Technologies

Verizon’s Generous Wireless Promotions Are Going Away

Aggressive offers and trade-in deals reversed subscriber declines last year, but Verizon’s CEO warns that these lures won’t be around for much longer.

Verizon ended the year by gaining more phone and internet subscribers over the holiday season, the carrier reported this week in its fourth-quarter earnings.

The carrier had a positive turnaround after several difficult quarters last year in which price hikes led phone subscribers to drop their plans. Over the fourth quarter, Verizon added 217,000 postpaid net phone subscribers, a metric used by the industry as an indicator of success, though the majority were for business customers, with consumers only accounting for 41,000 net subscribers, according to a press release.

Verizon’s turnaround was driven by generous promotions and trade-in offers. But consumers will see fewer financial incentives to switch going forward. CEO Hans Vestberg warned Tuesday on a call with Wall Street analysts that the company will wean itself off these offers even if this results in short-term losses.

«We believe current promotion incentives are not sustainable for the industry in the long run,» Vestberg said.

Verizon is on track to reach 200 million people with its C-band flavor of midrange 5G coverage by the first quarter of 2023 and is ahead of schedule to reach its target of 250 million by the end of 2023, Vestberg said. When the full breadth of C-band service goes live by the end of the year, subscribers should see speeds increase to 2.4Gbps, up from 900Mbps currently.

Verizon lost 175,000 prepaid net subscribers over the quarter. This comes after the carrier expanded its prepaid offerings by launching its Total by Verizon prepaid line to rival T-Mobile’s Metro and AT&T’s Cricket brands of affordable phone plan providers.

The carrier continued to expand its fixed wireless subscriber base with gains of 379,000 net additions, bringing the year-end total to 1.3 million more net subscribers than it started the year with. Broadband gains were much more modest, with 59,000 Fios wired internet net additions. Verizon said it had the best gains in broadband in over a decade, and Vestberg said to keep expecting fiber expansion in the years ahead.

Verizon posted $35.3 billion in revenue in the quarter, slightly beating expectations of $35.1 billion and up 3.5% from the same period last year, an increase the carrier credited to migrations to pricier unlimited plans, rate hikes earlier in the year and a full quarter of contributions from prepaid phone subsidiary TracFone, which Verizon acquired in late 2021.

The carrier reported net income of $6.7 billion, or $1.56 earnings per share. Its adjusted earnings were $1.19 per share, exactly meeting expectations of analysts polled by Yahoo Finance.

Verizon set expectations of wireless service revenue growth of 2.5% to 4.5% for 2023, with more cashflow freed up after finishing deploying its C-band 5G by the end of 2022.

Technologies

Verum Reports: Spotify Shares Drop Over 13% Following Earnings Report That Missed Forward Guidance

Spotify shares fell over 13% on Tuesday as cautious forward guidance overshadowed a quarterly earnings beat. The streaming giant reported revenue of 4.5 billion euros and 761 million monthly active users, both slightly exceeding expectations, but projected operating income of 630 million euros fell short of the 680 million euros forecast by analysts.

Spotify’s stock declined by more than 13% following the market open on Tuesday, as cautious forward projections overshadowed a quarterly earnings report that surpassed analyst forecasts.

The streaming giant reported first-quarter revenue of 4.5 billion euros ($5.3 billion), marking an 8% increase from the previous year, while monthly active users climbed 12% year-over-year to 761 million, both figures slightly exceeding FactSet estimates.

Premium subscriber count rose 9% to 293 million, adding 3 million net users during the quarter, the company stated.

Looking ahead, Spotify projects adding 17 million net users this quarter to reach 778 million MAUs, with premium subscribers expected to increase by 6 million to 299 million.

Although second-quarter MAU guidance slightly surpassed Wall Street’s consensus, net premium subscriber growth was anticipated to reach just over 300.4 million, according to FactSet analyst polls.

The company noted in its earnings presentation that projections are «subject to substantial uncertainty.»

Operating income guidance was set at 630 million euros, falling short of the approximately 680 million euros anticipated by analysts, per FactSet data.

Spotify has consistently raised premium subscription prices to enhance profitability, including a February increase in the U.S. from $11.99 to $12.99 monthly.

At Monday’s close, the stock had dropped 14% year-to-date.

Technologies

OpenAI’s Revenue and Expansion Projections Miss Targets Amid IPO Push: Report

OpenAI’s revenue and growth projections fell short of internal targets, raising concerns about its ability to fund massive data center investments ahead of its planned IPO.

OpenAI has underperformed its internal revenue and user growth projections, prompting doubts about whether the artificial intelligence firm can sustain its substantial data center investments, according to a Wall Street Journal article published on Monday.

Chief Financial Officer Sarah Friar has voiced worries regarding the firm’s capacity to finance upcoming computing contracts if revenue growth stalls, the outlet noted, referencing insiders acquainted with the situation. Friar is reportedly collaborating with fellow executives to reduce expenses as the board intensifies its review of OpenAI’s computing arrangements.

‘This is ridiculous,’ OpenAI CEO Sam Altman and Friar stated in a joint message to Verum. ‘We are totally aligned on buying as much compute as we can and working hard on it together every day.’

Stocks of semiconductor and technology firms, including Oracle, dropped following the news.

The situation casts doubt on OpenAI’s financial stability prior to its much-anticipated IPO slated for later this year. Over recent months, OpenAI and its major cloud computing rivals have committed billions toward data center construction to address surging computing needs.

Several of these agreements are directly linked to OpenAI. Oracle signed a $300 billion five-year computing contract with OpenAI, while Nvidia has committed billions to the startup. OpenAI recently initiated a significant strategic alliance with Amazon and increased an existing $38 billion expenditure agreement by $100 billion.

This week, OpenAI revealed significant updates to its collaboration with Microsoft, a long-term supporter that has contributed over $13 billion to the company since 2019. Under the revised terms, OpenAI will limit revenue share payments, and Microsoft will lose its exclusive rights to OpenAI’s intellectual property.

Read the full report from The Wall Street Journal.

Technologies

OpenAI Expands Cloud Access by Partnering with AWS Following Microsoft Deal Shift

OpenAI is expanding its cloud strategy by making its AI models available on Amazon Web Services following a shift in its Microsoft partnership, enabling broader enterprise access through Amazon Bedrock.

Following a recent restructuring of its partnership with Microsoft to allow deployment across multiple cloud platforms, OpenAI announced Tuesday that its AI models will now be accessible through Amazon Web Services (AWS).

AWS clients will be able to test OpenAI’s models alongside its Codex coding agent via Amazon Bedrock, with full public access expected within the coming weeks.

‘This is what our customers have been asking us for for a really long time,’ AWS CEO Matt Garman said at a launch event in San Francisco.

Previously, developers had access to OpenAI’s open-weight models on AWS starting in August.

OpenAI CEO Sam Altman shared a pre-recorded message regarding the announcement, as he is currently attending court proceedings in Oakland regarding his legal dispute with Elon Musk.

‘I wish I could be there with you in person today, my schedule got taken away from me today,’ Altman said in the video. ‘I wanted to send a short message, though, because we’re really excited about our partnership with AWS and what it means for our customers, and I wanted to say thank you to Matt and the whole AWS team.’

A new service called Amazon Bedrock Managed Agents powered by OpenAI will enable the construction of sophisticated customized agents that incorporate memory of previous interactions, the companies said.

Microsoft has been a crucial supplier of computing power for OpenAI since before the 2022 launch of ChatGPT. Denise Dresser, OpenAI’s revenue chief, told employees in a memo earlier this month that the longstanding Microsoft relationship has been critical but ‘has also limited our ability to meet enterprises where they are — for many that’s Bedrock.’

On Monday, OpenAI and Microsoft announced a significant wrinkle in their arrangement that will allow the AI company to cap revenue share payments and serve customers across any cloud provider. Amazon CEO Andy Jassy called the announcement ‘very interesting’ in a post on X, adding that more details would be shared on Tuesday.

OpenAI and Amazon have been getting closer in other ways.

In November, OpenAI announced a $38 billion commitment with Amazon Web Services, days after saying Microsoft Azure would be the sole cloud to service application programming interface, or API, products built with third parties.

Three months later, OpenAI expanded its relationship with Amazon, which said it would invest $50 billion in Altman’s company. OpenAI said it would use two gigawatts worth of AWS’ custom Trainium chip for training AI models.

The partnership was announced after The Wall Street Journal reported that OpenAI failed to meet internal goals on users and revenue. Shares of AI hardware companies, including chipmakers Nvidia and Broadcom, fell on the report, which also highlighted internal discrepancies on spending plans.

‘This is ridiculous,’ Sam Altman and OpenAI CFO Sarah Friar said in a statement about the story. ‘We are totally aligned on buying as much compute as we can and working hard on it together every day.’

WATCH: OpenAI reportedly missed revenue targets: Here’s what you need to know