$8M Ads, Streaming Wars, & Google’s Costly AI Bet

TL;DR

1. Disney Beats Estimates but Sheds Streaming Subscribers

2. Uber Drops 7% Despite Revenue Growth and Robotaxi Partnership

3. Google Tanks 9% as Cloud Growth Slows

4. Spotify Surges 13% After Posting First Ever Annual Profit

Disney+ Sees First Subscriber Decline — And More Losses Are Coming

Disney beat analyst estimates on the top and bottom lines, but shares dropped 4% as Disney+, the firm’s flagship streamer, shed 700,000 subscribers this quarter. Executives warned of another decline next quarter. 

• Every streamer but Netflix is dying to be Lyft, i.e. No. 2. Last quarter alone, Netflix added 19 million subscribers. Disney+ added 13 million subscribers in the past year. 

• Churn is another problem: Netflix retains subscribers far better than Disney, with a 2% churn rate versus Disney’s 5%. That means Disney+ must constantly replace a larger share of its customers just to maintain its baseline.

Disney+ lost subscribers for the first time, and the company shrugged it off, blaming a 4% price hike. But Netflix also raised prices last year and still added 19 million subscribers.

Then there’s the box office. Moana 2 essentially carried the quarter, highlighting a bigger issue: Disney’s reliance on sequels. If Disney+ is no longer a reliable growth engine, and box office success depends on endless franchise recycling, how sustainable is the business?

Netflix has cracked the code on producing content cheaply overseas, cutting costs while attracting global subscribers — while Disney+ is still trying to make Hollywood economics work.

Netflix funneled more than half of its $15 billion content budget last year into international production, while Disney allocated just 4% overseas. The result is a stark contrast in profitability: Netflix runs at a 27% operating margin, while Disney+’s is less than 5%. The market has responded, pushing Netflix’s stock up 1,500% over the past decade, while Disney has gained just 18%.

The price-to-sales (P/S) ratio measures a company’s stock price relative to its revenue, showing how much investors value each dollar of sales. A high P/S can signal optimism about future growth and profitability, but it may also indicate overvaluation. Ultimately, its significance depends on each investor’s expectations for the company’s future.

Uber’s Revenue Soars, Robotaxi Ambitions Expand

Uber reported 20% YoY revenue growth, but shares fell 7% on weaker-than-expected guidance.  

The company now controls 76% of the U.S. rideshare market, widening its lead over Lyft (24%). In San Francisco, Lyft faces an additional threat: Waymo, whose robotaxis are rapidly eating into its market share.

Uber is taking a different approach — partnering with the competition. The company announced an expansion of its robotaxi efforts in Austin, Texas, through a collaboration with Waymo. Riders will be able to order a driverless ride as early as this year.

Uber is taking an asset-light approach to autonomous vehicles, relying on partnerships rather than developing its own self-driving tech.

This contrasts with Tesla’s vertically integrated, capital-intensive strategy — one that has yet to produce a single autonomous taxi. Tesla gets all the hype for its robofleet, while Uber is actually rolling out rides.

Google Sheds $200B — Is AI a Goldmine or an Existential Threat?

Google’s full-year sales jumped 14%, net income surged 36%, yet the stock fell 9% as investors fixated on weaker-than-expected Cloud revenue.

• Google Cloud, seen as Alphabet’s best bet for AI monetization, saw revenue growth slow from 35% to 30% this quarter. 

• CEO Sundar Pichai blamed supply constraints, not demand, noting that customers are now using 8 times more compute power for AI workloads than 18 months ago.

But that hasn’t eased investor concerns. Slower Cloud growth raises doubts about Google’s ability to monetize AI effectively — and worse, AI may be eroding its core business. For the first time since 2015, Google search’s market share dropped below 90%. 

• That only amplifies worries over Alphabet’s aggressive spending: Capex is set to hit $75 billion this year, far exceeding Wall Street’s $58 billion forecast. 

Google’s been overpunished. The Cloud miss wasn’t about weak demand; it was about supply constraints, and they’re spending to fix it. At 23 times earnings with 14% revenue growth, Google looks like one of the better deals in Big Tech. Compare that with Apple at 36 times earnings with 4% growth and the case for Google gets even stronger. I’m bullish.

Alphabet is an empire, not just a company. It has five businesses generating over $30 billion annually — each capable of being a $100 billion company on its own. Meanwhile, seven of its platforms serve over 2 billion users, from Search and Maps to Android and YouTube. That scale gives Alphabet an unmatched ability to collect data and monetize it — second only to Meta in its ability to extract “rents” from users and advertisers.

Wall Street Cheers Spotify’s First Profit — But Artists Say They’re Paying the Price

Spotify surged 13% to an all-time high after posting its first profit in 16 years. The company also set record highs for revenue, gross margin, operating income, and free cash flow. 

• Premium subscribers grew 11% YoY, and total monthly active users reached 675M. In other words, 1 in every 12 people on Earth uses Spotify. 

• Spotify’s stock has surged 160% YoY, giving it a market value that surpasses the combined worth of the three largest record labels.

Unsurprisingly, Wall Street and artists aren’t celebrating the same victories. At the Grammys this past weekend, Best New Artist award winner Chappell Roan called out the music industry for not compensating artists fairly.

The world doesn’t owe you your passion. Spotify’s pro rata model means the top 1% of artists take ~90% of royalties, and for everyone else, payouts shrink as the platform grows. That’s not a conspiracy: it’s just winner-take-most economics. Blaming Spotify for this is pointless; if artists truly want change, they should pull their music off the platform and force a better deal.

Artists’ outrage feels misplaced. Spotify wasn’t hoarding cash; it was losing money for 16 years. Netflix has been profitable since 2003 because it’s been able to raise prices 13 times without losing its grip on subscribers. Netflix’s original content acts as a moat, while Spotify’s library is nearly identical to Apple’s and Amazon’s.

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