Snap Shows Operating Leverage

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Happy Tuesday.

We’re live on YouTube and 𝕏.

The current thing in tech and business is OpenAI saying Apple confused two people with similar Asian last names in its trade secrets lawsuit against OpenAI.

Today’s Lineup

Intelligence Co-Founder Grace Li at 11:50 AM
Allocate CEO Samir Kaji at 12:00 PM
Quinn Emmanuel Executive Chairman and Founding Partner John Quinn at 12:20 PM
Kaizen Co-Founder & CEO Nihkil Reddy at 12:45 PM
Cognition President Russell Kaplan & VP of Global Partnerships Art Levy at 1:00 PM
Federal Communications Commission Chairman Brendan Carr at 1:15 PM

Run of Show

Snap Shows Operating Leverage

Good quarter for Snap. Clear beat. Revenue up 19% YoY with profitability and cash generation rising even faster. Advertising revenue grew 9% to $1.28B for the quarter, but the really surprising number was $316M in subscriptions and paid services (up 85%). Usage is up globally, but they are losing a step in western markets. DAU fell 7% in North America which is rough for ad monetization. Europe also shrank, but only by 2%.

The tougher story is Specs. Priced at $2,200 and still bulkier than competing smart glasses, not many people are optimistic about where the project goes. The good news is that it isn’t all that expensive. An estimate might be $300M per year in Specs-related R&D, which is around 5% of all spending. The company hasn’t given any guidance around how many pairs have been pre-ordered, which doesn’t seem great, but fortunately the rest of the business is showing solid progress.

Really accelerating a next-gen hardware product does not seem in the cards right now though, but I do wonder if there’s something else Snap could do to keep energy and excitement at the company without breaking the bank on frontier augmented reality R&D. — John

More in the news:

OpenAI published a blog post yesterday saying that Apple essentially lied about some of the claims it levies against them in Apple’s recent lawsuit against the company. The news is all over the timeline today, but basically OpenAI is refuting Apple’s allegation that it contacted OpenAI about their concerns in February and never heard back. OpenAI says that Apple contacted the wrong person after confusing 2 employees with Asian last names, and that Apple only admitted this after OpenAI pointed it out. Drama.
Bending Spoons, which has been on a run recently of acquiring distressed assets such as AOL and Eventbrite, just acquired Airtable in an all cash transaction valued at just under $1.3B. This marks a dramatic collapse (88%) in Airtable’s valuation from its peak $11B venture valuation in 2021.
Is BMW forcing its owners to watch a Spider-Man: Brand New Day promo when they start their cars up? Sheel Mohnot says so. But there may be some nuance here. Community Notes are saying the ad is pretty much an opt-in feature; “BMW’s Spider-Man promo is an optional startup banner on compatible cars… Click to play full-screen animation with music/lights; it does not autoplay. Like their holiday animations,” one says. The Note cites BMW’s press release for the feature.

Clip Spotlight: Valar Atomics CEO Isaiah Taylor says he doesn't need a technical edge to win

"We want this reactor to be as simple as possible. If we could just staple this thing together from Ikea, then this would be a trillion-dollar company much faster."

"There are two philosophies that we use in building the reactors. We either try to buy things that are completely off the shelf or we make it ourselves."

"We're trying to go 100x faster than the nuclear industry has ever gone before. So if we're plugging too deeply into the existing network, it's not going to work that well. We want to use off-the-shelf things and make things ourselves when we can't buy something off the shelf."

"The nuclear industry is full of very smart people. It's full of physics people, PhDs, and people who have spent their life doing complex analysis, and they actually want something that is a little bit complicated. It's an ego thing to design something that is complicated and looks very sophisticated... It's our preference that [our reactors] are so simple that somebody with a nuclear PhD looks at it and says, 'That's like a toy,' and it's great because people make toys in the millions."