It’s too soon to know if the tariff will go through or how it might work, but it’s safe to say studios are watching their bottom line closely. It could impact blockbuster movies in the works like Avengers: Doomsday or Mission: Impossible — The Final Reckoning. The lack of clarity could slow down production or halt it in some cases.
What happens next could reshape Hollywood — or freeze it in its tracks.
Today at a glance:
📈 Streaming subscriber trends
🏰 Disney: Streaming & Parks Shine
🦚 Comcast: Broadband Weakness
🎥 Warner: Streaming Drives Gains
⛰️ Paramount: Merger Momentum
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Netflix capped 2024 with 302 million members — but in Q1, it stopped sharing membership numbers, leaving us to focus on the “best of the rest.”
So, let’s zoom in on the streaming platforms still sharing their numbers.
Note: Disney+ Hotstar (India) is excluded after its merger with Reliance. Platforms like YouTube Premium, Prime Video, and Apple TV+ don’t share subscriber numbers quarterly — if at all.
Now, let’s break down how the biggest players performed this quarter.
Disney’s fiscal year ends in September, so the March quarter was Q2 FY25.
📈 Streaming’s profits rise: Disney’s direct-to-consumer segment, which includes Disney+ and Hulu, delivered its fourth consecutive profitable quarter with $336 million in operating income — a substantial rise from $47 million a year ago. Despite price increases, Disney+ gained 1.4 million subscribers, reaching 126 million, while Hulu added 1.1 million, reaching 55 million.
🏰 Parks expansion gains traction: Operating income for the Experiences division climbed 9% to $2.5 billion, driven by domestic parks and cruise performance. However, international parks, particularly in Shanghai and Hong Kong, struggled with a 23% drop in operating income due to higher costs and lower attendance. Disney announced plans for a $30 billion domestic park investment and a new Abu Dhabi resort.
📺 Linear TV stabilizes amid cost cuts: Revenue from Disney’s traditional TV networks declined 13% to $2.4 billion while operating income rose 2% to $0.8 billion. ESPN’s domestic revenue increased 5%, but higher programming costs pressured segment margins. Disney plans to launch an ESPN DTC product this year, allowing cable subscribers to access the streaming version without additional fees.
🍿 Content Sales rebound: Content sales and licensing swung to a $153 million operating profit from an $18 million loss last year, as Moana 2 and Mufasa: The Lion King continued to perform well in theaters and on streaming. Weaker releases like Snow White and Captain America: Brave New World weighed on box office results, tempering the overall rebound.
🔮 Updated guidance: Disney raised its FY25 adjusted EPS guidance to $5.75, up from $5.30, driven by streaming profitability and anticipated gains in entertainment and sports. Management forecasts double-digit operating income growth in these segments, alongside 6-8% gains in the Experiences division.
What to make of all this?
Disney’s Q2 showed solid execution across streaming and parks, with strategic expansions setting up the entertainment giant for future growth. However, macro headwinds, international park challenges, and rising content costs could weigh on profitability.
📉 Subscriber losses deepen: Comcast lost 199,000 broadband customers in Q1, surpassing the anticipated 146,000 losses, as competition from fiber and wireless intensified. Video customer losses also exceeded estimates, with 427,000 cancellations. Despite this, broadband revenue remained stable, driven by a 3.3% increase in ARPU.
📈 Peacock surges ahead: Peacock added 7 million subscribers, reaching 41 million, aided by a promotional deal with Charter Communications. Peacock’s revenue rose 16% to $1.2 billion, while operating losses narrowed to $215 million, outperforming expectations. However, Peacock’s subscriber gains may face headwinds as the promotional deal winds down.
🎥 Studios maintain momentum: Universal Studios delivered a 3% revenue increase to $2.8 billion, driven by strong performances from Wicked and Nosferatu. Yet, lower theatrical revenue and video game delays partially offset these gains, tempering the segment’s overall momentum.
🎢 Epic Universe gears up for launch: Theme parks revenue fell 5% to $1.9 billion, impacted by wildfire disruptions in Los Angeles and pre-opening expenses for Epic Universe, set to open on May 22, 2025. Management emphasized strong pre-bookings and long-term park growth as key levers for future profitability.
📺 Cable networks spinoff advances: Comcast plans to spin off its traditional cable TV networks by year-end, including MSNBC, CNBC, and USA Network. The move is intended to streamline operations and focus on broadband, streaming, and wireless. Management emphasized the importance of long-term content rights, including its recent NBA deal.
🔮 Updated guidance: Comcast doubled down on its broadband and wireless networks, rolling out a new five-year pricing guarantee to drive customer retention and fend off competition. Management anticipates continued challenges in broadband and video, but expressed confidence in growth opportunities for Peacock, theme parks, and wireless.
What to make of all this?
Comcast’s Q1 results were mixed. Peacock’s subscriber surge and studio gains were offset by broadband losses and ongoing video declines. With Epic Universe on the horizon and the cable spinoff underway, the focus now shifts to execution.
📈 Streaming expansion continues: Max and Discovery+ added 5 million subscribers in Q1, bringing the total to 122 million globally. Local language content, including local sports, has contributed to the 22 million subs added in the past year (albeit at a declining ARPU). Streaming revenue rose 8% to $2.7 billion, while adjusted operating income increased to $339 million, up from $86 million a year ago. CEO David Zaslav reiterated Warner’s target of $1.3 billion in streaming EBITDA for 2025 and 150 million subscribers by 2026.
🎥 Studio slump: Studio revenue dropped 18% to $2.3 billion, hurt by a weaker theatrical slate compared to last year’s hits like Dune: Part Two and Godzilla x Kong. Video game revenue fell 48%, as Warner released no major titles this quarter. Management is counting on upcoming releases like Minecraft Movie and Sinners to lift the studio’s performance in Q2.
📺 Linear TV struggles: Traditional TV revenue slid 7% to $4.8 billion, with ad sales down 12% amid declining viewership and lower international affiliate rates. Warner plans to restructure its linear TV division and may spin it off to focus on higher-margin streaming and content production.
💵 Debt reduction: Warner paid down $2.2 billion in debt, reducing its total debt load to $38 billion. Free cash flow was $302 million, down 23% Y/Y, as the company ramped up spending on content and international expansion. With global rollout plans in motion, Warner is prioritizing debt reduction while navigating higher costs.
🔮 Updated guidance: Warner reiterated plans to launch Max in key international markets like the UK, Germany, and Italy by early 2026. Password-sharing measures are set to roll out globally in late 2025, expected to drive incremental revenue growth.
What to make of all this?
Warner Bros. Discovery’s Q1 highlighted strong streaming momentum. Yet, steep declines in studio and linear TV revenue underscore structural challenges. With ambitious streaming targets and international expansion plans, Warner is focusing on content quality and cost controls to navigate a tough media landscape.
📈 Streaming growth continues: Paramount+ added 1.5 million subscribers in Q1, bringing the total to 79 million globally. Streaming revenue rose 9% to $2 billion, driven by a 16% jump in subscription revenue. Operating losses narrowed to $109 million, a significant improvement from the $286 million loss a year ago. Paramount reiterated plans to reach domestic streaming profitability by the end of 2025.
🎥 Film Division steadies: Filmed entertainment revenue increased 4% to $627 million, bolstered by carryover hits like Sonic the Hedgehog 3 and the Q1 release of Novocaine. However, theatrical revenue fell 3% Y/Y with tough comps. Management expects stronger results in Q2 as new releases gain traction.
📉 TV Media declines: Television media revenue dropped 13% to $4.5 billion, largely due to the absence of the Super Bowl broadcast that CBS carried last year. Ad revenue fell 21% but was flat excluding the Super Bowl impact. Affiliate and subscription revenue declined 9% amid lower linear TV rates.
🤝 Skydance merger on track: Paramount expects the Skydance Media merger to close in H1 2025, pending regulatory review by the FCC. CEO David Ellison is set to lead the merged entity, with Paramount eyeing cost synergies and expanded content production capabilities. Meanwhile, Paramount faces ongoing scrutiny from a $20 billion lawsuit filed by President Trump against CBS News.
💵 Restructuring pays off: Paramount swung to a $152 million net profit, driven by restructuring and cost controls. Free cash flow was $302 million, down 23% year-over-year, as spending increased on content and merger-related expenses.
What to make of all this?
Paramount’s Q1 demonstrated solid streaming growth and narrowing losses. However, linear TV remains a drag, and regulatory hurdles surrounding the Skydance merger could add uncertainty in the coming quarters. Management remains cautious about potential macro headwinds and the Trump lawsuit.
Disclosure: I own AAPL, AMZN, GOOG, NFLX, and ROKU in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-05-07 04:51:25
Welcome to the Premium edition of How They Make Money.
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After six decades, Warren Buffett—now 94—is retiring as CEO of Berkshire Hathaway at the end of the year.
His successor, Greg Abel, will inherit the world’s 8th largest publicly traded company: a $1+ trillion powerhouse built on trust, patience, and a track record like no other—more than 5,500,000% gains since 1964.
That means $1 invested in Berkshire became $55,000, excluding taxes, fees, or reinvested dividends. By comparison, $1 in the S&P 500 returned $391—still impressive, but a vivid reminder of what long-term outperformance can compound into.
Buffett taught generations how to invest—not just with capital, but with character. He proved you can win without rushing, without shouting, and without compromising your principles.
His time at the helm is ending.
But his blueprint endures.
Today at a glance:
🦎 Berkshire: Buffett’s Last Brushstroke
🕵️ Palantir: ‘Ravenous Whirlwind’
↗️ AMD: Steady Climb in AI Race
🏎️ Ferrari: Pricing Power on Display
💊 Hims & Hers: Post-Compounding Pivot
⚡️ Celsius: Alani Integration
🌊 DigitalOcean: Scaling AI Simplicity
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Buffett once called Berkshire his ‘painting’—a canvas expanded over decades, each investment a deliberate brushstroke. Berkshire enters its CEO transition with $348 billion in cash—a new record—and a portfolio still anchored by giants like Apple, Bank of America, and Coca-Cola. Operating earnings fell 14% this quarter as the broader economy softened, but Geico gained share and investment income rose 11%, thanks to rising Treasury yields.
Buffett stayed cautious. No buybacks for a third straight quarter. More stocks sold than bought. Commenting on recent events, his message was clear: long-term thinking matters more than market noise. Greg Abel now leads the next era. He isn’t trying to be Buffett—nor should he. His task is to preserve the culture, protect the compounding machine, and write the next great chapter with the same calm confidence that built it.
Palantir posted another quarter well above expectations with revenue up 39% Y/Y to $884 million ($22 million beat). US commercial sales surged 71%, reaching a $1 billion run rate, partially offset by a 5% decline in the rest of the world. Government revenue rose 45% Y/Y, accelerating again. Management raised full-year guidance across the board—now expecting revenue to grow 36% Y/Y to $3.9 billion ($147 million raise) and as much as $1.8 billion in free cash flow.
CEO Alex Karp called demand a “ravenous whirlwind,” citing record deal activity and accelerating AIP adoption. Total customer count rose 39% Y/Y to 769, and Palantir booked $810 million in US commercial contract value (+183%). Its Rule of 40 score rose to 83 (using adjusted operating margin), balancing strong growth with stepped-up investment in talent.
Still, with shares up nearly 5x in the past year, the bar was sky-high. The stock pulled back post-earnings as investors weighed valuation risk and tempered international growth. But Palantir’s momentum in US defense and enterprise AI remains undeniable.
AMD’s revenue jumped 36% Y/Y to $7.44 billion ($320 million beat), while adjusted EPS came in at $0.96 (a $0.03 beat). The Data Center segment led the charge again, growing 57% Y/Y to $3.7 billion, fueled by demand for MI300 AI accelerators and EPYC processors. However, growth decelerated from the triple-digit pace seen in prior quarters, reflecting the industry digestion and new export restrictions.
Client revenue surged 68% Y/Y to $2.3 billion as AMD continued to gain ground on Intel in PCs. Gaming revenue fell 30% to $647 million, weighed down by the maturing console cycle. Embedded sales dipped 3% Y/Y.
Revenue guidance for Q2 was solid at $7.4 billion (midpoint), $0.2 billion above consensus, though it includes an $800 million charge tied to tightened US export controls on China. Excluding this, adjusted gross margin is expected at 54%.
While AMD remains far behind NVIDIA in AI chips, it’s keeping pace and widening its product reach. CEO Lisa Su emphasized momentum in data center and AI, despite regulatory and macro headwinds. The race is long, and AMD is still very much in it.
2025-05-03 22:01:22
Welcome to the Saturday PRO edition of How They Make Money.
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📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
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📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
💻 Microsoft: Cloud Reaccelerates
📱Apple: iPhone Holds, China Fades
♾️ Meta: Scaling the AI Stack
💊 Eli Lilly: GLP-1 Boom, CVS Blow
💳 Mastercard: Cross-Border Resilience
🍟 McDonald's: Consumer Pressure
📲 Qualcomm: Tepid Outlook
🏝️ Booking: Travel Uncertainty
☕️ Starbucks: Turnaround Takes Time
🔬 KLA: AI Drives Momentum
🍪 Mondelez: Cocoa Pressure Builds
🛖 Airbnb: Next Chapter
☁️ Atlassian: Longer Deal Cycle
🏨 Hilton: Resilient Pipeline
🚗 GM: Tariffs Shake the Outlook
👾 Roblox: Bookings Rebound
🪶 Robinhood: Growth on All Fronts
🌮 YUM Brands: Taco Bell Shines
🔲 Block: Macro Pressure Mounts
🌭 Kraft Heinz: Demand Still Weak
🎤 Live Nation: Big Year Ahead
👽 Reddit: Ads and AI Power Growth
🛵 Grab: Profits Accelerate
🦉 Duolingo: Max Momentum
💬 Twilio: AI Drives Confidence
👻 Snap: Cloudy Outlook
🦷 Align: Innovation Lifts Outlook
📺 Roku: Streaming Acquisition
📊 Confluent: Cloud Growth Slows
📦 Etsy: Buyer Weakness Lingers
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Microsoft delivered a strong Q3 FY25 (March quarter), with revenue up 13% Y/Y to $70.1 billion (a $1.6 billion beat) and EPS rising 18% to $3.46 ($0.24 beat). Growth was broad-based—but Azure led the charge, surging 35% in constant currency, up from 31% in Q2. AI accounted for 16 points of Azure growth, accelerating from 13% in the prior quarter. Microsoft Cloud grew 20% Y/Y to $42.4 billion (a $0.2 billion beat). CapEx came in at $21.4 billion—slightly below last quarter—as expansion moderated after 10 new data centers launched.
What’s next? Microsoft guides for Q4 revenue of $73.2–74.3 billion (above consensus), with Azure expected to grow 34–35%. While CapEx will increase in FY26, the pace should slow. CEO Satya Nadella highlighted Microsoft's infrastructure scalability, record AI workloads, and enterprise traction across SQL, Teams, and Fabric. Despite macro uncertainty, Microsoft looks well-positioned to lead the AI platform race—powered by OpenAI integrations and resilient enterprise demand.
Apple’s Q2 FY25 (March quarter) revenue rose 5% Y/Y to $95.4 billion (a $840 million beat), with EPS up 8% to $1.65 ($0.03 beat). iPhone sales were up 2% at $46.8 billion, while Services jumped 12% to $26.7 billion—marking another quarter of double-digit growth. Mac ($8.0B) and iPad ($6.4B) both beat expectations, though Wearables fell 5% and missed. Gross margin slightly improved to 47%, boosting net income to $24.8 billion. Apple returned $29 billion to shareholders via buybacks and a 4% dividend hike.
The drag? China. Revenue in the region fell 2% to $16.0 billion, pressured by competition and geopolitical tension. Tariffs are expected to add $900 million in costs for the June quarter, accelerating Apple’s supply chain shift—most US-bound iPhones will soon be made in India, with other devices from Vietnam. Looking ahead, Apple guided for low- to mid-single-digit revenue growth next quarter as it gears up for major AI updates and a fall hardware refresh.
Meta posted a strong Q1 FY25, with revenue up 16% Y/Y to $42.3 billion ($950 million beat) and EPS surging 37% to $6.43 ($1.21 beat). Ad growth drove the beat, with a 10% rise in prices and 5% more impressions, despite tariffs and macro pressure.
User engagement remained high across the Family of Apps, with daily active users up 6% to 3.43 billion. Meta AI now has nearly 1 billion monthly users, while Threads has surpassed 350 million. Reality Labs losses persisted, but operating margin expanded to 41%, helping generate $10.3 billion in free cash flow.
The big pivot? AI infrastructure. Meta raised its full-year CapEx outlook to $64–72 billion (up from $60–65 billion previously), citing increased hardware costs and data center investments. Mark Zuckerberg unveiled a new standalone Meta AI app to compete more directly with ChatGPT, while outlining plans to embed AI across the company’s tools and platforms. Q2 revenue is expected at ~$44 billion (midpoint), above consensus. Despite trade war tension and regulatory noise, Meta appears to be winning investor confidence in its long-term AI strategy.
Eli Lilly posted Q1 revenue growth of 45% Y/Y to $12.7 billion (in line), driven by Mounjaro ($3.8B) and Zepbound ($2.3B). EPS of $3.34 missed by $0.12 due to a $1.6 billion acquired R&D charge, leading management to lower full-year non-GAAP EPS guidance to $20.78–22.28 (down from $22.50–24.00). Still, gross margin rose to 83.5%, and US GLP-1 sales remained the clear growth engine, despite flat Verzenio and mixed Zepbound sentiment tied to a label update for heart failure.
But sentiment took a hit. Shares dropped after CVS Caremark excluded Zepbound from its standard formulary in favor of Novo’s Wegovy, fueling access concerns despite Lilly’s reassurances. CEO Dave Ricks emphasized Lilly’s edge in efficacy, manufacturing, and oral delivery, spotlighting Orforglipron’s trial win. The company reaffirmed FY25 revenue guidance of $58–61 billion (+32% at midpoint), brushed off tariff risks, and called for policy incentives favoring pharma innovation. Despite volatility, the GLP-1 thesis remains intact, with data catalysts on the horizon.
2025-05-02 20:01:54
Welcome to the Free edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
Amazon delivered a solid Q1, but fell short of the breakout Azure momentum Microsoft revealed earlier this week.
During the call, CEO Andy Jassy used a baseball analogy to frame AI’s role in AWS:
“We're not even at the second strike of the first batter in the first inning. It is so early right now. […] Our AI business has a multibillion dollar annual revenue run rate, continues to grow triple-digit year-over-year percentages, and is still in its very early days.”
AI remains the pièce de résistance, with growth constrained only by infrastructure — something Amazon plans to address with $100 billion in FY25 CapEx, much of it going toward AI compute.
But there are other moving pieces: tariffs, currency headwinds, and Kuiper-related costs, as Amazon builds out its LEO satellite network to challenge Starlink.
Let’s break down the quarter and the key shifts in Amazon’s business.
Today at a glance:
Amazon Q1 FY25.
Recent developments.
Key quotes from the call.
Kuiper, Prime, and what’s ahead
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Income statement:
Revenue breakdown:
💻 Online stores (37% of overall revenue): Amazon.com +5% Y/Y.
🏪 Physical store (4%): Primarily Whole Foods Market +6% Y/Y.
🧾 3rd party (23%): Commissions, fulfillment, shipping +6% Y/Y.
📢 Advertising (8%): Ad services to sellers, Twitch +18% Y/Y.
📱 Subscription (9%): Amazon Prime, Audible +9% Y/Y.
☁️ AWS (19%): Compute, storage, database, & other +17% Y/Y.
Other (1%): Various offerings, small individually +4% Y/Y.
Revenue grew +9% Y/Y to $155.7 billion ($0.6 billion beat).
Excluding AWS:
North America grew +8% Y/Y to $92.9 billion.
International grew +5% Y/Y to $33.5 billion.
Gross margin was 51% (+1pp Y/Y).
Operating margin was 12% (+1pp Y/Y).
AWS: 39% margin (+2pp Y/Y).
North America: 6% margin (+1pp Y/Y).
International: 3% margin (+0pp Y/Y).
EPS $1.59 ($0.23 beat).
Cash flow (trailing 12 months or TTM):
Operating cash flow TTM was $114 billion (+15% Y/Y).
Free cash flow TTM was $26 billion (-48% Y/Y), driven by the operating cash flow growth, offset by an 80% rise in Capex to $88 billion.
Balance sheet:
Cash, cash equivalent, and marketable securities: $95 billion.
Long-term debt: $53 billion.
Q2 FY25 Guidance:
Revenue +7% to +11% Y/Y (~$0.4 billion beat).
Operating income $13 to $17.5 billion ($17.8 billion expected).
So, what to make of all this?
One-offs: The top line faced a $1.4 billion currency and a leap-year headwind. Excluding these, revenue grew 10% Y/Y. On the other hand, net income benefited from a boost from an unrealized gain tied to the revaluation of the investment in Anthropic.
Tariff clouds loom over Q2: Amazon beat expectations in Q1, but issued cautious guidance for Q2. Management flagged tariffs, trade policy, and recession fears — a shift from the previous call.
Pull-forward possible: CEO Andy Jassy noted “heightened buying” in some categories, suggesting some shoppers may be stocking up ahead of future price hikes. For now, prices haven’t materially changed, but third-party sellers remain exposed.
Third-party growth slowing: Revenue from third-party seller services grew just +6% Y/Y — its slowest pace in years — as sellers face higher costs and uncertainty. This has ripple effects on Amazon’s ad business, which remains strong (+18% Y/Y) but vulnerable to SMB budget cuts.
AWS growth was steady despite constraints: AWS revenue grew 17% Y/Y, slightly below projections. It underwhelmed relative to Microsoft Azure’s acceleration, raising questions about near-term momentum.
Margins under pressure: Q2 operating income guidance missed the Street’s consensus at the midpoint. Some Kuiper launch costs will hit the P&L (more on this in a minute), causing some variability. In addition, analysts worry Amazon may absorb some tariff-related costs to maintain its low-price advantage.
Capex and AI are still front and center: Amazon reiterated its $100 billion 2025 CapEx plan, focused heavily on AI infrastructure.
Tariffs are starting to bite. Since early April, hundreds of Amazon sellers have raised prices, with SmartScout estimating some categories up nearly 30%.
While Amazon says the impact is limited, the risk to its marketplace model—broad selection and low prices—is real.
Over 50% of Amazon sellers are based in China (Marketplace Pulse).
Many US-based sellers also source heavily from China.
Supply chain shifts to countries like Mexico and India could take years.
Higher costs could ripple into Prime, advertising, and fulfillment margins.
It’s less about Q1 and more about how tariffs could reshape Amazon’s e-commerce engine in the quarters ahead.
Some analysts warn that prolonged tariffs could thin product selection, raise prices, and pressure Amazon’s most profitable businesses.
🧨 Political Backlash: Amazon found itself in the political crosshairs this week after reports claimed it would display tariff costs at checkout. The idea, Amazon said, was only considered for Amazon Haul—its Temu competitor—not the main site. But that nuance was lost. The White House called the idea “a hostile and political act,” prompting a personal call from Trump to Jeff Bezos. Amazon quickly clarified the idea “was never approved.” The episode highlights how misinformation can escalate quickly, and how Amazon’s actions are now viewed through an increasingly partisan lens.
Total cloud infrastructure market spending grew by 23% Y/Y to $94 billion in Q1 2025, an acceleration from 22% Y/Y in Q4 2024. And it would have been even faster without 2 points of currency headwinds. GenAI remains a critical growth factor.
AWS had a commanding 29% market share, compared to 22% for Microsoft Azure and 12% for Google Cloud. Overall, Synergy Research Group estimated that AWS lost 1 point of market share to Azure. Some of the fastest-growing tier-two cloud infrastructure providers were CoreWeave, Oracle, Snowflake, Databricks, and Snowflake.
For context, in the March quarter:
Google Cloud grew 28% Y/Y (a slowdown from 30% Y/Y in Q4).
Microsoft Azure grew 33% Y/Y (an acceleration from 31% Y/Y in Q4).
AWS grew 17% Y/Y (a slowdown from 19% Y/Y in Q4).
As always, I wouldn’t read too much into Azure and Google Cloud’s growth rates relative to AWS, since they are all capacity-contained and have a different product mix.
What about margins? AWS continued to expand its operating margin. Management warned that margins could fluctuate as AI investments flow through the P&L. AI is a potential short-term headwind on margin, but management expects the AI margin to match that of the non-AI business over time.
While AWS’s operating margin improved by 2 percentage points to 39%, it was primarily due to an accounting adjustment (the useful life of servers was extended).
Amazon continues to build aggressively across all three layers of the AI stack — infrastructure, models, and applications.
Andy Jassy provided a few updates:
Amazon is scaling its AI infrastructure with a mix of custom silicon and NVIDIA chips:
Trainium 2, its second-gen AI chip, is rolling out at scale, delivering 30–40% better price performance than comparable GPU instances.
Demand is outpacing supply. Jassy confirmed AWS is adding capacity as fast as possible, but supply chain constraints (like motherboards) are still easing.
Project Rainier, an AI supercluster powered by Trainium 2 and built with Anthropic, is in the works.
Amazon sees reducing inference costs as a core mission to unlock mainstream AI adoption.
Amazon Bedrock — its LLM-as-a-Service platform — is expanding rapidly:
Recently added models include Claude 3.7 (Anthropic), Llama 4 (Meta), DeepSeek R1, and Mistral’s Pixtral Large.
Amazon’s own foundation model family, Nova, continues to evolve. The Nova Premier model launched this quarter, with customers like Slack, Coinbase, FanDuel, and Siemens.
Nova Sonic, Amazon’s new speech-to-speech model, offers low error rates and more human-like expression.
Amazon is also exploring action-oriented AI agents:
Nova Act is a new model trained to complete tasks in a web browser (search, checkout, upsells).
The goal is to raise multi-step task accuracy from 30% to 90% or higher, enabling complex AI workflows.
Amazon is integrating generative AI across its ecosystem:
Amazon Q: A full-stack assistant for developers now supports agentic coding workflows, multi-step refactoring, and automated code review in Git environments.
Alexa+: A major AI upgrade is rolling out. Now capable of taking multi-step actions (adjusting lights, temperature, music) — no longer just answering questions.
AI is now embedded across Amazon—from fulfillment and shopping to Prime Video and ads.
“We’re doing everything we can to keep prices low for customers in a way that makes economic sense. […] We have a better chance of some sellers deciding they’re going to capture share and not pass on all or any of those tariffs to customers.“
Jassy is confident Amazon’s scale, pricing power, and broad selection can help it gain share, just as it did during the pandemic.
“Amazon is not uniquely susceptible to tariffs. […] Retailers who aren't buying directly from China are typically buying from companies who themselves are buying from China, marking these items up […] The total tariff will be higher for these retailers than for China Direct Sellers.“
This is a critical distinction. Amazon’s marketplace model may insulate it better than competitors who rely more heavily on traditional wholesale and resale channels.
“As fast as we actually put the capacity in, it's being consumed. […] There is so much demand right now, but I do believe that the supply chain issues and the capacity issues will continue to get better as the year proceeds.”
With Amazon spending more on CapEx than any other Big Tech company in 2025, AWS may see relative upside in H2 as new capacity comes online.
Amazon’s $10 billion satellite broadband initiative is gaining altitude — but it’s not smooth sailing yet.
What’s happening:
Production delays: Only a few dozen Kuiper satellites had been built earlier this year, far from the 1,600 needed by mid-2026 to meet FCC deployment rules.
Manufacturing challenges: Complex designs, supplier issues, and in-house production slowed the ramp-up.
First launch success: This week, Amazon successfully launched 27 Kuiper satellites aboard a ULA Atlas V rocket — the first of 80+ launches needed to build out the 3,200-satellite constellation.
Why it matters:
Regulatory risk: Amazon must deploy half its constellation by July 2026 or risk losing its FCC license (though extensions are possible).
Political headwinds: Elon Musk, CEO of SpaceX, is advising the White House. Amazon, by contrast, has a rocky history with President Trump.
The bigger picture:
Starlink dominance: SpaceX already has 5+ million customers and 8,000+ satellites in orbit, with launches almost daily.
Reputation gap: Starlink’s recent cancellations in the UK and Canada—partly tied to Musk’s political affiliations—give Kuiper a potential opening.
Amazon’s path forward: The company says it’s still on track to begin service later this year, but the clock is ticking.
Advertising revenue reached $13.9 billion in Q1, representing:
27% of Google Search advertising revenue (+2pp Y/Y).
33% of Meta's advertising revenue (+0pp Y/Y).
156% of YouTube ads revenue (+10pp Y/Y).
In 2024, Amazon shifted all Prime Video users to its ad-supported tier, unless they pay $2.99/month to remove ads.
Prime Video captured 3.5% of U.S. TV time in March 2025 (Nielsen), nearly half of Netflix’s share, and up 0.7pp Y/Y.
US Prime memberships grew 9% Y/Y to 196 million (CIRP), giving Amazon unmatched distribution compared to Netflix’s 90 million US subs.
While most join for shipping perks, engagement with Prime Video is clearly rising.
New Antenna data shows the power of Amazon Channels:
In Q4 2024, after adding Apple TV+, Amazon Channels drove 1.5 million new sign-ups, accounting for 25% of all Apple TV+ sign-ups by December.
73% were brand-new to Apple TV+, vs. just 48% for Apple’s own iTunes sign-ups.
Notably, this was not a churn recapture story — of 2.8 million Apple TV+ cancellations via iTunes, only 47,000 resubscribed through Channels.
The takeaway: Third-party distribution is not just a retention tool — it’s a growth engine. In a crowded streaming market, distribution is the moat. And Amazon owns the rails.
Disclosure: I am long AMZN, GOOG, META, NET, and SNOW in the App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-05-01 07:59:38
Welcome to the Premium edition of How They Make Money.
🔥 The April report is here!
All the key earnings visuals from the past month in one report.
✔️ Cut through the noise with clear, concise financial snapshots.
✔️ See revenue trends, profit margins, and key takeaways instantly.
Download the full report below or log in to your account.
Here’s a sneak peek. 👀
💬 Social: Meta, Snap.
🏝️ Travel: Booking, Hilton.
🚗 Automotive: Tesla, GM.
📦 E-commerce: Chewy, Etsy.
☁️ Big Tech: Google, Microsoft.
💳 Payments: Amex, Fiserv, Visa.
🍿 Entertainment: Netflix, Spotify.
💊 Biopharma: AbbVie, Merck, Pfizer.
🛩️ Defense: Boeing, Lockheed Martin.
✈️ Airlines: American, Delta, Southwest, United.
🏥 Healthcare: UnitedHealth, J&J, Intuitive, Align.
📞 Telecom: AT&T, Comcast, Verizon, T-Mobile US.
⚙️ Semis: ASML, Cadence, Intel, KLA, Lam, TSMC, TXN.
💻 Software: Appfolio, Confluent, IBM, SAP, ServiceNow.
🌮 Franchises: Chipotle, Domino’s, YUM Brands, Starbucks.
🏦 Banks: JPMorgan, BofA, Wells Fargo, Citigroup, Schwab, SoFi.
🥤 Food & Beverage: Coca-Cola, Constellation, Kraft, Mondelez, Pepsi.
💰 Investment: Morgan Stanley, Goldman Sachs, BlackRock, Robinhood.
And more, like P&G, GE Vernova, UPS, P&G, Lululemon, Tilray, Adidas…
2025-04-30 05:09:44
Welcome to the Premium edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
🗓️ Earnings season is heating up!
With the busiest week on deck, let’s cruise through some early reports. It'll make the coming wave easier to ride.
You’re welcome.
Stay tuned: Apple, Microsoft, Amazon, and Meta are coming later this week.
Today at a glance:
💳 Visa: Resilient Spending
🥤 Coca-Cola: Manageable Tariffs
💉 Pfizer: Cost Cuts Continue
🎧 Spotify: Price Hikes Pay Off
📦 UPS: 20,000 Job Cuts
💡 Cadence: AI-Driven Growth
📱 PayPal: Profitable Momentum
👟 Adidas: Tariff Impact Ahead
🍕 Domino’s: Delivery Push
🏦 SoFi: Fee-Based Flywheel
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Visa’s Q2 FY25 (March quarter) delivered revenue growth of 9% Y/Y to $9.6 billion ($50 million beat) and non-GAAP EPS of $2.76 ($0.08 beat), driven by resilient consumer spending. Visa’s global network expanded 7% Y/Y to 4.8 billion cards. Cross-border volume rose 13%, processed transactions increased 9%, and total payment volume grew 8% to $3.94 trillion. The company authorized a new $30 billion share repurchase program.
Despite macro uncertainty and a slowdown from Q1 holiday peaks, Visa reaffirmed its FY25 outlook: low double-digit revenue growth and low-teens EPS growth. CEO Ryan McInerney emphasized strength across all segments and noted that US spending rebounded in March and April. Strong international volume trends and a growing services business keep Visa well-positioned for durable growth amid economic noise.
Coca-Cola’s Q1 revenue declined 2% Y/Y to $11.1 billion (in line) due to currency headwinds and bottler refranchising, but organic revenue grew 6%, with unit case volume up 2%. Adjusted EPS came in at $0.73 ($0.01 beat), helped by strong organic growth in Latin America, EMEA, and Asia Pacific, while Coca-Cola Zero Sugar surged 14%. Pricing remained positive (+5%), though at a slower pace than last year, and comparable operating margin expanded on cost control and refranchising benefits.
Management reiterated 2025 guidance for 5%-6% organic revenue growth and 2%-3% EPS growth, despite warning of 2%-3% currency headwinds and modest structural drags. Tariff risks were flagged but described as "manageable," helped by Coca-Cola’s largely local production model. With steady global momentum and best-in-class market positioning, Coca-Cola continues to outperform consumer staples peers like PepsiCo and Keurig Dr Pepper, even amid shifting consumer dynamics and macro pressures.
Pfizer’s Q1 revenue fell 8% Y/Y to $13.7 billion ($370 million miss), while adjusted EPS rose to $0.92 ($0.24 beat), driven by disciplined cost control. COVID-19 products remained a drag, with Paxlovid sales falling 76% Y/Y, below expectations, but Comirnaty surged 62% Y/Y and modestly beat estimates. The company maintained its 2025 guidance of $61–$64 billion in revenue and $2.80–$3.00 in adjusted EPS, though it warned that future tariff impacts are not yet reflected. Management now expects total cost savings of $7.7 billion by 2027, fueled by additional automation, AI, and process streamlining.
With its obesity pill program discontinued due to safety concerns, Pfizer is actively exploring acquisitions to rebuild its cardiometabolic pipeline. The company faces significant long-term pressures from patent expirations, regulatory risks tied to potential drug pricing reforms, and cooling investor sentiment. While cost cuts and pipeline investments aim to stabilize the business, Wall Street remains skeptical about Pfizer’s ability to replace its fading COVID-era windfall with new blockbuster products.