LT Weekly: May 23, 2025

It is always exciting to listen to Google I/O’s keynote presentation and this year was not any different. The Co unveiled a slew of new product updates centered on the expansion of its Gemini ecosystem and the transformation of Search into a deeply intelligent, agentic experience.

Google’s Gemini has seen strong adoption/usage, especially with its Gemini 2.5 Pro model and newly announced tools like Deep Think, Jules, and Gemini Flash 2.5 are designed to push the boundaries of reasoning and efficiency. Google’s upcoming “agent mode” and “personal context” were key highlights and aim to help Gemini to become a truly proactive assistant, capable of handling complex tasks across apps and devices.

The outlook for Google’s search business has been at the center of debate for some time given potential competition from AI platforms, but we were particularly impressed by Google’s product updates in this area. The Co’s new AI Mode is viewed as “reimagining” the search experience by integrating real-time visual understanding, deep research, and personalized shopping. The Co’s demos in this area were particularly interesting (and we look forward to testing them out).

Project Astra, Mariner, and StarLine are being embedded into products like Gemini Live and Google Meet, while new creative tools like Imagen 4, Veo 3, and Flow aim to empower users to generate rich media with native audio and video (the Veo3 demos were pretty mind blowing – see link to some Veo3 videos if interested). Google also introduced Android XR, a new platform for AI-powered headsets and glasses, and a partnership with Warby Parker (which includes up to $170mn in investment) was a key highlight.

All in all, there is still a long road ahead in the AI race but we were constructive on the scale and scope of Google’s AI product updates at the event which keeps them in the forefront and the debate about susceptibility of the Co’s core search business may die down a little bit, at least for the time being.

-> Alphabet’s shares traded down -1.5% on the I/O day but had previously rallied up +15.1% since the low in early April; The shares are still -18.4% below the closing high on Feb 4^th at $206.38

Some Key Updates On The Gemini Ecosystem

• # of developers: 7mn+ developers have built with the Gemini API via Google AI Studio and Vertex AI – a 5x increase since the last I/O; Gemini usage on Vertex AI is up +40x y/y

• New user disclosure: The Gemini app now has over 400mn MAUs, w/ usage of Gemini 2.5 Pro in the app up +45%
  • Back in March 2025, Gemini had 350mn MAUs, according to an internal Google analysis (link)

• Other Gemini updates –
  • Gemini Flash 2.5 is now available – optimized for speed and efficiency
  • Deep Think mode pushes Gemini 2.5 Pro to new reasoning heights, excelling in math, code, and multimodal benchmarks
  • Jules, the asynchronous coding agent, is now in public beta
  • Gemini SDK is now compatible with MCP tools, enabling broader agentic capabilities

Google Makes Progress On Its Vision Is To Make Gemini A Personal, Proactive, & Powerful AI Assistant

• The Co annc’d Gemini Live, a real-time conversational experience w/in the Gemini app that allows users to interact with Google’s AI assistant through natural, spoken dialogue
  • Gemini Live capabilities are now free in the Gemini app on Android and iOS
  • In the “coming weeks,” users will be able to connect Gemini Live to apps like Calendar, Maps, Keep, Tasks
• Google is bringing Project Astra (universal AI assistant w/ real-world understanding) to their products: Gemini Live has Project Astra’s camera & screen sharing capabilities so users can talk about anything they see
  • Rolled this out to everyone on Android and iOS this week
• Project Mariner (web-interacting agent that “gets stuff done” is coming to developers via Gemini API: Introducing multitasking (can oversee up to 10 simultaneous tasks) and the platform is using a feature called “Teach and Repeat” where users can show it a task once and it learns for similar tasks in the future
  • Testers like Automation Anywhere and UiPath are already starting to build with it
  • It will be available more broadly this summer

• Annc’d Google Beam, an evolution of its Starline 3D video calling tech, which uses multiple cameras and AI to create 3D image: The first devices will be launched w/ HP later this yr

 -> Zoom shares fell as much as -2.4% on the day of the announcement

• Deep Research, as of this week, supports file uploads and will soon integrate with Gmail and Drive
• Canvas allows Gemini users to transform content into “dynamic” web pages, quizzes, infographics, and podcasts in 45 languages
• Introduced real-time speech translation in Google Meet (English/Spanish now; more languages and enterprise support coming soon)
• Imagen 4 and Veo 3 are now integrated into the app for high-quality image and video generation with native audio
  • Imagen 4 is 10x faster than their previous model
  • Veo 3 can essentially generate sound effects, background sounds, & dialogue
  • Flow, a new AI filmmaking tool combining Imagen, Veo, and Gemini, is now live

The Co Will Be Bringing Agentic Capabilities To Chrome, Search & The Gemini App With Agent Mode

• An example of Agent Mode in the Gemini app is below…an experiential version of Agent Mode will be “coming soon” to subscribers –
  • You want to find an apartment for you and two roommates in Austin
  • You’ve each got a budget of $1,200 a month
  • You want a washer-dryer or at least a laundromat nearby
  • Normally, you’d have to spend a lot of time scrolling through endless listings
  • Using agent mode, the Gemini app goes to work behind the scenes
  • It finds listings from sites like Zillow that match your criteria and uses Project Mariner when needed to adjust very specific filters
  • If there’s an apartment you want to check out, Gemini uses MCP to access the listings and even schedule a tour on your behalf
  • And it’ll keep browsing for new listings for as long as you need
• Also, personalized “smart replies” are coming to Gmail…will be available this summer to subscribers
• Gemini in Chrome is rolling out to subscribers this week to Gemini subscribers in the US: It will offer contextual assistance while browsing

“Couldn’t Be More Excited About The Next Chapter Of Google Search”…AI Mode Is “The Next Big Step”

• AI Overviews have been scaling and is one of “the most successful launches in Search in the past decade”: Now serve 1.5bn+ users monthly across 200+ countries; In the US & India, they drive 10%+ growth in the types of queries that show them
  • Lens grew +65% y/y w/ 100bn+ visual searches already this yr

• The Co was very bullish on its newly annc’d AI Mode which is a new tab in Search … “it’s a total reimagining of search”: Powered by Gemini 2.5, it enables longer, more complex queries and follow-ups and key AI Mode features include:
  • Personal context is coming this summer: User will get personalized suggestions based on past searches and can opt-in (or out) to connect other Google Apps, starting w/ email from Gmail and other apps
  • Bringing deep research capabilities: Expert-level, fully cited reports
  • Complex analysis and data visualization for sports and financial questions is coming this summer
  • Launching Live search: Using your camera, Search can see what you see and given you info as you go back and forth in real time; “It’s like hopping on a video call with Search
  • Shopping experiences will be significantly enhanced as AI mode gives personalized shoppable options and also uses AI feature to see how styles look on you (Try it On); Their new visual shopping & agentic checkout features are rolling out in the “coming months”, and you can start trying on looks in Labs starting now
  • Availability: AI Mode is now available to everyone in the US

Source

Google Announces 2 New AI Subscription Plans

• Google AI Pro: Access to a full suite of advanced AI tools w/ higher rate limits and special features vs the free version
  • Globally available today

• Google AI Ultra: VIP-tier plan w/ early access to features like 2.5 Pro Deep Think mode, Flow, and Veo 3 and plan comes w/ the highest rate limits
  • Includes YouTube Premium and expanded storage
  • Its available in the US now and will be globally available “soon”

Google Partner’s W/ Warby Parker On Its Smart Glasses

• Google Android XR platform supports a broad spectrum of devices for different use cases, from headsets to glasses & “everything in between”
  • Built in collaboration w/ Samsung & Qualcomm

• Samsung’s Project Moohan headset launches later this year: The first Android XR device, Moohan gives you an infinite screen to explore your apps with Gemini by your side
• Android XR glasses: Glasses prototypes are in testing
  • Annc’d that Gentle Monster & Warby Parker will be the first eyewear partners to build glasses with Android XR
  • Features include real-time translation, contextual awareness, and navigation.

-> As part of this collaboration, Google committed up to $75mn for Warby Parker’s product development & commercialization costs; In addition, Google committed to investing up to $75mn in Warby Parker, at Warby Parker’s option and subject to reaching certain collaboration milestones; The first line of intelligent eyewear is planned to launch after 2025

-> Separately, but related in the smart glasses space, Apple is reportedly aiming to release its own smart glasses at the end of next year; The glasses would have cameras, microphones and speakers, allowing them to analyze the external world and take requests via the Siri voice assistant, and could also handle tasks such as phone calls, music playback, live translations and turn-by-turn directions (link)

While Google’s AI advancements at I/O this week were quite impressive and exciting (see Theme #1), the question about how much energy is needed to run these more complex AI queries resurfaced in our mind on the back of an interesting MIT Tech Review paper this week on this very topic. More and more of all energy usage is going towards data centers and more and more is going towards AI-specific servers.

From 2005 to 2017, the amount of electricity going to data centers remained relatively flat given that the additional power needs from the proliferation of new data centers to support the rise of cloud based online services like Facebook and Netflix was offset by increased efficiency. But the dawn of AI changed that curve. Data centers started getting built with energy-intensive hardware designed for AI, which led them to double their electricity consumption by 2023. All in all, an estimated 4.4% of all energy in the US now goes towards data centers, and an increasing amount is being used for AI -specific servers.

With the rapid improvement in AI capabilities, what will these power needs look like in the future?  Our key takeaways from the paper are below and if you’d like to dig in further, this is the link to the MIT Paper.

• Data centers in the US are est’d to have used ~200 terawatt-hours of electricity in 2024 (4.4% of all the energy in the US) … this equates to roughly what it takes to power Thailand for a year
  • AI-specific servers in these data centers are est’d to have used between 53-76 terawatt-hours of electricity
    • On the high end, this is enough to power more than 7.2mn US homes for a year

• Estimating where this is going is a challenge given the lack of transparency and information on power usage of closed source models…the use case below was based on an analysis of various open-source models as a proxy
• As a simple use case…You’re running a marathon as a charity runner and organizing a fundraiser to support your cause and you –
  • Ask AI 15 questions about the best way to fundraise
  • Then you make 10 attempts at an image for your flyer before there is one you like
  • And then you make 3 attempts at a 5 second video to post on Instagram
  • All this would require an est’d ~2.9 kilowatt-hours of electricity
    • That’s enough to ride 100+ miles on an e-bike (or ~10 miles in an avg electric vehicle) or to run a microwave for 3.5+ hrs

• The paper included some estimates on ChatGPT’s power usage as well…
  • A single ChatGPT query requires 0.3 watt-hours, or 1,080 joules, per message
  • 1bn queries per day for one year implies over 109 gigwatt-hours of electricity, which is enough to power 10,400 homes for a year
  • Adding images implies an addtl 35 gigawatt-hours, which is enough to power another 3,300 homes per year
  • And this does NOT include video generators
  • And this is just for ChatGPT…let alone all the other models

• By 2028, the share of US electricity going to data centers could triple to 12% w/ more than half of the electricity going to data centers projected to be used for AI (power going to AI-specific purposes will rise to between 165 and 326 terawatt-hours per year)
  • At that point, AI alone could consume as much electricity annually as 22% of all US households
  • That would generate the same emissions as driving over 300bn miles – over 1,600 round trips to the sun from Earth

• Leading tech companies are trying to plan ahead –
  • SoftBank, OpenAI, Oracle, and the Emirati investment firm MGX intend to spend $500bn in the next four years on new data centers in the US
  • Anthropic has suggested that the US build an additional 50 gigawatts of dedicated power by 2027
  • AI companies are also planning multi-gigawatt constructions abroad

• Tech companies are looking to nuclear power sources as well
  • Meta, Amazon, and Google have annc’d goals to use more nuclear power
  • They have joined a pledge to triple the world’s nuclear capacity by 2025
  • Today, nuclear energy only accounts for 20% of electricity supply in the US, and powers a fraction of AI data centers’ operations

Deal making in the connectivity sector over the past 12 months has been on fire! Starting last spring, T-Mobile announced the formation of a JV with EQT Infrastructure to acquire Lumos in April 2024 and also announced the formation of a joint venture with KKR to acquire Metronet in July 2024. Verizon then announced the acquisition of Frontier in September 2024. Moving into 2025, Crown Castle announced it’s selling its Fiber segment to EQT and Zayo in March 2025, Charter and Cox last week announced a merger, and, now this week, AT&T announced that it is buying the vast majority of Lumen’s Mass Market fiber business. What a list! In the background, the connectivity sector has been a shining star as well given the defensive and domestic nature of business in the sector, making it an attractive place for investors to hide during volatile and uncertain times. Mgmt teams also have a lot more visibility to their operations than many other consumer oriented sub-sectors of TMT.

More specifically on AT&T’s deal this week, it had been speculated for some time so it was not a complete surprise (link). The strategic rationale makes sense in that AT&T will be able to expand its fiber reach and penetration into new regions and drive more wireless customers as well given expected uptake in converged bundled packages of broadband and mobile in these new areas and a separate FWA re-sale agreement with Lumen. Another aspect of AT&T’s plan post the close of this transaction is to bring on an equity partner, who will co-invest in other deals (and this unit will be deconsolidated from AT&T’s financials). They believes this structure is “consistent with its balanced approach to capital allocation – supporting the accelerated and capital-efficient expansion of AT&T Fiber outside of its traditional wireline operating region.”

This Lumen deal itself will be immaterial to AT&T’s overall financials during the next 12-24 months and AT&T reiterated its existing guidance. Longer term as the asset scales, AT&T expects the transaction to be accretive

See below for the need to knows regarding this transaction…(link/link)

-> AT&T share fell -0.9% in reaction; While Lumen’s stock rallied at much as +17.1%, it pared those gains through the day to end up only +0.8%; YTD, AT&T is up +20.4% (outpacing both VZ and TMUS up +8.3% and +10.0%, respectively), while Lumen’s stock is down -29.9%  

• Deal basics
  • Deal value: $5.75bn, cash
  • Expected close: H1 2026

• What is AT&T buying and what is included in the deal?
  • Effectively all of Lumen’s Mass Markets fiber business, made up of ~1mn fiber customers; This will expand AT&T’s fiber reach by 4mn+ locations across 11 states
    • Includes last-mile fiber assets & central office network elements, “enabling a consistent AT&T Fiber experience within Lumen’s footprint”
    • These assets generate $750mn+ in annualized revenue
  • Lumen will support AT&T post-close via transitional agreements (~2 years) covering operations, IT, billing, and customer support
  • AT&T will also receive long-term access to certain Lumen central offices, poles, and conduits
  • AT&T will hold the acquired fiber network assets, including certain fiber network deployment capabilities, in a new, fully owned subsidiary (“NetworkCo”)

• What is Lumen keeping?
  • Lumen retains its enterprise-focused infrastructure: national/regional fiber backbone, central offices, and real estate

• AT&T will bring in an equity partner for NetworkCo post the close of this transaction
  • These acquired fiber assets will be held in a new fully owned subsidiary called NetworkCo
  • But post close, AT&T plans to bring in an equity partner, selling partial ownership of NetworkCo, which will operate as a wholesale open access platform with AT&T as anchor tenant
    • AT&T expects to identify an equity partner & close a transaction w/in ~6-12 months of closing the transaction with Lumen
  • After bringing in the equity partner, NetworkCo will be deconsolidated from AT&T’s consolidated financial statements
  • All acquired Lumen Mass Markets fiber customers will remain AT&T customers

• The deal will have an immaterial financial impact to AT&T’s consol adj EBITDA, EPS & FCF over the next 1-2 years
  • AT&T reiterated its FY25 guidance (including buyback plans) & will maintain its leverage target (~2.5x net debt to adj EBITDA)
  • The deal is expected to be accretive “long-term” as the business scales

• The deal will enable AT&T to accelerate its fiber plans and tap into locations outside its traditional operating region
  • With Lumen’s Mass Markets fiber biz, AT&T’s total fiber reach will increase to 30 states and to 60mn customer locations by the end of 2030; This is double the amount of AT&T fiber locations today
    • This includes expansion in metro areas such as Denver, Las Vegas, Minneapolis-St. Paul, Orlando, Phoenix, Portland, Salt Lake City, and Seattle
  • AT&T believes it can increase fiber customer penetration in the acq’d footprint to the current penetration of AT&T Fiber which is in the 40% range
  • Given AT&T will gain access to Lumen’s fiber construction capabilities w/in its ILEC footprint, it also plans to accelerate the pace at which fiber is being built in these territories
• AT&T also expects the deal to drive new postpaid wireless & FWA additions
  • The geographies that AT&T is acquiring include some of the largest metro areas where AT&T has the lowest mobility share so there is opportunity to further penetrate
    • Converged customers remain very attractive: T’s share of postpaid phone subs is 5ppts+ higher than their national avg where they offer AT&T fiber
  • AT&T & Lumen also have separate agreements regarding re-selling FWA: Lumen will be able to resell AT&T’s residential w-less services technologies, such as via AT&T Air, to their legacy copper customers that won’t have the oppty to migrate to T’s fiber services
• AT&T is confident about executing on the deal strategy
  • AT&T “knows how to operate and build fiber networks at scale”
  • It “has experience operating fiber networks that were decoupled from legacy infrastructure”

Given we reached the end of the Q1 earnings season, as always, we like to zoom out and take a look across our LionTree TMT and Consumer Universe of ~200 companies across 32 sub-sectors with market caps of $1bn+ to evaluate financial performance relative to Wall Street projections overall.

Despite all the headlines around inflation, tariffs, and shifting rate expectations, quarterly performance relative to expectations remained more or less consistent. Profitability and revenue beats were largely in-line with recent quarters, though there were some shifts in magnitude and distribution.

On the profitability side, 76% of companies beat consensus projections, up slightly from 74% in Q4, but what stood out more was the much higher magnitude, with 43% of companies delivering double-digits beats (vs 31% in Q4). The median EBITDA beat also widened to +4.4%, up from +3.3% last qtr, even as the avg beat moderated from +12.1% in Q4 to +9.7% in Q1.

On the revenue side, 74% of companies topped estimates, which was the same as in Q4, and 3% of companies posted double-digit revenue beats, up slightly from 2% in Q4. That said, the median sales surprise pulled back to +1.0% from +1.4% in Q4, while the avg ticked up to +2.0% from +1.7%.

Given these dynamics, slightly more companies (52%) traded up vs down (48%) following results, but fewer stocks made large moves in either direction. Overall, there are still a lot of uncertainties ahead but at least so far, more companies focused on delivering stronger profitability levels during this period.

See below for more on Q1 financial and stock performance of companies and sub-sectors within our LionTree Universe of TMT and Consumer stocks.

More Stocks Traded Up Post-Earnings Q/Q, Though Fewer Made Double-Digit Moves…Gogo, Groupon, & Oscar Health Shares Rallied The Most

• 52% of stocks traded UP post their reports, which was a step up from 46% in Q4 and 50% in Q3
  • 14% traded UP double-digits in reaction to earnings, which was down from 15% in Q4 and 20% in Q3
  • 9% traded DOWN double-digits in reaction to earnings, which was down from 12% in Q4 and 16% in Q3

• The top 3 BEST performers in reaction to earnings were –
  • Gogo, up +45%
  • Groupon, up +43%
  • Oscar Health, up +30%

• The bottom 3 WORST performers in reaction to earnings were –
  • Block, down -20%
  • FuboTV, down -17%
  • Liberty Latin America, down -15%

Of The Companies That BEAT Expectations In Q1…

• Clover Health, Sonos & TripAdvisor had the largest % beats on adj EBITDA
  • Overall, 76% of the companies in our Universe beat consensus on adj. EBITDA, and 43% had double-digit beats (vs 74% & 31%, respectively for Q4)
  • The median adj EBITDA rose to +4.4%, up from +3.3% in Q4 (but was below +7.0% in Q3)

• Liberty Braves, Electronic Arts, and Hasbo had the largest % beats on Sales
  • Overall, 74% of the companies in our LionTree Universe beat consensus on revenue (about in-line w/ 73% in Q1), but only 3% of those companies beat expectations by double-digits or more (up from 2% in Q4)
  • That said, the median sales beat fell back down to +1.0%, after rising to +1.4% in Q4, which was up from +1.0% in Q3

Of The Companies That MISSED Expectations In Q1…

• Roblox, Liberty Formula One, & Six Flags had the largest % misses on adj EBITDA
  • Overall, 24% of the companies in our Universe missed consensus on adj. EBITDA

• Six Flags, Tesla, & Block had the largest % misses on sales
  • Overall, 26% of the companies in our Universe reported sales in-line/lower than consensus 

We continue to closely follow the progress of the autonomous vehicle industry and the race to mass commercialization is accelerating. There were several notable updates this week that we wanted to flag. Tesla CEO Elon Musk announced plans to launch a fully driverless robotaxi trial in Austin by the end of June. The initial rollout will be very limited, with around 10 vehicles on the road, but Musk expects a rapid ramp-up to 1,000 cars and expansion into additional cities within a few months if all goes well. That said, when it comes to Elon Musk, timelines need to be taken with a grain of salt.

Musk also addressed questions about the future at Tesla this week given his political advisory involvement in the last yr and reaffirmed his commitment to leading Tesla as CEO for at least the next five years.

While Tesla captured much of the spotlight in AVs this week, others also made notable moves – WeRide expanded its partnership with Tencent to further drive its robotaxi ambitions (with a focus on expanding globally), and Waymo announced that it surpassed 10mn paid robotaxi rides.

See below for more.

Tesla To Launch Driverless Robotaxi Trial in Austin by June As Musk Reaffirms Commitment To His Cos (link/link/link/link)

• Tesla is on track to launch a robotaxi trial in Austin, Texas, by June end, per Tesla CEO Elon Musk
  • Expect a quick ramp up after a limited rollout next month: “We’ll start with probably 10 for a week, then increase it to 20, 30, 40… It will probably be at 1,000 within a few months”
  • What cars/technology will be used? To start, Tesla’s robotaxis will be Model Y vehicles equipped with a forthcoming version of FSD, or full self-driving, known as FSD Unsupervised
    • There will be no driver in the vehicle when the Robotaxi program launches in June
    • The Cybercab, which was unveiled by the Co last October, will not be available initially, as those cars will likely be produced in 2026
  • Launch in Austin will be “geo-fenced” to certain parts of the city: Robotaxis will be limited to certain parts of Austin and avoid intersections that the CO deems unsafe; “We are actually going to deploy not to the entire Austin region, but only the parts that are the safest”
    • Plan to bring the robotaxis to Los Angeles and San Francisco following the planned Austin debut

• Update on Musk’s role at Tesla – he will reduce his work for Trump administration to focus on Tesla
  • “My rough plan on the White House is to be there for a couple days, every few weeks, and to be helpful where I can be helpful”
  • Will Musk still be CEO of Tesla in five years? “Yes, no doubt about that at all” -> Comes after a WSJ report earlier this month that Tesla’s board had reached out to several executive search firms to work on a formal process for finding Tesla’s next chief executive; Tesla later issued a denial and Musk criticized the article on X (link)
  • Musk is also looking to increase his share of the Co to 25%: “That’s the number I’d feel comfortable at, because that’s where I have some control, but not so much control that I can’t be thrown out”
    • Musk currently owns a 12.77% stake in Tesla, worth ~$140bn, according to FactSet
  • On future political spending plans – “going to do a lot less in the future”: When asked why, Musk responded “I think I’ve done enough”

• On a potential merger b/w Tesla and xAI – that is not being considered but also is “not out of the question”

-> While not AV related, Musk also said his satellite internet service Starlink, which is currently owned and operated by SpaceX, could eventually stand alone as a separate public company (link)
Some Addtl Key Updates This Week In The AV Space  

• WeRide is expanding its strategic partnership w/ Tencent Cloud to drive robotaxi commercialization (link)
  • It will support WeRide’s autonomous driving R&D, robotaxi commercialization, and global expansion efforts
    • It builds on an initial April 2024 agreement focused on co-developing cloud platforms and smart driving solutions for OEMs and Tier 1 suppliers
  • The Cos will jointly develop intelligent driving solutions for intl markets: Tencent Cloud will provide localized, compliant cloud infrastructure to accelerate WeRide’s scaled commercial rollout of its autonomous driving products overseas
  • WeRide’s Robotaxi svs will be integrated into Tencent’s platforms, including Tencent Smart Transportation Mini Program on Weixin/WeChat and Tencent Maps

• Waymo has reached 10mn paid trips, doubling in five months (link/link)
  • Half of those rides have taken place this yr
  • The 10mn figure includes rides in Austin, Los Angeles, San Francisco and the Phoenix area
  • Waymo is currently delivering 250k+ paid robotaxi rides a week, Alphabet said in its latest earnings report
  • Waymo is not yet profitable but that the Co is “super focused on building a sustainable business

The era of ad-free dominance, a hallmark of the early streaming boom, appears to be rapidly fading. Just two years ago, half of the Premium SVOD services didn’t even offer an ad-supported plan, and only about 1 in 3 subscribers were opting in to ad plans. But today, the landscape looks very different.

Ad-supported streaming options are surging in popularity, now making up nearly half (46%) of SVOD subscriptions, according to Antenna. At the same time, new research from Hub Entertainment Research shows that consumers are becoming increasingly price-sensitive, cutting back on individual premium services due to rising costs and content fatigue. Instead, they’re gravitating toward bundled offerings and value-driven packages to get more out of their streaming dollars.

Both reports highlight some compelling shifts. See below for more.

Ad-Supported Streaming Grows To Nearly Half Of SVOD Subscriptions, Per Antenna (link) 

• Nearly half (46%) of subscriptions are ad-supported among the SVOD services that offer both ad-free and ad-supported options
• Ad-supported subscriptions GREW +32.7% y/y, while ad-free subscriptions FELL by -0.1% over the same period

• 71% of net adds in the past 9 qtrs came from ad-supported plans

• Ad-supported net adds GREW by +7.6mn y/y: From 19.8mn in 2023 to 27.4mn in 2024
  • Note that ad-supported net adds in Q1:25 were down -3.3mn y/y, driven by the exclusive NFL AFC Wild Card Game on Peacock in Q1:24, which drove a surge in ad-supported acquisition

• Ad-free net adds FELL by -8.7mn y/y: From 14.1mn in 2023 to 5.4mn in 2024

Consumers Cut Back on Individual SVODs As Perceived Value Declines, While Bundling Drives Higher Engagement, Per Hub Entertainment Research’s “The Best Bundle” Report (link)

• 52% of consumers currently pay for the “Big 7” premium US SVODs: Netflix, Amazon Prime Video, Hulu, Disney+, HBO Max, Paramount+ and Peacock
  • Which is DOWN from 61% last yr
  • Why the cutback? “A reaction to increased prices and the fact that each offers an abundance of content”

• More consumers feel like they’re getting less value vs last yr
  • Based on how much they’re spending, fewer users feel like they are getting excellent or good value (60%) vs last yr (65%)

• Consumers that use aggregators have more paid svs overall
  • Bundling increases paid svs consumptions – people who bundle through aggregators like Amazon or Roku use about three of more paid svs than non-bundlers

• Recent sign-ups are driven more by value (packaging and pricing) vs content (exclusive titles)
  • More than specific content, “package deals” stands out as a top reason for starting to use paid SVODs (Netflix was the exception)

• OpenAI is buying iPhone designer Jony Ive’s AI devices startup io for $6.4bn in an all-equity deal (link/link/link)
  • io is coming in-house, while Ive and his “creative collective” called LoveFrom will stay independent
    • io was founded a year ago by Ive, along with Apple alumni Scott Cannon, Tang Tan and Evans Hanke
    • LoveFrom was founded in 2019 by Ive after he annc’d he was leaving Apple
  • How will io be integrated into OpenAI?
    • Ive is taking on “deep creative and design responsibilities across OpenAI and io”
    • io’s team of ~55 hardware engineers, software developers and manufacturing experts will now merge with OpenAI to work more intimately w/ the research, engineering and product teams in San Francisco
  • OpenAI said it’s paying $5bn in the transaction, as it already owns 23% of the company
  • Purchase is OpenAI’s largest thus far, and comes weeks after the Co agreed to buy AI-assisted coding tool Windsurf for $3bn; Prior to that, OpenAI acquired analytics database company Rockset for an undisclosed sum in 2024
  • OpenAI products in the works? Per OpenAI CEO Sam Altman –
    • “It’s a relationship and a way of working together that I think is going to yield products and products and products”
    • “OpenAI is going to create a product at a level of quality that “has never happened before in consumer hardware”
    • Competition for smartphones? “In the same way that the smartphone didn’t make the laptop go away, I don’t think our first thing is going to make the smartphone go away…It is a totally new kind of thing”
    • The first devices are slated to debut in 2026

• NBCUniversal had reportedly made a bid for ESPN’s Major League Baseball (MLB) package (link)
  • ESPN walked away from the package in February after exercising a clause to opt out of the final three years of its $550mn/yr contract after the 2025 season
    • The move ended a 35-yr partnership with MLB and put the rights into play for others
  • NBC is reportedly offering “significantly less” than what ESPN paid, in part because it isn’t seeking the intl and radio rights that ESPN licenses from MLB, or the rights to highlight clips
    • ESPN was reportedly willing to pay $200mn/yr in a renegotiated pact, but the league declined, according to a previous WSJ report
  • If the bid is successful…
    • NBC would air games on Sunday night, the slot ESPN has occupied since 1990
    • Games would also appear on NBC’s sister streaming service, Peacock
    • NBC is also interested in the first round of the postseason and the annual Home Run Derby, which ESPN currently carries
  • What rights does NBC have right now? National Football League and, starting later this year, National Basketball Association games on Sundays
    • Per the report, when there are scheduling conflicts with other sports, MLB games would be streamed on Peacock

• Trump threatens steep tariffs on Apple iPhones and EU products (link/link)
  • 25% import tax “at least” on iPhone not manufactured in the US, later widening the threat to any smartphone
    • Later on Friday, Trump told reporters that his proposed tariff on Apple would also apply to “Samsung and anybody that makes that product,” apparently referring to smartphones
    • Trump last week during his Middle East trip said he was displeased with Tim Cook, Apple’s CEO, over the Co’s plan to manufacture iPhones set to be sold in the US at newly built plants in India
    • Apple’s iPhone is produced primarily in China, but the Co has been shifting manufacturing to India in part because that country has a friendlier trade relationship with the US
  • 50% tariff on all goods sent to the US from the EU, starting June 1st
    • The warning against the EU came just hours before the two sides were set to have trade talks – “Our discussions with them are going nowhere!” Trump wrote in a Truth Social post
    • Trump last month announced a 20% tariff on most EU goods, but had halved it to 10% until July 8^th to allow time for negotiations
    • Not looking to negotiate, but added in an investment caveat: “I’m not looking for a deal – we’ve set the deal,” Trump said, but added that “If somebody comes in and wants to build a plant here, I can talk to them about a little bit of a delay”
  • An update on overall trade talks with countries – “There are 18 important trading partners and, I would say, with the exception of the EU, most are negotiating in very good faith,” said Treasury Secretary Scott Bessen in a Fox News interview
    • Talks are “far along with India,” and many Asian countries have presented “very good deals”
    • “Over the next couple of weeks we’re going to have several large deals announced”