Closing Bell - Closing Bell Overtime: Google Cloud CEO Thomas Kurian On AI, Competition; Former Amazon Studios’ Matthew Ball On Streaming Landscape 5/10/23

Episode Date: May 10, 2023

Averages closed near session highs with S&P 500 and Nasdaq in the green and Dow slightly negative. Axonic’s Peter Cecchini and Vital Knowledge’s Adam Crisafulli talk the market action and react to a raft of earnings including Robinhood, Unity Software and Beyond Meat. Dow component Disney fell after reporting earnings. Wolfe Research’s Peter Supino broke down the negative investor reaction while former Amazon Studios head Matthew Ball talked long-term streaming strategy. Fresh from the stage at Google I/O conference, Google Cloud CEO Thomas Kurian talked the new AI tools GCP is offering and the intense cloud competition among big tech giants. Plus, Twilio CEO Jeff Lawson after his stock tumbled following weak guidance.

Welcome to Closing Bell Overtime. I am John Ford. Morgan Brennan is off today and we are kicking off another jam-packed hour of earnings with Disney, the headliner, due out with results in just moments. We're also going to get numbers from Robinhood, Beyond Meat, Cheesecake Factory, and Unity Software. Plus, a big interview you will not want to miss. We will speak with Google Cloud CEO Thomas Kurian about today's announcements from the Google I.O. Conference. Alphabet jumping about 4% on that news and a lot of AI moving into that cloud division under Kurian. As we wait for the earnings numbers to cross, let's get into today's market action. Joining us now are Adam Christofoli from Vital Knowledge and Peter Cicchini from Axonic. Welcome, guys. Peter, we got that CPI number, but it's kind of like as expected. Does this actually inform us what the Fed is likely to do next? Do we are we more likely to think pause or do we just have to move on

to the next number? Does PPI take on significance that it usually doesn't? Yeah, interestingly enough, that was my thought, John. I think PPI will have a little bit more significance. And in fact, from a predictive standpoint, PPI has actually been a nice lead on CPI and actually helped us to understand that we were going to get hot CPI readings. So I think PPI is going to be an important look on really the heels of the CPI number that was ho-hum and really gave us nothing incremental. What we've been focused on is the survey data from everything from Michigan to regional PMIs, ISM. It's been showing a growth slowdown accompanied by a little bit hotter than expected inflation. So it's going to be interesting to see if CPI catches back up to that.

It obviously hasn't yet. Pretty much an inline number. Don't think CPI standing alone really affects the Fed in any meaningful way. Okay. And, Adam, we're going to get a nice bit of detail from Disney earnings in that we get to see how the writer's strike is going to potentially affect a large company that, at the same time, has a pretty nice library to draw from. Also, it is exposed to the ad market, which has been struggling a bit, but also has this parks business exposed to travel, which had been relatively strong,

but is flagging in the macro sense. We don't know how it's doing for Disney. So, Adam, what do we listen for in Disney? And what's your take on how we factor CPI into where the market goes from here? Yeah, so on Disney, quickly, I think if you kind of go back to the recent Warner Brothers and Paramount reports, there was quite a discrepancy between the two of them. And I think on Warner Brothers, they actually achieved profitability in their streaming business for the first time ahead of schedule and markets rewarded that stock. And Paramount was the opposite where they had a huge loss in streaming. They had to cut the dividend. And so I think for Disney,

investors will be watching to see what the progress is on not just profitability within streaming, but in general, Iger is in the process of enacting a pretty aggressive restructuring cost cutting plan. So investors will be listening very closely to see if that is on track. On the parks, the parks are super important because that's really underwriting a lot of the big changes that are happening on the media front. The parks have been on fire, like you said. All signs, Airbnb's guidance was a little bit underwhelming, but everyone else in the travel leisure space has been quite bullish on demand in that industry.

And I suspect Disney's seen, you know, a lot of the same conditions on the ground as far as demand is concerned. For the CPI, I think it probably helps to reinforce the message the Fed sent last Wednesday, which was that they're very likely done hiking. And now I think the question is the market's pricing in some pretty aggressive rate cuts in the second half of this year. And I think the issue now is watching to see how data comes in in the coming months to see if it either reinforces that view or causes it to reprice in a hog structure. I think the market is probably a little bit too aggressive in pricing in second half rate cuts. But I definitely think the Fed is done hiking. And now, again, it's kind of watching to see the disinflationary process unfold. So, Peter, for the investors out there who

maybe did the right thing and have some dry powder on the sidelines, you've been waiting. If you've been waiting for the major indices to fall, I mean, the S&P is still stuck in this range. Do you keep waiting? Do you put that into fixed income? How do you think about the opportunities that the rest of the year might bring? Interesting, John, you know, a technical analyst I respect has referenced this as a technical torture chamber when it comes to large cap equities. And as we've discussed on the show before, you know, it's the S&P's performance really belies much weaker performance in equities for the rest of the market. When you look at the New York Stock Exchange breadth, some 40 percent of companies are below their 200-day moving average. And for the S&P, it's something like 50 percent. So the underlying internals of the equity market are not all that great. the risk-adjusted returns in owning equities now relative to a lot of areas of fixed-time,

and especially in structured credit where we reside, a 1% to 2% earnings risk premium doesn't make an awful lot of sense to me when we see a yield curve that's been an inversion, or let's call it a year. I'm looking at twos to tens. It went in, an inversion came out, and then went back. Peter, I've got to interrupt you. I've got to interrupt you because Disney earnings are out. Let's get to Julia Borsten with the numbers. Julia. John, Disney reporting earnings right in line with expectations.

Adjusted earnings of $0.93 per share. Revenues of $21.82 billion were just a hair above expectations. The company's loss in its direct-to-consumer division was much better than anticipated, a loss of $659 million versus the $841 million consensus estimate loss. And notably, that is a big drop from the more than $1 billion that that division lost in the prior quarter. Now, Disney Plus subscribers did miss estimates. The total number actually declined from $162 million in the prior quarter to $157.8 million. That's compared to the gain expected to $163 million. And overall, average revenue per user for Disney Plus and ESPN both falling short of expectations.

But digging into these ARPU numbers, average revenue per user, the core Disney Plus subscribers in the U.S. and Canada actually paid 20 percent more. That's thanks to those price hikes that were rolled out in prior quarters. Those hot star subs, those are the subscribers that are based in India, saw their average revenue per user actually decline. And that's what's weighing on those overall numbers. Disney's parks division continues to outperform with both revenues and income topping expectations. And that parks experiences and products division continues to be the company's fastest growing with revenue growing 23 percent in the quarter. Now, the call starts 4430 p.m. Eastern. We'll be listening for

commentary from CEO Bob Iger and we will be back with more. John, Julia, I got to ask about price sensitivity in streaming, because in a sense, we've seen it from Netflix with the consumer response in some regions to clamping down on password sharing. Now, perhaps we're seeing it from Disney with this sub number lower as they hike prices. What's the lesson there yet, if anything, that Disney is rightly prioritizing costs and not just going to spend to grow? Yeah. Prioritizing profits. It's interesting. It's right here on page six revenue per user numbers is that Disney hot star business, we saw a 20% decline in the average revenue per user there. So it seems like the company's really focusing in on having profitable growth, profitable subscribers.

That's why they rolled out those price hikes. And I think we're also seeing the impact of the fact that they're losing less on that streaming division than they had been and also than they were expected to. And I think that's being reflected in those bottom line numbers. But I think we're going to hear more about this focus on profitability, on sort of not growth at all costs, but growth with profitable growth. So I think that's going to be a big focus of the call that's coming up shortly, John. OK, we'll watch that. That stock down about two and a half percent, at least at the moment. We also have Robinhood earnings out. That's headed higher. Christina Parts and Nebulas has the numbers. Christina. Well, online broker Robinhood hasn't posted a profit since going

public in July 2021. Its Q1 results are no different. The company posting a loss per share of 57 cents on revenues of 441 million. So revenue was a beat, but we're not going to compare for EPS. So that could be the initial reaction of 6% higher. But like peer Coinbase, Robinhood is heavily reliant on retail investors who tend to pile in when market conditions are strong and flee when markets sell off, causing swings in quarterly results. And so that means also, too, competition has been wrapping up. But if we were to break it down in terms of transactions, we are looking at options that came in at one hundred and thirty three million dollars. Options is important because it contributes over 35 percent of total revenues. That number was

a little bit weaker than what the street was anticipating. Cryptos, cryptocurrencies came in in line at thirty eight million dollars. And then equities, another strong contributor. That one came in at twenty seven million dollars for the month as a quarter Q1. And then equities, another strong contributor. That one came in at $27 million for the month, quarter Q1. And then I also want to point out monthly active users. Another key metric for Robinhood came in at $11.8 million, slightly lower than what the street anticipated for this company. But you can see that markets are reacting quite positively to the news. Yeah, that's up about 6% at the moment initially after hours. Christina, thanks.

Thanks. And for more on Robinhood, don't miss the first on CNBC interview with the CEO, Vlad Tenev, tomorrow, 8.45 a.m. on Squawk Box. Mike Santoli, now I want to go back to you on Disney here, prioritizing the paying users, perhaps eventually the profitable users of Plus, with the overall number going down. Of course, there's a lot more to Disney than that. But what's your read so far on these earnings? Yeah, I mean, strategically, I think that that has buy-in from the street, the idea of getting the average revenue per user up.

That slippage in domestic subs, in other words, outside of the India distribution channel, probably giving a little bit of hesitation here. It's fine. Who knows what the ultimate upside for global subs is when Disney's at 160-ish and Netflix is, what, 230? But I do think that's probably the reason here. Also, parks, I mean, continue to really operate at a high level, kicking in two-thirds of the company's operating income for the year, growing 17 percent on the top line. So that's that's a very good story. I think the question is legitimate to say exactly how much you can extrapolate that indefinitely. So it's a similar deal where linear networks stepping down in profitability.

We know that's been challenged and it's all about, you know, the reduction in the losses in streaming is absolutely welcome. But do we have a line of sight to when that really does kind of close toward break even at an impressive enough scale in terms of total subscribers? So that's probably a lot of the talk in the call that's coming up. OK, yeah, coming up at 430 for now, the stock down just shy of 2 percent. You parks up 17%. Operating income in that division up 23% as well. Let's get back to the panel. Peter Cicchini, as we look at Disney and the reaction here, trying to focus more on profitable growth in subs, how much is this a bellwether perhaps for how investors are going to treat cost-cutting versus top-line growth for other stocks going forward? Well, it's interesting because I think the Disney results do reflect a trend that we see more broadly in the macroeconomic data as well as with other service companies.

You know, consumers are spending on services, but they're cutting back on goods. And what I think is interesting about the streaming results is also, you know, when I go to ESPN Plus to pay $80 to watch a UFC pay-per-view, like, quite frankly, I tap out. I mean, that's as far as I go. So I think we're going to start to learn a lot more, and we're seeing it in the Disney results, about what demand elasticity does when you continue to raise prices. And I would be surprised, frankly, if Disney and others are going to be able to continue to raise prices in the way that they have been. OK. And so, Adam Crisofulli, we are expecting unity numbers as well. And it's interesting. Roblox was up 7 percent today and EA was up decently after earnings as well. What is that telling about the entertainment piece of the market as you look at that alongside Disney and how investors should think about that? Yeah, I think the gaming, it's been a decent earning season for the gaming companies.

I think for Roblox in particular, similar to Disney, there's a huge cost story to that stock. And that's something management talked about. They did well on the top line. The earnings results in the actual quarter for Roblox were a little bit underwhelming. But management talked about how they're now at a point where they're going to start to dial back investments and achieve operating leverage. And that was one of the real drivers of the stock. And so I think for Unity, people will be looking at the same story. You're kind of threading that needle, and you sustain healthy top line growth, but also cutting back on a lot of the cost bloat that formed during the pandemic years. And that's tapping across the board, you know, tech, tech, most, most dramatically, that's really happening in a lot of

companies, that's been a huge theme on the Q1 earnings calls. It's cutting back on a lot of the excessive COVID costs without compromising the top line. And so, you know, yeah, Disney, you know, you see with Disney, they lost a little bit of subs as they slashed costs, and that's going to be a big theme for Unity. All right. Adam, Peter, thank you. And I was talking about Unity as if the results weren't out, but here they are, and the stock is popping dramatically. Steve Kovac has the numbers. Steve? Yeah, John, shares are up about 14 percent. I saw as close to 15 percent just a few minutes ago. So here's how they did. Now, there's a loss per share of 67 cents, which we aren't comparing to estimates. But I will note that the gap loss or net loss rather year over year is getting bigger. Revenue, though, was a beat, $500 million

even versus the $480.4 million expected by the street. And guidance also beating expectations probably behind this move. Now it's up 16%. Revenue guidance for the current quarter, $510 to $520 million. That's versus the $508.5 million the street was looking for. And look, just like you guys were just saying, John, cost cuts are a big part of this. Just a week ago, they announced another, a third round of layoffs, laying off 8% of the workforce.

That's about 600 jobs. More to come on the call, I'm sure, John. All right, whether digital or physical, these entertainment companies cutting costs, going for profitable growth. Steve, thanks. Don't miss Overtime's exclusive interview tomorrow with Unity CEO John Riccitello, 4 p.m. right here.

All right, that stock, yeah, still up about 15%. Up next, we're going to talk more about Disney's earnings, specifically the content side with Matt Ball, the former head of strategy at Amazon Studios. And later, we will talk to Twilio CEO Jeff Lawson about his company's results. That stock fell hard today on soft guidance. Overtime is back in two. Beyond Meat earnings are out. That stock popping as well. Kate Rogers has the numbers. Kate.

Hey, John, the stock was as high as 14% at one point on Beyond Meat, reporting a better than expected first quarter here. 92 cent loss compared to loss projections of a dollar and one cent. Revenues also better than expected. 92.2 million for the quarter versus the street's estimate of 90.8 million. For its 2023 guidance, the company's citing near term uncertainty in macroeconomic issues, including inflation, interest rates, demand for the category, and increasing concerns about a recession, but projecting net revenues expected to be in the range of approximately $375 million to $415 million for the year. The mid-range was for $395 million. The company's CEO also saying it's making progress on its strategy to become cash flow positive on

operations as use and loss are substantially improved here. And John, as you can see, the stock higher by 9%. That conference call is at 5. We'll bring you any more news as we get it. Back over to you. All right. Thanks, Kate. Yeah, the midpoint of that guide looks about $5 million higher than the street's expectation. Thank you. Now let's get back to Disney reporting Q2 numbers. Moments ago, shares still moving lower. CEO Bob Iger saying he's pleased with the financial performance of the streaming business. Joining us now is Matt Ball, CEO of investment firm Epillion, a venture partner at Makers Fund and former head of strategy for Amazon Studios. Matt, welcome.

Now, you said you were watching these declining average revenue per user numbers from Disney. It seems like Disney's paying more attention to the revenue piece than the user piece looking to get those numbers up. Well, look, it's clear that they have started to correct the ARPU challenge that came with the introduction of an ad tier that was priced at the prior ad free tier, enabling them to hike the price of the old Disney Plus by several dollars. Churn has been low, and yet this drop in subscribers is a bit of a concern. Why? Well, we know that the company is still losing quite a bit of money, about $659 million this last quarter. That's leagues away from the Bob Chapek high at more than $1.5 billion, even down from $1.1 billion last quarter. But's leagues away from the Bob Chapek high at more than $1.5 billion,

even down from $1.1 billion last quarter. But there's a general consensus that we need not just less spending, but also far more consumers and far higher ARPU to turn this into a great business. And that's what shareholders want. So we're trading after hours right now. Disney is under $100 a share. For investors who are thinking about getting in here, talk to me about the puts and takes of Hulu. There's this thing between our parent company, Comcast, and Disney over the future of Hulu. Does Disney buy Comcast out? Do they try to do something else? How is that going to affect the stock, you think, one way or another when investors seem to be concerned about bottom line costs? Look, it's hard to see what the obvious solution is here. I think Comcast is really going to try and stick Disney with that $19 billion or so sum, but it's hard to imagine that Disney is going to

want to spend $9 billion back to Comcast just to get the remaining portion of the business that's already losing money that shareholders don't seem super excited about. And the success of Disney Plus internationally, especially with Star, Hot Star as well, suggests that it's not as important as three years ago many investors imagined. I don't see the obvious solution here. One or both sides are likely going to have to give on that price. So you think it's a price issue and Disney ends up taking it or Comcast ends up taking it? What do you think happens? If we were talking about a month ago, prior to the departure of Jeff Schell, a clear advocate for DTC at Comcast, as well as the primary force behind Peacock, I would have guessed that Comcast would have bought the entity. After Schell and with Comcast, Mike Kavanaugh at the helm, I really think it's unclear.

Amazon also higher today by more than 3%, as a matter of fact. They've been cutting a lot of things. How key do you think Prime still is? And how much is Amazon's presence in this market a competitive issue for the likes of Disney? I think, look, anytime you have two of the largest companies on earth, Apple Inclusive, who are in video as part of other parts of their businesses, in some regards, just the advertising business, a $40 billion behemoth for Amazon, a $400 billion business in primarily hardware and services for Apple, it's hard to imagine how that's good for margins. If you go back a decade, cable network television in the

United States was in the top decile of all U.S. businesses on EBITDA margins. That's pretty unusual. It's four times the industry average. And the introduction of large streaming giants from tech companies that don't need profits in that category, that's not good, certainly. All right. Matt Ball, thank you. Matthew Ball from Epillion. Thank you. After the break, a rare interview with Google Cloud CEO Thomas Kurian from the sidelines of the Google I.O. Conference in Mountain View, California. We'll talk cloud outlook, AI, a lot more. That stock was up on the news today. Overtime is back in just a moment. Welcome back. Google's come a long way since five years ago when Thomas Kurian joined from Oracle to head the cloud division. Just before COVID, the company began breaking out the cloud unit in earnings results for the first time.

Google Cloud has cemented itself as a major cloud power, third to Amazon and Microsoft, and turned profitable for the first time in Q1. And now much of Google's AI technology is moving into Kurian's unit as artificial intelligence emerges as the next growth engine and possible profit engine of the cloud. And that's why Thomas Kurian was part of the main stage at Google's IO developer event today, where news sent the stock up about 4%. And he joins us now from there. Thomas, good to see you. Both profitable and getting a big chunk of Google's AI R&D into your unit. What is the charge that Sundar Pichai has given you with these resources? Good to see you, John. You know, our focus has always been build great products, make them easy for people to adopt, bring them to market through our

incredibly strong sales and partner organizations. And so consolidating our AI allows us to move even more rapidly with our innovation. You saw so many announcements from us today on what we're doing with our infrastructure, with our tools, new AI models, and also success we're seeing with customers. Okay, now Satya Nadella over at Microsoft said he's going to make you guys dance. The stock price today up on this announcement sort of raises stakes. It doesn't seem like Bing has been able to gain a ton of search share. What is your approach to AI with the cloud customers right now, getting their data ready to take advantage of the technology that you have at root?

We have three core elements of what we're doing. One, giving people world-class infrastructure so that they can train and serve their models with great performance and extremely cost-effectively. You saw our announcement with Character AI, for example, today, their customer using that. Secondly, building world-class models and making them available through our platforms. You saw a number of customers, Canva, Uber, Deutsche Bank,

Replit, a number of partners talk about what they're doing. Orange, for example, talk about what they're doing in different business scenarios. Third, helping people understand their data and then integrating it into our products. You've heard about all the things we're doing with Google Workspace and our Duet for Workspace, for example, bringing collaborative AI right into everybody's day-to-day workflows. So we're very busy,

lots of amazing customers using our products and picking up our generative AI capabilities. Okay now when you first came in four and a half years ago I was talking to you and you were very focused on building up an enterprise workforce. How much of that enterprise workforce can you afford to continue building and deploying in this cost-conscious environment and now that you've got these profits that you've got to continue delivering? You know, John, over the last three years, we've increased the number of transactions people are doing, buying our products by 500%. They've grown large deals over $250 million by 300%. We work now almost from zero when we started with over 60 percent of the thousand

largest companies in the world. And we have a very strong go to market organization and we continue to hire and expand our business globally. We're also hiring and expanding our engineering team. So it's a reflection of the demand for our products. It's a reflection of the engineering innovation we're able to bring, including all the new announcements we made around generative AI. And it's a reflection of customer and partner ecosystems working with us to broaden how we're bringing these technologies to market. We have over 100,000 partners up from virtually nothing three years ago. Another reflection of the momentum we have. Okay, now I want to talk market share, and it's very difficult to talk apples to apples across Google, Amazon, Microsoft,

because you guys do some different things. But here are some IDC numbers. One, we see infrastructure as a service, infrastructure share. Amazon, of course, huge there. You guys in the 4%, 5% range, and this is just top line. Also, I want to take a look at this broad cloud share. You'll see Salesforce in the mix here because it includes platform as a service and software as a service. What this doesn't show, of course, is profitability and potential to grow there. So if you were able to give investors all the numbers that they wanted, right, what is the sort of metric that we should be tracking in the AI era to gain progress? Is it top line market share? Is it something else? You know, if you look at our business, first of all, John, four years ago, we started barely from scratch. Today, no matter how you cut Google Cloud,

our numbers are public. We're one of the top five largest enterprise software companies in the world. And every one of the other four started well before us over 20 years ago. So in four years, to reach where we are is a testament to our strength and success. When we look at AI, we always say it's going to be driven by adoption of capability. If you look at Google Workspace, we first introduced AI in it in 2015.

And it's the reason that so many people use it today. And we will continue to introduce features and capabilities into these products. And we're very confident that as customers start using it, they'll start buying it. And that drives top line revenue growth for us. OK, given the macro environment, possible slowdown in some consumer activity industry wise, where do you focus for growth? Is it tilted more toward government? Is it in retail anymore? Are you going more toward industrial customers? We are seeing different segments of the market having different strengths in different parts of the world.

We obviously are seeing the recession-resistant industries doing really well for us. We're seeing a real strong presence in some, even in some of the traditional sectors, because even within an industry, you may have winners and losers, and winners are going to continue to invest for the long term. So we are very diversified in our customer base, across industries, across geographies, and we're very confident about how we will continue to adapt to market demand over the coming months. Is the debt ceiling and the macro impact a concern for the environment for you? No, we're always investing in the long term. We obviously manage well quarter to quarter. You've seen us improve profit margins 60% over the last three years, even while we grew the top line and

built one of the most successful enterprise software franchises. So we're balancing both, but we're very confident that we're not investing just for 24. We're investing for the long term. All right. Thomas Currian, CEO of Google Cloud, coming to us live from Mountain View. Appreciate it. Thank you, John. And time now for a CNBC News update with Brian Sullivan. Brian. Hey, John. Thank you very much. Here is your CNBC News update at this hour. Senator Dianne Feinstein arrived back on Capitol Hill today after a nearly three-month absence due to health issues. In a statement today, the senator said she will be working a lighter schedule as she resumes her duties.

Feinstein was greeted by Senate Majority Leader Chuck Schumer upon her arrival. Congressman George Santos pled not guilty to money laundering and fraud charges in federal court today. He was released from custody on a $500,000 bond with the next court hearing set for June. After the hearing, he spoke with reporters. I'm going to fight my battle. I'm going to deliver. I'm going to fight the witchhood. I'm going to take care of clearing my name, and I look forward to doing that. And an FDA advisory panel voted unanimously in favor of making the Opil birth control available without a prescription,

despite concerns from FDA scientists about the quality of data used to support switching the birth control pill from prescription to over-the-counter. If approved, O-Pill from French drug maker HRA Pharma will become the first birth control pill available over-the-counter in the U.S. The agency is expected to make a decision on that this summer. John, back to you. All right, Brian, thank you. Up next, Mike Santoli is going to take a closer look at today's inflation report and whether it changes the calculus for the Fed. And later, don't miss our exclusive interview with Twilio CEO Jeff Lawson following a rough day for that stock after earnings. We will be right back. Welcome back to Overtime. Check out shares of

Sonos getting slammed after hours, giving up almost all the 2023 gains down about 20 percent. The company reporting a wider than expected loss for the second quarter, cutting its full year guidance on softening demand, echoing some of what we heard from global foundries here yesterday about tightening inventories. Meanwhile, Disney's earnings call is underway. So let's get back to Julia Borsten with some news from the call. Julia. CEO Bob Iger is saying that in light of the cost-cutting initiatives that are underway, they are on track to meet or exceed their target of cutting $5.5 billion. So that's the update. They're saying he's very optimistic about the direct to consumer business longer term.

He announced that they're going to start offering a single app experience in North America that in domestically U.S. and Canada that incorporates Hulu and Disney Plus, saying that there's a greater opportunity for advertisers. This will be I'm sorry, Disney Plus, Hulu and ESPN Plus, while they will continue to be offered as standalone options. They are planning to bundle these into a new sort of mega app. What's notable here is, of course, that Disney has to make the decision or Disney is expected to buy out the remainder of Hulu that it doesn't currently own from CNBC's parent company, Comcast. The fact that they're going to be bundling this, these apps together to have this more unified streaming experience for the consumer and also more of an offering for advertisers indicates that they do intend to complete the buyout of the rest of Hulu there. So interesting to hear his perspective here. He's also right now talking about the opportunity for programmatic advertising, really leaning into the potential in the ad business, just announcing that they've added more than 1,000 advertisers over the past year and now have 5,000 across their streaming platforms.

Julie, doesn't it strike you as a little bit strange that they would announce adding Hulu to a super app? Wouldn't that weaken their negotiating position versus Comcast on price? Well, look, they already had a deal all set with Comcast. I mean, the terms of the deal were already established that there is, you know, a piece of Hulu that Comcast still owns and there was a set price that Disney was going to come in and have to buy it out at. So I think to a certain extent, yes, there will always be a negotiation. But this was sort of the assumption and that this is what was going to happen from day one, from when they made this deal. It would have been an aberration had he said, actually, we're not interested in Hulu and we want to sell our stake. That would have been

a far bigger surprise. But this is really affirming his commitment to, I think, general entertainment, which has been a big question on the call. Do they just want to be about Disney Plus or do they want to be about much more than that? I also just want to bring you here that Iger just said on the call just moments ago that they plan to set a higher price for their ad-free tier later this year to better reflect the value of the content offering. So on one hand, they're going to be leaning into advertising, working to make it easier for advertisers to come onto the platform. And then for the part of their streaming services that do not have ads, they will be charging more for it. So indicating they do seem to think they have pricing power there. But Disney shares now down about two and a half percent. And perhaps pushing users toward that ad tier, does this perhaps make it easier for Netflix to grow its ad tier as well

if that becomes the standard? Well, look, Disney definitely has more experience in the advertising business. Remember, they could draw on everything that they've done, not just at Hulu, but also with their their years of working the linear business there. Netflix has really been starting from scratch over the past year or so, building up an ad engine. So I do think it's a little bit different here. But I think in bundling together all of those assets, Hulu, ESPN+, Disney+, what they're creating here is a much bigger option. This is the great rebundling, John. You know, we've talked about all of these apps going a la carte. Now they figure it's easier for consumers, it's probably more profitable for them, and maybe people are locked in for longer and aren't going to be

as enticed to churn out and to drop the service when their favorite show ends. All right. And the stock down about 3% at the moment after hours. Julia, thanks. Now, from the mouse house to the lion of the larger market, CNBC senior markets commentator Mike Santoli joins us with a closer look at today's inflation report and the potential implications for the Fed. Mike? Yeah, John. In general, today's CPI coming in just slightly below forecast on an annual basis made investors relatively comfortable with the thing, with the idea that the Fed could be on pause. It's reflected in the one-year T-bill yield here. And this tells an interesting story, right? When we got to October of last year as the stock market bottomed, it suggested that Wall

Street felt like they saw the ultimate destination on short-term rates, and it was going to be up in this 5% zone, give or take. And then we got hot data, inflation and growth. In the first part of this year, people said, whoop, that number's got to be revised up. That vertical line down is SVB. So we got a probably earlier than anticipated pause. The question is, what it's going to cost in terms of the economy. Today's number pretty consistent with this moderating view of inflation and what the Fed has to do. Now, take a look at longer term inflation expectations as embedded in market pricing. This is from the Treasury Inflation Protected Security. So this is a 10 year inflation expectation implication from those securities. And you see it's down in the 2.2

percent area. That's relatively, you know, I think acceptable for the Fed. In fact, it's right about where we were in, you know, 2014 or so. These were deflationary scares. This is pretty much in the zone where the Fed wants to be in terms of its target 2 percent, give or take. This isn't necessarily a reliable forecast of what inflation ends up being, but it does show that inflation expectations remain anchored. So maybe it's safer for the Fed to perhaps take its foot a bit off the brake, John. That's what people want to hear, Mike. Thanks. Twilio shares plunging today, down 12.5% after a second quarter revenue forecast that overshadowed an earnings beat.

CEO Jeff Lawson is going to break down the numbers and discuss whether he's seeing a slowdown in customer spending when overtime returns. Welcome back. Shares of Twilio getting hit hard today. The software maker reported Q1 results last night surpassing expectations, but investors focused on the Q2 guidance, which shows a deceleration of growth to 4% to 5%, down from 15% in Q1. Morgan Stanley saying in a note, quote, this stock will likely linger here absent any activity around the collapsing share structure in late June, unquote. Twilio CEO Jeff Lawson joins us now from San Francisco.

Jeff, good to see you. So within the context of the dual class structure going away starting in July, explain to me how Twilio accelerates out of this period and why it should stay structured the way it is now. Well, John, thank you for having me. You know, there's two parts of our business, right? We've got a communications business, which is usage-based. And the usage of our platform really tracks to our customers and how much activity is going on

in their businesses. And so when the economy contracts or pulls back in its growth, I should say, and companies are spending less on marketing, for example, to bring customers to their sites, right, that drives less usage of our platform. And it kind of is what it is. And on the downside of the economy on the backside, it means more decelerated growth for us. And that's unfortunate. And that's why we have the guide we do. But the flip side is when things pick back up, we see a pretty quick re-acceleration of the business because that reflects more activity. And that happens much more quickly than a traditional software company, which is out there essentially selling seats that then have to roll through into revenue. We see a pretty direct correlation between what's happening in the economy and what's happening on our platform. And we've called out several industries like

retail or on demand or social media or crypto as things that have been headwinds for us in this kind of economy. And most of those, with the exception of crypto, I'd say, I think can turn on pretty quickly when the economy changes in the coming, you know, hopefully weeks and months. But exactly when that happens, who knows? I don't have the crystal ball. I think everybody wishes they had that crystal ball. But what I can say is we've got a customer base of 300,000 customers that really span the entirety of the economy, of the globe, of every sector you can imagine, startups, big companies,

AI companies. And so I think you can expect that we'll track to the, you know, track to the economy. I want to ask you now about AI as a piece of that eventual growth, should that arrive, because everybody wants to talk about AI as if it's all upside, but some companies are starting to get whacked by it in the short term. So explain to me what Twilio's moat is in that situation. Do you have data that you're able to train AI on so that you can say to your customers, hey, you need to stay with Twilio, maybe even on this premium level of service, because we're going to allow you to send more effective messages to your customers? Or are potential competitors going to be able to enter

the market and undercut you using AI? Well, you know, that's a great question. Just a couple of years ago, we acquired the leading customer data platform called Segment. And what Segment does is it allows companies to really gather all the data about their customers, like all the signals you're getting from how they use the website, the mobile app, and all the information that's trapped in all these myriad systems that are traditionally siloed, and bring it together into one profile of a customer.

And now when you think about where AI is going, the large language models themselves, there'll be many options out there, and every company is going to use them, and every capability will be powered by many of large language models themselves, there'll be many options out there and every company is going to use them and every capability will be powered by many of these language models, but the language model is only as good as its understanding of who it's talking to and that's where segment comes in. The data that we have about our customers' customers can be combined with these language models to power some amazing experiences. And if you think about two

worlds, one where I'm having some sort of conversational experience with a company and that bot knows nothing about who I am or what I represent to the business or what I've bought or if I'm a great customer or a bad customer versus a world where I'm chatting with a bot and it knows everything about me. It knows everything I've ever bought. It knows my spending potential. It knows if I'm about to churn. We can bring that intelligence to the applications that our customers are building.

And that's the conversation that I'm having with our customers today. I guess that's also the argument for keeping the pieces of Twilio together is that you need the communication capability and you need the data capability if you're going to execute on AI. Do I have you right? Well, that's the whole point. That's the reason why we're bringing together communications, which is how you engage with a customer, and data, which is how you understand the customer you're engaging with. And it's only when you bring those two together

can you really have an effective way to talk to your customers. When you talk to them, but you're not particularly relevant, you don't know anything about the customer, well, that's not a great customer experience. If you know your customers really well, but you don't use that understanding of your customers to actually drive all the touch points between sales, marketing, service, in-product, et cetera, that's not a great customer experience. So it's the fusion of those two that really allows us to create this customer engagement platform, which is the real opportunity

going ahead. Meantime, how tightly are you committed to managing the bottom line? Are you hitting those cost-cutting targets as quickly, faster than you expected? Well, I think as you can see, we take investor feedback very seriously. We've took a number of substantive actions in Q1 to bring down our costs, including a restructuring of the business,

a reduction in force, a stock buyback, and a number of other things. And you see those decisions now rolling through in the first quarter of execution, where we jumped to a 10% non-GAAP operating margin in this quarter, as well as brought down our stock-based compensation substantially and laid the path for our execution towards not just a non-GAAP profitability company, but of course a GAAP profitable company in the coming years. And that's what we're committed to doing.

And I think our profit results in Q1 really demonstrate how seriously we've taken those actions and how well they're actually working already. All right. Well, I will certainly, and we here on Overtime will keep tracking the results. Jeff Lawson, CEO of Twilio. Thank you. Thank you, John. Disney, meanwhile, just announcing it's going to bundle Disney Plus and Hulu into a single app. As we told you, a top analyst reacts when overtime returns. Welcome back to overtime. Three upside movers for you as we look ahead to fast money.

Robinhood up better than three and a half percent after posting some strong revenue numbers. The trading app also saying it's going to launch 24 hour, five day a week trading beginning next week. It'll cover 43 stocks and ETFs to start. Unity up 11.5 percent. The company beating Wall Street estimates for revenue and giving guidance also higher than forecast. And finally, Beyond Meat also up 6 percent. That company posting smaller than expected losses while topping analysts estimates for revenue. All right. Now let's get another check on Disney.

Moving lower in the post-market, EPS matched estimates while revenue beat. And on the call, Bob Iger announcing it's going to add Hulu to the Disney Plus app and set a higher price for the ad-free Disney Plus plan later this year. Joining us now is CFRA Director of Equity Research, Ken Leon. Ken, doubling down on getting people to pay up and perhaps on paying up himself for Hulu if he's bundling it in. What does all this mean? Well, it's great to be here, John. And this call is still going on with investors. The breaking news of why the stock has dipped down 4% is that for direct to consumer or streaming uh they're going to take in the next quarter a 1.5 to 1.8 billion dollar impairment charge so they're going to streamline

the amount of content that they curate for streaming uh this is not a big surprise to me because this is rebalancing and getting more efficiency as they curate content. This is big news. It's essentially saying we're not putting everything in to the future of direct streaming. And we're also going to look at where we can get the best returns and drive free cash flow. Does is the breaking news. Does this news that you just brought us, along with the writer's strike, signal the end of the golden age for streaming

and just paying up for content? Is it now a lot more targeted? Well, it really gets to the trajectory of, can you make money or get to a break even on streaming in the case of Disney and fiscal 24. But also they have other great businesses. So I think it's a repositioning of their distribution channels, knowing that they can do extremely well with theatrical blockbuster movies, as well as still some solid linear networks like ESPN. I've got to ask this for investors, too.

Does Disney's library have greater value in a writer's strike, though? Do they perhaps have more value to deliver when there's less brand new content? So the way this is going to work is that there still is plenty of releases coming for both the third and fourth quarter. They're on a fiscal year where the writer's strike is only going to affect general entertainment really for programming at night, perhaps ABC. So I don't see this as a big financial risk near term, not that really Disney or any major company wants to talk about fighting the riders' guilt. So ultimately, I think this gets done, but it's not going to be a major interruption that would affect the outlook for revenues or earnings for the quarter.

OK. And with that stock now after hours, just under $97 a share Investors got a question whether it's cheap, whether the ship is righted and whether Florida is going to cause more problems. Ken, thank you. And, you know, we look ahead to finishing that call and, of course, following up on the rest of earnings. A lot of movers, including, as we mentioned, Unity Software, which is now up almost 12 percent. That's going to do it for overtime.