The Rundown - Uber Shares Fall on Weak Outlook, Google Reports Growing Pains for Cloud Business

Episode Date: February 5, 2025

Stock market update for February 5, 2025.

Public.com presents the rundown. Your daily market update in five minutes. My name is Zadadmani, and today is Wednesday, February 5th. In today's episode, we tell you why Apple is one of the early losers from the U.S. 's trade war with China. We also recap earnings from Google, Disney, Uber, and Snap, and the market reaction to some of these earnings was kind of surprising. Then stick around to the end of the show to find out the latest innovation coming

out of Apple that's getting some great reviews. All right, let's go. Well, stocks had a nice bounce back on Tuesday as investors bought the dip after the drama around tariffs died down a bit, at least for now. The S&P 500 was up 0.7% and the NASDAQ jumped 1.4%. Now, a 10% tariff against China are in effect as of yesterday. China did retaliate with their own tariffs on U.S. imports. We covered that in more detail on yesterday's show, so go check that out if you missed it. One of the biggest losers from this trade war against China seems to be Apple. Apple will now have to pay a 10% tariff on all the products they import from China, where a ton of their products are assembled. But on top of that, China is launching investigations against U.S. tech companies as a form of retaliation against these U.S. tariffs.

And Apple is one of the companies being impacted. Yesterday, I mentioned that China started an antitrust investigation into Google, even though Google hasn't operated in China since, like, 2010. And now today, China says they're looking into Apple's App Store policies and fees. Apple famously is pretty strict with their App Store. They don't allow third-party app stores on iPhones or iPads. And they take a 30% cut on all apps and in-app purchases from their App Store. Developers have been complaining about Apple's App Store policies for years now. And regulators all over the world are now starting to notice.

So now add China to that list. Not great timing for Apple because they're already facing challenges in China where the revenues were down 11% in Q4 because of increasing. competition from local rivals like Huawei. So not only are they dealing with increased competition, they have to deal with investigations as well. So pretty tough week for Apple. Now, as for the rest of the markets, I think investors have mostly moved on from the tariffs drama and are focusing on earnings results. We're about halfway through earnings season. And the results so far have been pretty promising. According to data from LSEG, earnings per share are on track to be up 11.5%. And revenue is up

4.6% for companies in the S&P 500. So pretty solid data so far. And we got some handful of earnings last night and this morning, so let's talk about them. Let's run through some headlines. And we're going to go heavy on earnings starting with Google. Google shares are dropping this morning after the company reported slower cloud revenue growth. The tech giant reported 30% revenue growth for their cloud division, which missed Wall Street estimates and is down from the 35% growth that they had in the previous quarter. Investors don't like it when growth slows down. Now, Google partially blamed this on the lack of available supply. They said the demand outweighed supply, but they plan to expand that supply, according to the company.

I think the other big thing to stand out from Google's earnings was the amount of money the company plans to spend on AI and CAPEX in 2025. They're planning to spend $75 billion in 2025, which is a big jump from the $52.5 billion in 2024. I guess the emergence of DeepSeek hasn't scared off Google's big spending plans. You know, Google has big plans for AI. They want to have 500 million users for their AI chatbox Gemini by the end. end of the year, that still would be trailing open AIs plans for 1 billion users of chat GPT and

Mehta's plans for a billion users for their meta AI. So I guess that's why Google's spending $75 billion to close that gap. Now, while the AI stuff gets all the attention, Google's main business continues to be advertising. And that business is still growing. Search revenue was up 12 and a half percent last quarter to $54 billion, and YouTube's ad revenue was up nearly 14 percent from a year ago to over $10 billion for the first time ever. I think YouTube continues to be a or not. I wonder what YouTube would be valued at if it was his own company. Now, the market's reaction to Google's earnings weren't great. Shares are down around 7% this morning at the time of this recording. I think it might be the high CapEx number that's catching investors off

guard. Maybe this is an early sign that investors aren't okay with tech companies spending unlimited money on CapEx to build up AI. All right, let's shift gears and talk about Disney. They reported earnings this morning, and their earnings came in better than expected because of their streaming profits and the box office success of Moana 2. Let's start with the streaming business, which includes Disney Plus, Hulu, and ESPN Plus. That brought in a profit of $293 million, which cleared Wall Street projections by more than $100 million. You know, Disney is showing signs of figuring out the streaming business. They're delivering profits now compared to the $138 million lost he had in Q4 of 2023. Disney Plus has more than 124 million subscribers,

which is actually down around 700,000 users. Hulu did add, 1.6 million subscribers and they have over 53 million now. Now the loss and subs for Disney Plus was expected. Disney's been raising prices and that's resulted in some people canceling their subscription. Disney actually expects another modest decline moving forward. Now a bright spot for Disney was Moana 2, which brought in over a billion dollars at the box office and it helped drive the studio unit to a quarterly profit of $312 million. That's a sharp turnaround from a year ago where they lost $224 million. I think Disney is proving to investors that they're figuring out the streaming business. They're making a profit from it to outpace the decline from the traditional TV business.

And they're also bringing back the firepower to their studio business. Now, despite me just hyping up Disney, the stock is still down more than 1% this morning. So I guess investors wanted to see more. Let's talk about some stocks making moves today. Snap shares are up this morning after reporting better than expected earnings with revenue up 14% last quarter. The social media slash messaging company has been making headways in their advertising. advertising business targeted at medium to small businesses and SNAP plans to scale out this business this year. Snap is also expecting their daily active users to jump to 459 million in Q1, which is above the estimates for the quarter. Snap could also potentially benefit if TikTok permanently gets banned in the U.S.

So as a result, shares of SNAP are up more than 15%. Oh, wait a minute. I just check SNAP stock again and it's down more than 5% now. What happened? Snap investors have to be in shambles right now. Let's move on and talk about another stock that's having a tough day, Uber. Their shares are down this morning despite the company reporting a strong performance in booking growth. Gross bookings, which includes ride-hailing services and delivery orders grew 18%, which helped boost their total revenue above Wall Street's expectation.

But the stock is still down because the company missed on profits and had a weak booking forecast for the current quarter. Now, what's interesting, though, was how much attention the company was giving to autonomous vehicles on their earnings slides and on the earnings call. Analysts were asking Uber CEO Dara Kosher-Ashahi with questions about Uber's business model. Uber sees autonomous vehicles as a $1 trillion opportunity in the U.S. And they believe that they'll be an indispensable go-to-market partner for AV players like Waymo. But I guess despite the upside presented by the CEO, there was a hint of caution in Dara's commentary. So given the slightly miss on earnings and the uncertainty around autonomous vehicles, Uber shares are down around 7% this morning at the time of this recording. Let's wrap the show with a fun fact.

Let's go back to Apple. On the one-year anniversary of the Apple Vision Pro, Apple announced a new innovation, an invite app. Apple is launching an app called Apple Invite where people can create events for birthday parties and send out invites through the app. You know, they pretty much ripped off Partifle. So yeah, who says Apple can't innovate anymore?

Apple says you'll need an iCloud plus subscription to send out the invites. So I guess Apple is hoping that this app keeps people locked into their services. So don't be surprised if the next birthday party invite you get is through Apple's invite app. And for all my Android users out there, don't worry, you'll still be able to RSVP. It's just that you won't get the full experience. But Android users are used to that by now.

Well, all right, guys, that's the rundown for today. A lot to cover in this episode, a lot of earnings to go through, and we're still only halfway through earnings season. So we'll have a lot more to talk about over the next couple days over the next few weeks. So make sure you guys are subscribed for the podcast. Hit that notification bell if you want to be notified as soon as an episode goes up every morning. And if you have like 12 extra seconds, consider giving us a five star rating on Apple or Spotify. Vote in today's Spotify poll. Leave us a comment on Spotify.

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