TMTB: Morning Wrap
Good morning. QQQs +20bps as we got some positive news flow on China/U.S. although still sounds like overtures at this point:
China Says It’s Assessing US Talks, Hinting at Possible Thaw
Bloomberg:
China said it is assessing the possibility of trade talks with the US, the first sign since Donald Trump hiked tariffs last month that negotiations could begin between the two sides. China’s Commerce Ministry said in a Friday statement that it had noted senior US officials repeatedly expressing their willingness to talk to Beijing about tariffs, and urged officials in Washington to show “sincerity” toward China.
“The US has recently sent messages to China through relevant parties, hoping to start talks with China,” the ministry added.
Sounds like more of what we have already heard to me…China +2.5%
QQQs are now +20% from the lows - that was quick! All eyes on NFP at 8:30am.
TTWO delaying GTA VI release to May ‘26 from ‘25 - was dead wrong on this one - didn’t think would get delayed this early…still we’re buyers of the dip in low 200s. Pain will be real today but doesn’t change our view on GTA VI and our plan was to add on a delay so here it is….Arguably good for RBLX/EA as was biggest risk for engagement/DAUs in the fall…
Let’s get to it…Earnings comprising most of the reap early this morning. Let’s get to it…
EARNINGS
AMZN -1%: Solid Q1 / Q2 Rev guide above. 17% AWS missed raised 18% bogey post-Azure, but 20% backlog growth
Bottom line: Solid results — buyside numbers don’t move much, AWS is capacity constrained which should ease in the next few months driving likely accel (backlog +20%), no big impact on consumer demand/tariffs yet (AMZN did a lot of inventory pre-buying in Q1). However, uncertainty remains around tariff impact past the June Q, NA retail margins were down 170bps q/q, and AWS missed expectations. Near-term, stock a do nothing for me given tariff uncertainty although we’re feeling better about finally being closer to the elusive AWS accel and the China Tariff news from last night should help px action today, but we find ourselves asking: Why not just own more MSFT with no tariff uncertainty and Azure accel certainty?
Q2 EBIT guide of $13.5B - $17.5B roughly in line with bogeys of $17.5B at the HE roughly in line with expectations
Q2 Rev Guide $159 - $164B above bogeys of $162 at the HE
AWS margin 39.5%, record and up 260bps q/q
NA Retail Margin worse at 6.3% down from 8% last q and 3% internationally, flat vs. last q
Advertising revenues grew 19% year-over-year cc, 1 ppt accel from Q4
Key quotes
AWS Demand:
…we could be helping more customers and driving more revenue for the business if we had more capacity. We have a lot more Trainium 2 instances and the next generation of NVDA’s instances landing in the coming months…We grew 17%…And as I said, I think we could be doing more if we had more capacity. And I expect that -- the capacity to ease in the coming months.
Tariffs:
We do have tariffs that we'll be paying on retail purchases based on current tariffs. It's not large in Q2. We had done a lot of pre-buying of inventory in Q1, as I mentioned earlier.
On consumer demand:
We haven't seen any attenuation of demand yet. To some extent, we've seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact…we saw actually some strength in April based on what could end up being some pre-buys of a number of things, and advertising has been strong.
On pricing:
We also have not seen the average selling price of retail items appreciably go up yet…some of this reflects some forward buying we did in our first-party selling, and some of that reflects some advanced inbounding our third-party sellers have done, but a fair amount of this is that most sellers just haven’t changed pricing yet… We've done some forward buys of inventory where we're the first party seller, our third party sellers have pulled forward a number of items so that they have inventory here as well.
AI:
And I would tell you that our AI business right now is a multibillion-dollar annual run rate business that's growing triple-digit percentages year-over-year …Before this generation of AI, we thought AWS had the chance to ultimately be a multi-hundred billion dollar revenue run rate business. We now think it could be even larger….If you believe your mission is to make customers' lives easier and better every day, and you believe that every customer experience will be reinvented with AI, you're going to invest very aggressively in AI, and that's what we're doing
RDDT +7.5%: Strong results but commentary around GOOGL algo and slower DAU growth takes shine of the beat
Much better than feared results and stock was +18% at one point but sold off on the following quote:
And we do expect some bumps along the way from Google, because we've already seen a few this year. This is expected in any year, but given that the search ecosystem is under heavy construction, the near+term could be more bumpy than usual... There's no doubt LLMs will evolve search on the internet…To give you an early read on Q2, through the month of April, we're seeing total DAUs growing in the high-teens range year-over-year…expect some bumps and expect us to continue to improve the product and lay the foundation for more consistency in the back half of the year
I will acknowledge there's a lot of uncertainty in the market, but so far it's mostly business as usual.
Street is modeling DAUs of 23% in Q2 so “high teens” worse than expected. In fact, 18% Global DAU growth implies 0% U.S. DAU growth and US DAUs dn 5M q/q, a massive decel from 21% y/y growth in Q1 (granted its on 13 ppts tougher comp and comps get easier after)
To hit their rev guide, high teens DAU implies that ARPU would have to grow 28% y/y, an accel up from 23%, which doesn’t sound completely unreasonable, but leaves little room for upside like we’ve seen in previous quarters, especially given advertising headwinds.
This will fan fears that were raised last q which caused stock to sell off from $200 to $100. We think these issues are more structural than actually fixable as the nature of search/internet is evolving to more users sourcing their answers from AI instead websites. We think these headwinds will carry over to international at some point and we felt mgmt sounded a bit flummoxed when answering questions around it.
The guide was much better than expected which makes it tough to foot with the quote that “near-term could be more bumpy than usual.” RDDT will continue to lap tougher comps over the next 3 quarters where they were benefitting from tailwinds from the GOOGL ramp.
Bulls will say RDDT has navigated GOOGL algo changes before, no signs of advertising weakness yet, U.S. ARPU accelerated to 31% on a 10 ppts tougher comp (street models 12 ppts decel on 8 ppts easier comp next q), point to accelerating international growth to 82% (now 20% of revs and accelerated 5 straight quarters), and continue to point to early evolution in ramping ads and CPMs with plenty of upside.
Bears will say DAU growth is tracking to down and US DAUs aren’t growing any longer putting a cap on how big this platform can be, GOOGL algo creates volatility and shift to AI searches makes RDDT an AI loser, comps get tougher, ad environment remains very uncertain, ad dollars shift to large platforms like META/GOOGL in times of uncertainty, and stock not cheap at 35x next year P/E.
I think bears have it here near-term — stock is +50% from the bottom on April 7th and we think should give back some of those gains in the near-term. This has potential of being a structural (AI searches slowing DAU growth) and cyclical (advertising headwinds) short. However, stock was heavily shorted and positioning leaned short going into the print. Mgmt continues to execute well and MT story around ARPU/Int’l growth is a good one while results helped alleviate some fears, which why stock still up right now. Still, we think stock will remain a funding short going forward…
Bernstein analyst Mark Shmulik upgraded Reddit to Market Perform from Underperform with a price target of $130, up from $110, following the Q1 report. The firm cites the company's "strong execution" for the upgrade. "In an unnerved market, Reddit is quietly going about their business, too small to be heavily exposed to macro swings while broadening out their advertiser base," the analyst tells investors in a research note. Bernstein believes Reddit can execute its way into sustained positive growth.
After SNAP, ROKU, and RDDT, hard not to feel relatively more comfortable with META as the safest ad play.
1Q Revs beat at $392.4M vs cons $369.3M (bogeys only had a $20M beat)
Q1 EBTIDA $115.3M vs street $89M.
Q1 DAUS ahead at 108.1M vs street 107.2M, in line with bogeys
Q1 ARPU of $3.63 vs street $3.44
Q1 Guide:
Revs $410-$430M vs cons $390.74M, well above bogeys of in line with street.
Q2 EBITDA to $110-$130M vs cons $103.2M
AAPL -4%: Q1 roughly in line with expectations although China missed.
Bottom Line: results won’t change bulls or bears minds. Outlook and impact on tariffs/court ruling past June Q remains uncertain, likely putting cap on stock.
Q3 guided to “low to mid single digits” inline with expects and GM 45.5% = 46.5% which included $900M in tariff related cost.
Cook said they are now sourcing half of iPhones for the US from India. China was dn 2% y/y but Cook said Chian sales are accelerating on quarterly basis (up from -12% in Dec) and would have been flat y/y
…in terms of the pull forward in demand, if you look at the March quarter, we don't believe that we saw obvious evidence of a significant pull forward in demand in the March quarter due to tariffs.”
Given the Epic court ruling yesterday, they refused to give more clarity around services growth;
With respect to services, given the uncertainty we see from several factors, we aren't providing the category level of color today.
Jefferies downgraded Apple from Hold to Underperform while slightly raising their price target to $170.62 (from $167.88). While Apple's March quarter performance met expectations and management indicated limited demand pull-forward into fiscal Q2, Jefferies is concerned about their modest revenue growth guidance (low-to-mid single digits) and projected $900M tariff impact next quarter. The firm believes tariff impacts on components from China will expand over time, creating further earnings pressure despite adequate U.S. demand for the June quarter. Product gross margins, already under pressure, are expected to face additional headwinds as these tariff effects compound.
Rosenblatt downgraded Apple from Buy to Neutral while reducing their price target to $217 (from $223).. While acknowledging Apple's "amazing supply chain skill" and better-than-feared iPhone demand in the quarter, Rosenblatt's primary concern centers on the lack of AI-driven growth acceleration for iPhones. The firm argues that the thesis for AI-powered sales improvement "seems to be fading" over time, leaving Apple as merely a "well-run company with OK-muted growth." Rosenblatt suggests Apple needs an exciting new product to reinvigorate growth and expresses concern about the stock's premium multiple "in a choppy tariff and regulatory environment."
TEAM -16%: Skinnier Cloud beat than normal at 25.2% vs guide of 23.5% (previous beats had been closer to 4% and expects were for a 3% beat). Q3 Cloud guide of 23% vs bogeys closer to 24-24.5% (street at 22.8%).
Cloud rev decel’d 450bps on a 4% tougher comp. DC and Marketplace also missed - mgmt cited change in pricing strategy in the q to offer only 1 year license terms, saying change in rev recognition dynamics hiding actual strength in customer demand
OPM beat was also 200bps lower than previous q’s.
Why the big negative reaction? No one is arguing whether stock should be down given smaller cloud beat and lower guide, but magnitude being debated. Stock was crowded and sentiment/expectations had crept up post NOW/SAP beats and beat was much smaller than expected while guide implies decel. On a stock trading at 10x+ revs, not surprising to see it down 10%+.
Bears will focus on deceleration and mix pressure. The revenue beat narrowed to just half a percent while billings grew a modest 2 %, and guidance implies only high‑teens growth—short of 20% —raising doubts about the durability of Cloud seat expansion. Limiting multi‑year Data Center deals plus offering Rovo for free dampen near‑term revenue and gross margins, and as more customers shift to Cloud, higher‑margin license revenue is cannibalized. Bears will also say customer‑add momentum is slowing in the SMB segment, and up‑market wins face intensified competition from MSFT and NOW. Why buy a sw stock missing with smaller beats and decel’ing revs trading at 65x P/e and 11x revs?
Bulls wills argue TEAM’s long‑run story is intact: the migration of large Data Center customers to Cloud is only beginning, and management still expects this wave to tack on mid‑ to high‑single‑digit incremental growth as it peaks in FY26‑27, helping sustain a 20 %‑plus revenue CAGR. Cloud revs dcel’d 400bps but it was on a 400bps tougher comps and comps flatten out going fwd, then get easier in Q2’26. Operating‑margin leverage remains powerful because the product‑led‑growth model keeps sales costs low; margins have already climbed past 25 %, and bulls see free‑cash‑flow margins moving toward 30 %, justifying a multiple catch‑up to faster‑growing SaaS peers. Bulls will also point to new catalysts—Rovo AI, Collections bundles, government‑cloud SKUs—that expand the addressable market and deepen enterprise penetration, which now makes up about 40 % of revenue.
Bottom Line: While we like the AI product story + margin expansion story here and think some pricing changes are masking better demand + think cloud can continue to row in mid 20s, we think bears raise some good pts and stock will need some digestion in the near-term
ABNB -5%: Misses Nights and calls out weakness in U.S.
Q1 Nights 8% vs bogeys of 8.5% as GB 9% fell below 10% for the first time in 4 years.
Q2 Nighs guided to moderate relative to Q1
FY25 EBITDA margin of at least 34.5% reiterated.
During April, we saw strong demand for Easter travel from Latin America–which remains our fastest growing region. Whereas in the U.S., we’ve seen relatively softer results, which we believe has been largely driven by broader economic uncertainties.
Negative read for EXPE given US weakness.
ABNB is leaning more into traditional hotel accommodations via its Hotel Tonight asset and Experiences is set to relaunch on May 13th.
Bottom Line: Positioning skewed short going into the print and the weaker Nights growth and commentary will do nothing to change that. Bears will say why own ABNB at 25x P/E growing nights sub 8% when you can own BKNG who grew faster, trades at 20x, a best in class mgmt team, and has less US exposure. Or why not EXPE at 9x which is growing similar to ABNB. Bulls will point to experiences launch and say adjacencies should drive growth going forward while pointing to 40%+ FCF margins and continued margin expansion despite expansion/slower growth.
Wedbush analyst Scott Devitt downgraded Airbnb to Neutral from Outperform with a price target of $135, down from $150. Airbnb reported "healthy" Q1 results, but the company's Q2 outlook was below expectations, notes the analyst, who also says forward guidance was "disappointing relative to expectations" and that management commentary suggests emerging evidence of a slowdown in U.S. travel.
CART +6%: Solid print down the middle with Q1 GTV, maybe a bit shy of bogeys but at high end of guide. Q2 GTV outlook 8-10% inline with expectations.
Faster order growth of 14% was offset by 2% AOV contraction. Order growth is being helped by Uber Eats partnership and CART’s reduction in the free delivery threshold to $10
On the macro mgmt. noted “In terms of recent trends, we look at a lot of data across our business. And even though macro uncertainty remains, we have not seen any unexpected changes in consumer behavior through April.” although they highlighted caution among CPG advertisers.
TWLO +9%: Solid Q1 with 3% beat and accelerating revenue growth
Y/Y Rev accelerated to 12% vs 11% in Q4.
Communications‑cloud growth re‑accelerated to 13 %
Total NRR 107%, up 1% q/q
Management sees Q2 revenue of $1.18‑1.19 billion (≈9‑10 % YoY, a touch above consensus) and operating income of $195‑205 million. For 2025 they lifted the topline range by $22 million to $4.79‑4.84 billion (7.5‑8.5 % growth) while maintaining their 17.7‑18.1 % operating‑margin target, effectively baking only half of the Q1 upside into the year and implying a conservative ~6 % growth exit rate for 2H 25. Comps do get harder beginning in Sept with Q2→ Q3 comp going from 4% to 10% which likely means big decel in single digit growth.
Bulls will say (1) momentum is now three straight quarters of double‑digit revenue growth with improving expansion rates, suggesting the core CPaaS engine is back on a sustainable 10 %+ trajectory; (2) disciplined cost control and mix shift toward software are driving rapid operating‑margin expansion and a path to 20 %‑plus FCF margins, which could justify multiple re‑rating toward mid‑growth SaaS peers; and (3) new demand vectors—AI‑driven voice use cases, self‑serve onboarding, and fraud‑prevention workloads—provide incremental growth that is relatively macro‑resilient while guidance still carries visible conservatism.
Bear will say that comps get harder in Q3 and headline growth masks underlying deceleration: management’s own outlook implies mid‑single‑digit run‑rate growth by year‑end, and consumption billing leaves the model exposed if macro usage softens. Gross margin pressure persists from a heavier international‑messaging mix, and the Segment CDP unit remains flat with churn, undermining the “platform” narrative. Competitive intensity—from carrier price hikes to hyperscaler messaging APIs—could cap pricing power, while the stock already trades north of 20× ’25 EPS
Our view: While growth accel’d and multiple has come in significant with stock only trading <3x revs, hard to get excited given growth decel on the horizon unless we see some new demand vectors begin to contribute more to top line.
DUOL +9%: +38% bookings + top line growth (vs mid 30s expected), MAUs +14M and accelerating 100pbs while DAU growth of 49% was largest net adds ever. Q2 Revs, bookings ebitda above street and FY25 adjusted higher
Stock continues to be a long only darling given tariff/China safe haven, AI tailwinds (product expansion, Max Tier subscription tailwinds/video calls etc.), and upside to monetization as $7 per MAU significantly trails mobile peers (5x below RBLX and SPOT) while margins have plenty of runway for upside.
RESEARCH/NEWS/3p
Third party data roundup:
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