TMTB Morning Wrap
Good morning. QQQs +1.6% and Semis +4% finally catching a bid helped by reports of better July OpenAI ARR (CFO Frirar said ARR in July exceeded entire Q2) and some good ROI talk on spend from Satya and co. at MSFT along with a hefty Azure accel #. Software flat while internet -1% is being weighed down by META -9%
Asia mainly red overnight: TPX -0.54%, NKY +0.71%, Hang Seng +0.2%, HSCEI +0.25%, SHCOMP -0.62%, Shenzhen -2.46%, Taiwan TAIEX -0.26%, Korea KOSPI -1.23%. Samsung flat after better #s overnight. SK Hynix -3%
We sent out our recap of MSFT earnings earlier this morning here in case you missed it. We’ll cover META, ARM, LRCX, and QCOM and then onto the usual. Still working our way to CVNA, EQIX, Sammy, and FTNT and we’ll post those Recaps/Bull vs. Bear Debates in the #earnings channel on Slack in a bit.
Let’s get to it…
META -9%: Disappointing quarter with top line shy of what buyside was hoping for and modest opex increase another negative (vs expects for reit or slight downtick). Zuck with a mediocre call performance and bulls didn’t get a definitive compute-rental launch or other scaled non-ad AI monetization proof point.
Sentiment/positioning had shifted positive following the AI compute and new model announcements early in the month so the mediocre top line print & opex raise along with a so-so call performance not going to do it here. Capex raise was limited to ~2% at the midpoint with the high end unchanged (AI semis bulls wanted a bigger raise of $145B at the midpoint). Mgmt refused to give a 2027 framework while saying plans are designed to maximize 2026-27 capacity and preserve the ability to continue growing compute in 2028 and beyond. Op inc missed but backing out one time fine and severance costs ($3.6B total), actually in line-ish and they reit FY26 op inc.
Overall, we think r/r still skews up (as it has for a while), but we thought the print was going to be better and was hoping Zuck and co would sound more enthused and give more detail about some of the key items bulls wanted to hear about (capacity leasing, model improvements, etc). Our sense is buyside numbers going down slightly but still in the $35-$36 range for CY27 (not including any compute rental related revs). At $530, stock is trading at 15x so downside here appears limited (we’ll stick with the stock in our LT book) and bulls will say it can’t get worse than this, but very near-term stock like stays in chop until we hear more detail around compute leasing or better model release.