Michael Nathanson

Michael Nathanson from MoffettNathanson. asked about the different stages and expected duration of autonomous vehicle (AV) deployment, specifically how Uber plans to scale to tens of thousands of AVs on its network over the next several years.

Answer

Balaji Krishnamurthy, Incoming CFO of Uber Technologies, explained that the initial stage focuses on providing baseload AV supply to meet demand during off-peak times, noting AVs' consistent demand compared to the 45% Saturday-to-Monday drop for the overall network. He stated that scaling requires lower vehicle platform costs to expand service times and reduce consumer costs, eventually moving beyond trough demand. The long-term goal is a majority of AV supply in certain markets, but this depends on OEM production ramp-up. Dara Khosrowshahi, CEO, added that Uber's logistics ecosystem (delivery, freight) provides a structural advantage for higher AV utilization during troughs, unmatched by other players.

Michael Nathanson asked about Roku's opportunity with sports content moving to streaming, the vision for a centralized sports aggregation experience, and confirmation on distribution revenues growing faster than advertising, specifically regarding Fox and ESPN launches.

Answer

President of Roku Media Charlie Collier highlighted the tailwind from sports moving to streaming, emphasizing Roku's role as the 'front door' and the simplicity of the Roku Sports Zone. CEO Anthony Wood reiterated fragmentation as an opportunity. CFO Dan Jedda confirmed distribution revenues are growing faster than advertising, clarifying that Fox and ESPN launches did not present a timing issue for revenue recognition.

Michael Nathanson asked John Wren about the combined Omnicom-Interpublic Group revenue growth potential and which business lines and geographies offer the most opportunity to close the revenue growth gap with competitors like Publicis.

Answer

CEO John Wren stated that both Omnicom and Publicis are demonstrating growth, a trend he expects to continue. He was not yet prepared to disclose specific combined company growth projections but emphasized focusing on high-growth areas and differentiating the combined entity. He also noted that, when adjusted for the Olympics and presidential election, Omnicom's underlying growth was comparable to Publicis.

Michael Nathanson of MoffettNathanson asked how the combined Omnicom and Interpublic Group of Companies entity plans to close the revenue growth gap with Publicis, and which business lines present the most significant opportunities for accelerated growth.

Answer

CEO John Wren stated that both Omnicom and Publicis are growing, and he expects this trend to continue. He believes the combined company will accelerate growth due to an improved portfolio composition, noting that Omnicom's underlying growth, when adjusted for prior year's Olympics and elections, is comparable to Publicis'. He expressed confidence in the combined entity's strength and growth prospects.

Michael Nathanson of MoffettNathanson LLC asked about the risk to healthcare advertising from potential regulatory changes and how advanced AI video tools can be accretive rather than dilutive to the agency model.

Answer

Chairman & CEO John Wren dismissed political talk about regulation as noise, stating the need for complex health information to reach consumers remains and benefits Omnicom. Regarding AI, he noted compensation models can evolve towards outcomes. EVP & CTO Paolo Yuvienco added that AI tools expand creative possibilities and enable mass personalization, creating more value and work, not just replacing it.

Michael Nathanson of MoffettNathanson inquired about the current volume of new business pitches and how the pending Interpublic merger is addressed in those discussions. He also asked if the double-digit growth in third-party costs was unusual for the first quarter.

Answer

CEO John Wren stated that while he expects the new business pipeline to be less robust than last year, there are active pitches. He emphasized that due to strict rules, Omnicom does not go to market jointly with Interpublic. CFO Phil Angelastro explained that the growth in third-party service costs is driven by client demand and is not considered unusual for the industry.

Michael Nathanson asked how new AI tools are impacting Google Shopping behavior and monetization, and questioned the long-term capital intensity of the business given the $75 billion CapEx plan.

Answer

Executive Philipp Schindler highlighted that the AI-rebuilt Google Shopping experience led to a 13% increase in daily active users by simplifying product research. CFO Anat Ashkenazi addressed capital intensity by noting the rigorous governance process, the efficiency of their self-designed data centers and custom TPUs, and the fact that current demand exceeds capacity.

Michael Nathanson asked how Alphabet has changed its operational structure and go-to-market strategy to accelerate AI innovation and execution.

Answer

CEO Sundar Pichai explained that the company has restructured to operate with more speed and agility, creating a 'virtuous cycle' for AI development. He cited unifying teams, such as moving the Gemini app team to Google DeepMind, as a key change that has streamlined development and enabled smaller, dedicated teams to ship new products faster, comparing the shift to the company's evolution from desktop to mobile.

Michael Nathanson questioned the decision to halt the deprecation of third-party cookies and asked about the factors contributing to Google Search growing faster than YouTube Ads during the quarter.

Answer

CEO Sundar Pichai explained the cookie decision was based on ecosystem feedback, shifting the focus to user choice. CFO Ruth Porat attributed the growth difference to tougher year-over-year comparisons for YouTube, which was lapping a period of negative growth and anniversarying a ramp-up from APAC retailers. Sundar Pichai also noted that multimodal AI for YouTube is taking longer to develop.

Inquired about the importance of new AI-driven hardware like glasses for scaling AI and asked about the difference in user behavior between AI Mode in Search and the standalone Gemini app.

Answer

Sundar Pichai stated that while AI will drive new hardware innovation, he believes phones will remain the central consumer device for the near future. He differentiated AI Mode as being information-focused and grounded in search, whereas the Gemini app serves broader, more conversational, and personal assistant use cases.

Michael Nathanson from MoffettNathanson asked about the current new business pitch activity and whether clients are delaying decisions due to the Omnicom merger. He also requested clarification on how much of the headcount reduction was organic versus tied to divestitures.

Answer

CFO Ellen Johnson clarified the 6.5% organic headcount decrease was driven by transformation efforts like centralization and streamlining management structures. CEO Philippe Krakowsky described new business activity as being at a 'mid-range level,' noting that while it's 'business as usual,' some clients might delay decisions due to macro uncertainty. He added that they have briefed intermediaries on the process.

Michael Nathanson of MoffettNathanson highlighted the mention of 'Principal Media' as a factor in client losses and asked about the potential speed of integrating Omnicom's capabilities in this area post-merger. He also questioned the strategic rationale for merging to gain this capability versus building it internally.

Answer

CEO Philippe Krakowsky acknowledged that Principal Media was a challenge in 2024 and that merging with Omnicom, which has global expertise in this area, is a clear benefit. However, he emphasized that this is just one of many complementary strategic benefits of the proposed combination and the overall opportunity is much broader.

Michael Nathanson asked about client reception to IPG's 'fast follower' approach in Principal Media and requested an apples-to-apples full-year organic growth figure if R/GA and Huge were included.

Answer

CEO Philippe Krakowsky noted that client adoption of their Principal Media offering is tracking ahead of internal expectations, with a rollout planned for 6-8 international markets next year. CFO Ellen Johnson declined to provide a recalculated organic growth figure including the divested agencies, stating the company has been transparent about their drag and is following standard accounting practices for assets held for sale.

Michael Nathanson of MoffettNathanson inquired about Netflix's film strategy, particularly the cultural impact of direct-to-platform releases, its pricing philosophy, and its approach to competing with short-form video.

Answer

Theodore Sarandos (Co-CEO) stated that films like 'Carry-On' prove a Netflix-born movie can dominate the cultural zeitgeist, and the Narnia IMAX release is a tactical move, not a change in the core strategy of member-exclusive first runs. Gregory Peters (Co-CEO) reiterated their pricing philosophy: add value through content investment, then ask members to pay slightly more. Sarandos added that while they cater to younger audiences who watch short-form, Netflix's core is longer-form storytelling, and they aim to 'outcompete for those moments of entertainment truth.'

Michael Nathanson asked about the primary factors limiting U.S. subscriber growth for Max and the company's strategy for closing the gap with competitors. He also inquired about the company's philosophy on partnering with other streaming services internationally.

Answer

CEO David Zaslav reiterated his belief in bundling and industry consolidation for a better consumer experience, citing the early success of the Disney/Hulu partnership. CEO of Global Streaming JB Perrette addressed U.S. growth, noting that while legacy wholesale subs decline, retail subs are growing. He said the key to penetrating price-sensitive households is the ad-lite tier, bundles, and new partnerships.