Apollo Go Seeks International Expansion

Apollo Go, Baidu’s autonomous ride-hailing service, provided 988,000 rides in the third quarter of 2024, up 20% year over year. As of October 28, 2024, the cumulative rides provided to the public by Apollo Go surpassed 8 million. 

During the third quarter of 2024, rides provided by Apollo Go’s fully driverless vehicles accounted for over 70% of total rides nationwide. The proportion of fully driverless rides further increased to 80% in October 2024. Apollo Go’s sixth generation autonomous vehicle, the RT6, is now operating on public roads in multiple cities in China. 

"The overall market is still in its infancy," said Robin Li, CEO of Baidu, on an earnings call with analysts. "So, competition should help accelerate the growth of the market and foster a more friendly, pro innovation regulatory environment. We believe such regulatory environment is essential for the healthy growth of the -- of this industry and we remain prepared for expansion when the time is right.

"We are actively seeking new opportunities for international expansion. We see significant potential in cities that enable large-scale, fully driverless operations, similar to Wuhan, Chongqing. Additionally, we are open to exploring different business model options, focusing on asset-light strategy to keep our operations flexible and efficient as we grow." Source: Baidu's results

Meta Heralds AR and AI Traction

Meta's Reality Labs unit grew revenue by 29% in the third quarter to 270 million US dollars, driven by sales of its mixed reality headsets and smart glasses. Reality Labs' expenses were 4.7 billion dollars, up 19% year-over-year driven primarily by higher headcount and infrastructure costs.

Mark Zukerberg, CEO of Meta, said "demand for [Ray Ban Meta smart] glasses continues to be very strong. The new clear edition that we released at Connect sold out almost immediately and has been trading online for over a thousand dollars. We've deepened our partnership with EssilorLuxottica to build future generations of smart eyewear that deliver both cutting-edge technology and style." 

Meta also said Reality Labs has "evolved [its] roadmaps to respond to the earlier-than expected success of smart glasses," which now support AI functionality. The company plans to significantly scale up its generative AI infrastructure capacity, "while also prioritising its fungibility."   It anticipates full year 2024 capex will be in the range of 38-40 billion dollars, updated from the prior range of 37-40 billion dollars. Meta also expects significant capex growth in 2025. 

Meta said its Llama large language model (LLM) is seeing strong momentum, with Llama token usage growing exponentially this year (LLMs decompose text into tokens - words, character sets or combinations of words and punctuation). It has just released Llama 3.2 and is developing Llama 4. 

"We're training the Llama 4 models on a cluster that is bigger than 100,000 H100s or bigger than anything that I've seen reported for what others are doing," Zuckerberg claimed. "I expect that the smaller Llama 4 models will be ready first, and they’ll be ready, we expect sometime early next year, and I think that they're going to be a big deal on several fronts -- new modalities, capabilities, stronger reasoning, and much faster." Source: Meta

Waymo Reports Rapid Growth

Alphabet reported that its self-driving ride hailing unit has increased the number of paid rides it provides  by 50% since August. Each week, Waymo is driving more than one million fully autonomous miles and serves over 150,000 paid rides, Alphabet said. The Other Bets unit (in which Waymo is the largest component) increased revenues by 31% to 388 million US dollars, while making a loss of 1.1 billion dollars.

"Through its expanded network and operations partnership with Uber in Austin and Atlanta, plus a new multi-year partnership with Hyundai, Waymo will bring fully autonomous driving to more people and places," said Sundar Pichai, CEO of Alphabet. "By developing a universal driver, Waymo has multiple paths to market. And with its sixth-generation system, Waymo has significantly reduced unit costs without compromising safety." He went on to say that the pace at which Waymo can launch in a new city is accelerating. 

Alphabet also reported that its Lens augmented reality app is now used for over 20 billion visual searches per month. It added that one in four of these searches have commercial intent.  Source: Alphabet

Tesla Expects Energy Storage Deployments to Double

Reporting a 2% year-on-year uptick in automotive revenues for the third quarter, Tesla said that it is on-track to deliver more affordable electric vehicles starting in the first half of 2025. As a result, CEO Elon Musk posited Tesla could achieve a 20% to 30% increase in vehicle sales in 2025.

Tesla also reported a 52% year-on-year rise in energy generation and storage revenues to 2.4 billion US dollars for the third quarter of 2024. The company expects energy storage deployments to more than double year-over-year in 2024.

Tesla reported that Powerwall (a home battery that stores energy generated by solar or from the grid) achieved record deployments in the quarter, although shipments of Megapacks (a large scale energy storage solution for organisations) declined sequentially. 

Still "ramp of Powerwall 3 and the Lathrop Megafactory continued successfully – with Lathrop demonstrating 200 Megapack production (40 GWh annual run rate) in a single week," Tesla said. "As of Q3, over 100,000 Powerwalls were enrolled in Virtual Power Plant programs, delivering additional financial value to owners while providing much needed support to the grid during periods of stress. The Shanghai Megafactory remains on track to begin shipping Megapacks in Q1 2025."  Source: Tesla investor relations

Deutsche Telekom Flags Growth Opportunities

Deutsche Telekom is targeting 4% annual growth in service revenues between 2023 and 207, compared with estimated 3.6% growth between 2020 and 2024. It is also aiming for a return on capital employed (ROCE) of 9% (after tax) in 2027 compared with 9% in 2023 and 4.5% in 2022, as it looks to raise free cash flow to 21 billion euros in 2027 from approximately 19 billion euros in 2024.

Between 2020 to 2027, Telecom Deutschland is aiming to double its ROCE and "move from hardly any fiber to close to 40% of the country being fiberised," said Srinivasan Gopalan, member of the management board, responsible for Germany. 

The telco is also looking to increase its share of the German TV market from 13% today to 20% in 2027. "Magenta TV, with the plethora of streaming services, customers are looking for a simple aggregator. Magenta TV has filled that need, which is why it's one of our fastest-growing categories right now," added Gopalan, while Wolfgang Metze, managing director of private customers, described TV as "an important piece in our strategy and key to emotionalize our best infrastructures."

Elsewhere in Europe, Deutsche Telekom is looking to scale its "instant payment solution, Payzy, which is already on the market in Greece for two years," to other European countries, noted Yvette Dominique Leroy, member of the management board, responsible for Europe.  "Based on our market research and customer feedback, insurance is really something which they naturally would like to get as a service from us," she added. "The last piece here is personally my favourite is the Wi-Fi Sensing, whereas we actually try, with the help of team, to bring a product to the market where we can actually give further peace of mind of our customers when it comes to home security and also taking care of their elderly member of the families." Source: Deutsche Telekom Capital Markets day

Meta Claims AR Breakthroughs

Meta unveiled prototype augmented reality (AR) glasses that it described as "truly representative of something that could ship to consumers." The Orion glasses support holographic displays, which enable the wearer to place 2D and 3D digital content within their field of view.

Although the prototype glasses look comically large (see picture) and could attract ridicule, Meta enthused: "Nailing the form factor, delivering holographic displays, developing compelling AR experiences, creating new human-computer interaction paradigms – and doing it all in one cohesive product – is one of the most difficult challenges our industry has ever faced. It was so challenging that we thought we had less than a 10% chance of pulling it off successfully. Until now." 

While many people will be too self-conscious to wear the Orion glasses out and about, the form factor could be light enough and sleek enough to be used for enterprise applications or in the privacy of the home.

Orion will only be available to Meta employees and some external actors, but the company said it is building towards a consumer AR glasses product line, which it plans to begin shipping in the near future.

Meta said it is focused on "tuning the AR display quality to make the visuals even sharper,  optimising wherever we can to make the form factor even smaller and building at scale to make them more affordable."

Meta also unveiled Meta Quest 3S, a headset that promises the same mixed reality capabilities and performance as the Meta Quest 3, but at a lower price point - starting at 299.99 US dollars for the 128 GB model. The 128 GB Meta Quest 3 had cost about 500 dollars, but its display resolution and field of view is better than that of the Meta Quest 3S.

The company also announced new capabilities for its Ray-Ban Meta glasses, such as being able to translate speech in real time. "When you’re talking to someone speaking Spanish, French or Italian, you’ll hear what they say in English through the glasses’ open-ear speakers," Meta said, noting the glasses will support more languages in future.

Source: Meta newsroom

T-Mobile Forecasts Strong Service Growth

T-Mobile US forecast a compound annual growth rate of approximately 5% in service revenue in the next three years, as the mobile operator expects to generate 75-76 billion US dollars in revenue in 2027. "This is driven by continued wireless and broadband customer growth, continued growth in average revenue per account from deepening customer relationships and growth in new businesses," it said. It plans to invest 9-10 billion dollars in annual capital expenditures between now and 2027.

Providing examples of opporunities, T-Mobile US said it has grown "solutions that it built to improve advertising in its own business to other advertisers into an over 1 billion dollar in annual revenue business." The operator also pointed to its T-Priority service, "which gives first responder agencies of all sizes priority on the T-Mobile network to help ensure best-in-class connectivity during times of congestion, especially massive emergencies, and offers support for a wide range of data-intensive applications." Source: T-Mobile US

Big Tech Steps Up Investment

The AI arms race is driving up capital spending by the tech giants. In the first half of 2024, the aggregate capital spending of the Magnificent Seven was more than 107 billion US dollars, compared with 77 billion dollars in the same period of 2023. In 2024, Alphabet and Microsoft have both already invested about 25 billion dollars each in capex, compared with 8.6 billion dollars (including spectrum) for Deutsche Telekom - one of the biggest investors in the telecoms sector.

On its second quarter earnings call, Alphabet said its increase in capital spending was "driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers, followed by data centres." It expects total capital spending to be about 48 billion dollars in 2024.

On that call, Sundar Pichai, CEO Alphabet and Google, added: "Aggressively investing upfront in a defining category (AI), particularly in an area, which in a leveraged way, cuts across all our core areas, our products, including search, YouTube and other services as well as fuels growth in cloud and supports the innovative long-term bets and Other Bets. It is definitely something that for us makes sense to lean in."

"The risk of underinvesting is dramatically greater than the risk of over-investing for us here. Even in scenarios where if it turns out we are over-investing, these are infrastructure which are widely useful for us, they have long useful lives, and we can apply it across and we can work through that."

Despite Alphabet's ramp up, Amazon still has by far the biggest capex budget in the Magnificent Seven, reflecting the fact that it runs a massive logistics business, in addition to its cloud services and apps. After cutting investment sharply in 2023 (through lower spending on fulfilment and transportation), Amazon has said it will increase capex in 2024 to support growth in its cloud computing business (AWS), which is investing in generative AI and large language models.

Source: The Magnificent Seven - Follow the Money