Good morning. Mark your calendars: Our globe-trotting Fortune Brainstorm AI event series returns to the Rosewood London from May 6–7.
As with every Brainstorm, expect a heady mix of technologists, executives, and financiers—all committed to building, buying, or investing in the future. If you fit the bill and are based in the region, please register your interest in attending here.
Based elsewhere but keen to come? Please register all the same. I’ll need as many mates as possible to sing “Glory, Glory” with me at Tottenham Hotspur Stadium. —Andrew Nusca
Want to send thoughts or suggestions to Data Sheet? Drop a line here.
The key to Netflix’s blowout earnings? A flywheel
After Netflix’s market value surged more than $40 billion following a blowout earnings report on Tuesday that revealed record subscriber growth, it’s clearer than ever that the streaming company is embracing a “flywheel” approach wherein various components feed off one another to propel the business forward.
Amazon perfected the strategy more than two decades ago: More selection leads to a better customer experience, which leads to more shoppers, which attracts more sellers, which leads to more selection, which propels revenue growth to build warehouses for faster delivery speeds or Prime Video programming for more customer engagement.
Now it’s Netflix’s turn. In a note, Jeff Wlodarczak of Pivotal Research Group pinned the company’s flywheel on subscribers and average revenue per user. “The larger they get the more leverage they have over their peers/content creators, the better their product gets (allowing them to drive subscriber/ARPU growth), the more cash they have to spend on compelling content and the bigger the moat grows around their core business model.”
On Tuesday’s earnings call, Netflix CFO Spencer Neumann described succinctly: “It’s engagement, revenue, profit, and it drives the flywheel.
The scariest part for Netflix’s legacy content rivals like Paramount Plus or Disney is that one of Netflix’s key new levers to increasing ARPU is still in its infancy: advertising. Netflix introduced an ad-supported tier a little over two years ago and has been testing out its own tech stack to serve ads. It’s also chasing live sports.
“With each additional big sports licensing deal the Netflix team inevitably signs, I do believe it will result in even more engagement for the service and thus, lower churn,” wrote Jason Kilar, an early Amazon executive who went on to run Hulu and then WarnerMedia as CEO, on the social media service X. “Such that the flywheel can spin faster. Smart moves.” —Jason Del Rey
What’s really at stake with the Stargate Project
OpenAI CEO Sam Altman called Stargate, a $500 billion plan to build data centers in the U.S. to power the expected soaring use of AI in the coming years, the “most important project of this era.”
Whether or not you agree, Stargate is arguably the tech industry’s biggest gamble ever, with an eye-popping price tag, astronomical energy needs, and zero guarantee of return. Given that today’s AI is a generalized technology in its infancy, no one knows how to make money from it at such an enormous scale.
Other high-stakes tech bets over the years have not been as costly, nor as wholly uncertain.
The Manhattan Project changed history but was backed by the government, not private business, and based on well-understood science. The tens of billions of dollars spent on cloud computing had a clear business case and a timeline of more than a decade. Meta’s obsession with the metaverse, or virtual worlds, was a $50 billion flop, but a brief distraction. The Dotcom boom (and bust) was an industry-wide bet that did not have the concentrated risk of Stargate.
Altman and President Donald Trump frame Stargate as a national imperative that could preserve current U.S. advantages in the race with China to develop advanced AI systems. But not everyone is buying the hype.
Critics like Gary Marcus argue that AI’s transformative potential is vastly overstated, warning that the U.S. economy will be left holding the bag after a massive overinvestment. Others, like pioneering AI researcher Yoshua Bengio, take a darker view, believing that far from ushering in prosperity, AI could reshape the world so profoundly that it threatens humanity itself.
Whatever the case, Stargate is a bet that all of us are all-in on—whether we like it or not. Maybe it’s time to make sure we really understand the stakes. —Sharon Goldman
Microsoft to buy 3.5 million carbon credits
Microsoft is set to shell out hundreds of millions of dollars for carbon credits that it can use to clear its conscience over the vast emissions associated with AI data centers.
The company told the Financial Times that it would buy 3.5 million credits over 25 years from a Brazilian company called Re.green, which buys deforested land in the Amazon and Atlantic forests, and plants indigenous trees in them.
The newspaper estimates that the deal is worth around $200 million. Although the new Trump administration isn’t exactly big on environmental obligations, Re.green said U.S. tech firms were at the “leading edge” of such nature restoration projects.
Like its peers, Microsoft is scrambling to find ways in which it can support AI infrastructure buildouts while retaining its carbon-reduction goals. Its carbon footprint grew 40% between 2020 and 2023—and that’s after using carbon credits to cancel out some of its energy-use emissions.
The use of carbon credits is controversial, as it can be hard to confirm that the funded projects do what they promised, and also because trees burn more easily in a heating world, releasing their stored carbon again. —David Meyer
More data
—Stripe lays off 300 workers. Product, engineering, and operation teams take the hit.
—Samsung debuts Galaxy S25, Plus. New Qualcomm chipset, more AI.
—Elon Musk fumes over Stargate Project, says partners “don’t have the money.”
—SK Hynix records record profit, but misses expectations. The Korean chip supplier leads the race in high-bandwidth memory for AI.
—U.S. Cyber Safety Review Board dismissed. DHS cost savings bests cybersecurity investigations.
—Thailand deploys AI-generated prime minister to reassure Chinese tourists they won’t be kidnapped.
—Electronic Arts lowers Q3 guidance. Shares drop 7% amid concerns about underperforming games including EA Sports FC.
—Neko Health raises $260m. Spotify CEO Daniel Ek’s body-scanning startup wants to be the Apple or Tesla of health care.
—The most cyber-attacked industry: telecom, per Cloudflare’s Q4 2024 threat report.
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