alisa: i'm alisa parenti in washington. you are watching "bloomberg technology." let's start with a check of first word news. president trump reiterated the need for two willing parties and the push for a peace deal between the palestinians and israel. he spoke at the white house today after welcoming the palestinian president. the house passed a bill to fund the u.s. through september. it passed by a vote of 309-118. president trump does plan to sign the measure, even though it did not include a provision for a wall at the u.s. mexico border. testifying today about election related investigations, fbi director james comey says it would have been catastrophic to conceal the newly discovered

emails from hillary clinton. he says if given the chance for a redo, he would do the same thing. secretary of state rex tillerson tried to ramp up morale at the state department today, encouraging employees to approach work with "no constraints." the address aimed to reassure staff about thousands of global job cuts at the state department. former president obama and first lady michelle obama returned to chicago to share details about his future presidential center. obama spoke at a forum where the renderings for the center and library were unveiled. they will donate $2 million to summer job efforts. i'm alisa parenti, and this is bloomberg. emily: i'm emily chang and this

is "bloomberg technology." coming up, facebook nears monthly active users, but an ad slow down be looming? we hear from the coo sheryl sandberg on their earnings report. plus, tesla bulls can breathe easy for another quarter as the company confirmed its anticipated model three mass-market is on track to begin production on time. and our extended interview with silicon valley veteran chamath, taking on everything from president trump, to advise for embattled uber ceo travis kalanick. first, facebook shares are down after reporting earnings that missed expectations. the biggest tech companies keep getting bigger, though, and facebook is no exception. the social network now has 1.94 billion monthly active users, and at this rate, they could hit 2 billion total users by next quarter. another big contributor is

mobile advertising. accounted for 85% in revenue thanks in part to instagram. yet the company warns revenue growth could slow down this year. they are running out of space to put ads in the core app. i spoke to coo sheryl sandberg who had this to say. >> we carefully track the impact of ads on the user experience . we have been doing that for the past several years. we have been able to improve quality and relevance of ads. where we are focused is continuing to improve ad quality and relevance. emily: joining us from seattle, emarketer principle analyst deborah williams who specializes in social media marketing and demographics. your first take on the numbers, especially what's going on with ads. >> those are just incredible numbers. every quarter, it seems like facebook has another "great

quarter," and it's kind of hard to see where there might be problems. the revenue number looks great, the user number looks great. there is a lot of momentum at facebook. by the same token, sheryl sandberg's comment about ad load, we've heard about this for some time. i think it is starting to show that facebook is looking for act two when it comes to revenue. the newsfeed has been the main source of revenue for five years and now it is looking for other things. instagram, video. emily: the next act might be instagram, which some people call facebook's next facebook. 700 million users. the newsfeed has been the main source of revenue for five years take a listen to what sheryl sandberg had to say about instagram in particular, and how much it is contributing to the overall high. >> instagram is a very important mobile ad platform along with facebook. we think the two most important

platforms. we are seeing strong growth across both. the increasing visualization on ads is part of why they are so appealing, and the fact that you can buy ads through the facebook ad system on facebook, instagram, and audience network, use the same infrastructure and targeting. i think it gives the platform a lot of ability to deliver results for marketers. i think it's early, but we are also seeing advertisers excited about ads in stories, which has heavy visualization and the ability to reach people. emily: that said, they still don't breakout instagram revenue, which makes you wonder, why not? at what point does instagram meaningfully contribute to this to the point where they are willing to show us the numbers? >> i think it is already meaningfully contributing to facebook's revenue. our forecast this year is that instagram will have $4 billion in ad revenue, and that is going

to be over 1/10 of facebook's total revenue. we have a number of $36 billion for facebook ad revenue this year. so it's already a big contributor, so that's probably not the reason why they are not sharing the numbers, but i think instagram is a really interesting platform for marketers. they are still really intrigued by it, and they still want to learn more about how to reach that youth audience that is so prominent on instagram. emily: something else they are experimenting with is different forms of video advertising. eventually -- potentially mid-roll ads. take a listen to what she had to say about that. >> right now, the air in the testing phases of the ad breaks. we are excited to be testing them. it is going well so far, but it is early days. we will see. emily: mark zuckerberg has famously been against pre-roll ads, but middle ads, like a commercial on television, how optimistic are you about that as a future source of revenue?

>> mid-roll ads and pre-roll ads, for that matter, have been really successful for other platforms like youtube. so it makes a lot of sense for facebook to get involved in mid-roles. pre-role is maybe not the right format for facebook, but i feel as they start to roll out more video program, including advertising, i think advertisers will be intrigued by that. video advertising is growing enormously, and advertisers want to find new places to spend those dollars. i think facebook will benefit. emily: there's been concerned about graphic violence and facebook live, about the rise in fake news. facebook has announced a number of things to combat these issues. and sheryl sandberg told me they have not seen meaningful impact on revenue from these problems. how big a risk factor do you think those two things are?

>> i think they can be a risk factor. the advertisers that we talked to in the past couple of months >> i think they can be a risk about issues like this, they haven't reported any change in the way that their ads are being responded to or their engagement, or return on investment for advertising. so so far, these things have not had an impact on the revenue on the advertiser's ability to use facebook. but you have to wonder over time if people's attitudes change, if they are happy using facebook, if they are worried. if that causes them to be less engaged with facebook. all these things they are watching, but right now we are not seeing evidence on the revenue side. emily: we will be watching to see if they hit that 2 billion user mark. principal analyst debra williamson, thank you for joining us. an update following apple earnings results on tuesday. apple shares fell from record highs on flat iphone sales. revenue out of china dropped 14% in the quarter. earlier on bloomberg tv, we

spoke about the challenges apple is facing in china. >> china in particular is a challenging one. china is tough because not only do you have higher awareness, as we do in the u.s. as well, of the new iphone coming, but you also have significant localized competition with companies like huawei creating great devices that can compete from a features perspective. emily: coming up, we are continuing our earnings coverage with tesla reporting its first-quarter results. the company reported a bigger loss than expected, but investors are encouraged about model three production. shares are dipping after hours. and if you like bloomberg news, check us out on the radio. you can now listen on the bloomberg app, bloomberg radio, and sirius xm. this is bloomberg. ♪

emily: a story we are watching. hedge fund manager david einhorn is putting a target on tesla, saying the markets are too optimistic about the company's prospects for expanding electric car sales. he says stockholders put the irrational faith in ceo elon musk. >> for the time being, investors remain hypnotized by the tesla ceo. we are skeptical that the company will be able to mass-market cars and justify the current valuation. the enthusiasm for tesla and other bubble basket stocks is ravenous it of the march, 2000 dotcom bubble. emily: tesla says initial production of the model three is on track for july. still, the company reported a bigger loss than expected in the first quarter. we are joined by our reporter covering tesla for bloomberg news. what is the biggest surprise?

anything to do with the model three? reporter: i think the bulls, the lovers of tesla and fans of elon musk, have a lot to be happy about. this is a company that so often has to delay project launches, and now they have to say two months away from job one they are on track. they are going to get to 5000 oh week this year, 10,000 a week by next year. suppliers are ready. a lot for them to be happy about and be excited about. but of course, it's not the most explicit sort of earnings report. so the bears are kind of winning out now. vagueness on the guidance of the s and the x, and wondering whether spending is not as heavy as anticipated. a lot to chew on.

emily: the model three will be the first mass-market car, and you wonder if the owners will be as forgiving as owners of the model s or the model x. in terms of quality expectations for the model three, how optimistic are you? reporter: it is paradoxical. you expect a $100,000 product vehicle or any other product to be much better than one that sells for half or third that amount. but i think there is an issue that when somebody buys a model three, it might be their only car. someone buying a model s with ludicrous mode, they have other cars, so they can hire someone easily enough. where is the 30-year-old who is barely able to buy a model three, and it's in the shop, they are left out. i don't know if they will be that much more judgmental, but they are going to be in deeper trouble if there are breakdowns the kinds that have happened with other tesla models. emily: let's talk about tesla

compared to the other automakers. it is now the most valuable automaker by market cap. are investors too optimistic about tesla, just like what einhorn said? reporter: you know, that's the beauty of the marketplace. they get to debate and they do it with dollars. we still get to see about 20% of teslas flow is shorting. there are a lot of people who agree with mr. einhorn. based on the fundamentals, it shouldn't be worth more than gm and ford. but it is all about the possibility, what it could bring successodel three is a and of course as it builds beyond that and becomes a truly global maker of electric vehicles and if it can do so profitably. the profit margins are pretty darn good, but can you do that when selling $50,000 and $30,000 cars? that is the big test. and is there really going to be an ongoing market?

even worldwide, with china in the mix, is there going to be enough demand year after year, decade after decade? that is the real test. those who believe in it, they say this is like henry ford in 1915, if you can get with him 30 years before the ipo, you would. that's the way they see it with musk. emily: let's talk about cash burn. is that a concern? reporter: always. this quarter wasn't bad. they consumed about $600 million in cash, they raised 1.2 billion dollars. cash position is better than it was three months earlier, but elon musk said they need to spend about $2 billion to launch the model three, or before they started making the model three in full production, they only spent about 500 million dollars. that might be some of the overhangs causing anxiety and pushing the stock price down a little after market. emily: looking outward, tesla

has a lot to prove, but are the times changing too fast for ford and gm? can they catch up? reporter: if you ask gm, they will tell you tesla has to catch up to them, because they already have a $30,000 electric vehicle out. but on image, they can't touch tesla. until tesla completely implodes, unless tesla completely implodes, it is so hard to reach them. they aspired to be, and their image is, they are an electric porsche. they are superfast and they don't pollute. there is an aura about them that is an f-150 or a corvette just cannot touch. emily: jamie from the heart of motor city, our bloomberg news auto reporter. thank you. in addition to facebook earnings, the social network is stepping up its review of controversial videos involving crime and suicide.

this after recent murders in cleveland and thailand were both posted on the site. ceo mark zuckerberg says the company will hire an additional 3000 workers, on top of 4500 reviewers already employed. facebook has been criticized for not doing enough to prevent these kinds of videos from spreading. i spoke to coo sheryl sandberg, who says the social network does not take fake news lately or violence. this is bloomberg. >> we haven't seen any impact on revenue, but we take all of these issues really seriously. we know people want accurate news on facebook. we have announced a number of steps, including disrupting economic incentives and building new products to stop the spread of falseness. we take it seriously. ♪

emily: there is a serious bidding battle going on four r straight path communications. verizon is said to have offered a $2.3 billion takeover proposal, giving at&t three days to match the offer. losing straight path to verizon

would be a big blow to at&t, which agreed to acquire the company for $1.6 billion last month. they are one of the largest holders of spectrum approved for fifth-generation use. at&t is eager to use those airways to build the five g network. note to our continuing coverage from the global conference in beverly hills, our bloomberg editor at large erik schatzker caught up with reddit founder alexis ohanian, and asked what is at stake given trumps policy actions. >> we are in an industry that leads the world, and that's a powerful thing. there are not a lot of industries in the world that america is dominant in. the reason we do that is in part because we've always had an industry and a country that has wanted to get the best and the brightest and give them chances from anywhere. also, because we have had a level playing field for upstarts

with a great idea in their dorm room, to make something without waiting for permission, putting it out to the world, and making something better. reporter: i don't think anybody believes the administration is trying to stop anybody from doing anything. the other issue you raised implicitly is immigration. >> i would say net neutrality speaks to that second issue, where it is imperative we have a level playing field. the upstart needs to be a will -- able to win. if she makes something better and the market chooses the bigger winner and not cable companies. reporter: let's look at the issue separately, even though i can tell from your point of view, they are part of the same problem. let's begin with immigration. there's an effort underway and talk of restricting the number of h-1b visas issued to companies in silicon valley. how would it affect reddit, and how would it affect tech?

>> frankly, the h-1b issue wouldn't affect us tremendously. we have over 200 employees, but h-1b visas are not a primary concern for us. more broadly, what is so important is that we have amazing people who we want to bring here to help contribute to reddit, to create value, provide for their families. now they are wondering, is this the a country i can stay in long-term? we have our neighbors to the north, canada, taking advantage of the opportunity and the fact that you have talented, proud americans, or people who aspire to be that, who are thinking twice about whether or not america can be the place for them to find their american dream. reporter: you are worried about canada stealing the march on the u.s. when it comes to innovation, technological development? >> yes. frankly, one of the reasons

why we've been so dominant as an industry globally is because people have known this was the place you could go and create something amazing. whether it is starting a company or joining one. reporter: for you as a matter of principle, not practical. >> it is primarily a matter of principle. i published an open letter on reddit. reddit would not exist if it wasn't for the fact that, my father's side of the family were all refugees. my mother was undocumented for a couple of years and was able to remain in the country. it's a personal issue for me. obviously, reddit fx a lot of people, so i feel the need to speak up. the principle here underlines the biggest issue, which is structurally, the country has always thrived because it has taken the best and brightest in. reporter: let's talk about net neutrality. why are you so concerned about it?

ajit pai, he's blocking the sec shot. >> we have had a system in place that allows for a level playing field. all americans want companies to succeed because the market says they should. what we are talking about now, what the fcc chairman is talking about, is going to let cable companies pick winners and losers. that's against the founding principles of how the open internet works, and it's going to mean a worse outcome for consumers. i want better things, and i think most americans do. reporter: you have heard this argument, what about other arenas, like search, for example, were google picks winners and losers in its search algorithm? >> what is so interesting is, at the end of the day, i can load up any search engine i want. there are upstarts that get funded all the time to compete with google.

there isn't any difference between getting to a google website today with net neutrality and getting to some upstart. what i don't want, and what will happen if we lose net neutrality rules, is for one of our cable companies to decide that the default search package for your internet involves some competitor. if you want google search or other search options, you have to pay more per month. i don't want my internet to look like my cable bill. emily: reddit co-founder alexis ohanian with bloomberg editor at large erik schatzker. coming up, we will discuss president trump and the inner workings of facebook with chamath palihapitiya. in an update from the facebook earnings call. facebook cfo dave wehner says he's expecting revenue growth to slow down meaningfully. they warned last quarter this would happen. we will continue to bring you the highlights. this is bloomberg. ♪

it is 11: 29 in hong kong. the french presidential election tvned and nasty as the debate saw marine le pen on attack. she pretrade her opponent as part of the global elite surrounded by islamic terrorists. back, sayinghit she was unfit for office. the bitter fight between apple and qualcomm is seen to have seen the chipmaker demand the band on -- to the

u.s. disputelating legal concerns patents that allow it to charge a percentage of the smartphone,ry regardless of whether they use the chips. apple is refusing to pay. hainan tropical island is hoping to become a destination for medical tourism. half a million people went abroad for medical help last year. cancer and heart disease are soaring in china, and hainan is promising cutting-edge treatments not approved elsewhere. you are watching bloomberg. >> japanese markets off for

greenery day, but not much green. miners in the philippines helping to support -- the commodities collapse is very much in focus. copper continuing after falling the most since 2015. iron or seeing its biggest slump. take a look at asian bonds, sliding following the drop in treasuries. with the dollar being pushed higher, we are seeing a drag today. taiwanese dollar, back above 30. take a look at movers and asia. falling after resuming trade today. falling almost 5% in sydney. full share jumping almost seven

15%. the property developer rallying. we also have another jumping in singapore. emily: this is "bloomberg technology." i'm emily chang. let's get back to our top story. earnings season rolls through with facebook and tesla reporting results. the automaker confirming the highly anticipated model three is on track to begin production on time. ceo elon musk says the company is on track to support the ramp up to 5000 vehicles a week at some point in 2017, and 10,000 vehicles per week next year. yet, tesla shares are down after hours. the company reporting a bigger loss than expected in the first quarter. now to facebook. shares continue to fall after reporting earnings that missed expectations, but revenue topped estimates. ceo mark zuckerberg gave a new

number on the call, 175 million people using whatsapp status on a daily basis. the status is the same idea as snapchat stories feature, which facebook also ported to instagram, messenger, and the main app. social network founder and venture capitalist chamath palihapitiya is one of silicon valley's most candid tech leaders. earlier, we spoke with him to get his take on some of the top tech headlines. i started by asked him about his concerns about president trump's policies. >> it's really not the policies, but the unintended consequences, and specifically what i think is really scary is what the long-term impact to human capital are in the u.s. if i had to use a sports analogy, when your job is to win a championship, you try to draft and recruit from free agency the

absolute best players in every position you can, put them on the field or the court to win. similarly, the u.s., up until recently, has been that equivalent for human capital. if you were very good or really good at anything, you wanted to come here. what is interesting, the early data is starting to show signals that is changing. i think that is bad. that is irrespective of any ideology. we want the smartest and best people here working on behalf of americans and america. and anything that impacts that has long-term negative consequences to gdp and value creation. emily: how is he impacting venture-capital so far? >> on that human capital so far, we are seeing businesses having a terrible difficulty recruiting people. what that means is wage inflation, which doesn't really added to anything, because you are burning money without incremental productivity. two, you are starting to see competitive business is be

creative in increasing velocity outside the u.s., in canada, and china, and india. that is generally bad if you think about businesses that could theoretically be built here, where the value is then captured within the u.s. emily: do you think the u.s. could lose -- >> i think it is losing it. we saw a report today that said mba programs they have seen the , most market decline in applications from foreign applicants. in the short term, that might be good, but in the long term, the reality is there are some free agents we should be poaching from other countries and putting them on our team. emily: you spent a lot of time with mark zuckerberg in the early years navigating rough times at facebook. as the company matured, do you see parallels with what's going on with uber and travis kalanick? >> it's hard to know because i'm not in the situation at uber. but here's what i will tell you about facebook. in those moments where we pushed

certain boundaries and the way we build and design certain products, or how we were exploring the consequences and reach of privacy, and we had our hands slapped or we learned things, we internalized the cost benefits and the trade-off of the potential of what we wanted to build, and the impact of that to humanity versus taking a methodical approach. since then, i have to say facebook has been basically flawless. i think the opportunity for them to realize that their ego is not nearly as important as the impact. the minute you make that transition, there's just a different caliber of individual, particularly at senior ranks, that you will attract and will want to work with you on those. kinds of problems. it seems from the outside, there are early signals that transition is happening. i hope it's working. the human potential impact of uber is undeniable. emily: what are your recommendations to travis specifically? interposition outside the boiler

room as an observer. >> i think that when you are in a company that is that iconic and unique, the biggest thing you have to do is become a lot more introspective, and inside out validated. when stars and famous people and rich people and ceos call you and want to spend time with you, take you out to invite you to things, all this external validation that tells you you are important, you have to ignore it. in fact, you have to run away from it. you have to spend time with engineers in the boiler room of making the product every day. when you strip yourself of the outside validation, you learn to validate yourself inside out. i'm not saying he hasn't done that, but what i will tell you is if you can make that transition, you can become an extremely powerful ceo. i think mark is an example. emily: my colleague compared uber to airbnb. i will put the question to you like this. uber or airbnb? >> if you had to pick a more natural monopoly with pricing

power and scale, i think airbnb. uber is a fundamental consumer surplus business where there is still risk that the entire business model is about cost of capital. in the world of autonomy, what you have is the ability for new entrants with huge balance sheets, google, apple, facebook, companies you never would have imagined competing with you, could because it's a function of having enough money to buy enough autonomous cars because you already have customers. you can model the demand. in a market like that, there is potentially value erosion over time, because you have more players. in the case of airbnb, what they have to navigate is cost-effective customer acquisition at stale -- scale. instead of having many problems and many potential competitors, airbnb has to solve internal capability issues. if they solve that, it is probably the next massive company to come out of silicon valley. emily: you are bullish on amazon, and you spend a lot of

time at facebook. amazon or facebook? >> you have to find eventually that's fundamentally be in the largest most unconstrained market possible. when you look at the world where dollars are spent, advertising is a $200 billion plus market. it has created $1.1 trillion value between facebook and google. it's incredible. emily: but facebook is running out of space to put its ads. >> but at the end of the day, the thing that is unconstrained is consumption by consumers. wherever there are people making more money than they spend, they will find a way to allocate left overs to buying things. buying things is the most important part of gdp in america, and usually in most developed nations the company , that dominates selling you think you want to buy will probably be the largest in the world. probably by many orders of multiples. i would have to pick amazon. emily: you have historically been pessimistic about apple. where are you today?

>> we don't hold it. i look at it as a really interesting value stock. i don't view it as a company that represents for me what i want to own, which is basically innovating on the future in ways that represent change. at the end of the day, i also think a balance sheet that distributes cash back to investors, saying we believed you know what to do better than we know what to do. i think that speaks for itself. emily: that was social capital founder and ceo chamath palihapitiya. the feud between qualcomm and apple is hitting new highs. qualcomm plans to retaliate by asking the u.s. trade agency to ban imports of iphones. qualcomm is preparing to ask the international trade commission to stop the iphone, built in asia, from entering the country. it is threatening to block the iconic product from the american market in advance of the

anticipated new model in the fall. apple argues that the system is unfair and stopped paying licensing fees to qualcomm last month. coming up, another courtroom between, this time alphabet's waymo, the self driving car unit, and uber. driverless car ambitions hanging in the balance. we continue to monitor earnings. facebook continuing to decline in after-hours trading. anything in that magnitude would be the biggest slide of facebook shares since november. tesla ceo elon musk says their electric truck will defy expectations of what a truck can do. we will continue to monitor both calls. this is bloomberg. ♪

emily: court is in session for alphabet's car unit waymo, and uber. at stake is uber's driverless cars ambitions. a judge will weigh in until when freezing the self driving car efforts injury issues a verdict. it's the latest phase of a courtroom that all over trade secrets that threatens to topple a central pillar of uber's growth strategy. joining me is eric newcomer who covers uber. what do you know so far about what is happening? >> the judge says he hasn't found the smoking gun in the case, but alphabet and waymo, their case is very strong. he seems to be convinced that the former head of uber's self driving car program took these 14,000 files. what he's not clear on is whether uber ever use them in a

meaningful way. that is essential for the trade secrets case. emily: why wouldn't it matter? >> this suit is against uber. it is not a criminal question. it is not the subject of the suit. it is about whether uber benefited from that set. -- alleges the. theft.ged emily: if uber is forced to freeze its self driving car efforts, how crippling would that be? >> really bad for recruiting. bad for the forward-looking vision. there's also a timeline first to market the perception of advantage. on the other hand uber is still , trying to make the human driver business work. i think that will be what powers uber in the eventual ipo.

it is fighting for the future identity, not really the next couple years. emily: do we know anything about how the lawsuit has impacted uber's self driving car unit so far? we know anthony was slightly demoted, as you say. but is this impacting employees? >> we are still watching. it is coming up in all hands meetings within advanced , technologies groups, people were asking why he is still here, so i think people were asking questions and watching it, but whether it is resulting in mass turnover, i don't think we see yet. emily: to be clear, he cofounded the self driving truck start of which uber thought. -- bought. talk to me about the history of this judge. he has weighed in on other cases involving google and oracle. >> he's the guy in deciding these technical, big company versus big tech company, known for really studying up and

getting in the weeds. he requested all this information about how it works, and he even had this note, and and he really tries to understand what the different technologies are, to figure out whether uber did take anything meaningful from waymo's technology. emily: uber is trying to keep it from getting to a jury. what is the likelihood of that? >> we still have the question of arbitration. if that would be the case, everything would be kept quiet, . there is already a hearing that is closed to the press. there's a question from the judge, if you want to hide everything, why do you want to air this in public? result in arbitration. that decision needs to be made. we don't know exactly. emily: uber has had a lot of things going on while i have been on maternity leave. have you found that all of these things, one after another,

whether it is sexual harassment, how is this impacting the company's brand? >> the brand has taken a serious hit. i think delete uber, the reaction to trump was the biggest in terms of user backlash. users have been very upset over this case. we are waiting for the former u.s. attorney general eric holder to come out with this report. i think uber has been able to fend off critics, saying that they have a report coming, they will address all the big issues, and at the same time they are looking for a coo. if they fail on either front to deliver meaningful change, i think we are going to see this open up again. right now we are waiting for the court case, waiting for the coo, waiting for holder. we are waiting to see how uber can recover.

emily: thank you. we will continue coverage of tech earnings. square and fitbit jumping after-hours. we will dig into the numbers next. and the facebook earnings call is still underway. the company has been under scrutiny about facebook live, after a number of high-profile suicides, murders, and shootings were broadcast live. zuckerberg was asked what the social network would do. he replied that the holy grail it be having ai to stop violent video, but the tech is nowhere near able to do that, so they are hiring thousands of new personally vet these videos. this is bloomberg. ♪

emily: the new york times says the first quarter was the best ever for subscriber growth. the paper said it added a net 308000 digital subscriptions,

continuing dirt being -- during its momentum. the time strategy focuses partly on reaching younger readers three new partnerships with online services like spotify. square, meantime, is on a roll. the company run by twitter's jack dorsey is proving it is not just a niche player. revenue shot past forecasting. square also raised its sales and profit forecast for the year. joining us for more from new york, selina wang. first of all, what do you have to say about square blowing it out of the water? reporter: this was a hugely important quarter for them. as you said, they blew earnings and revenue out of the water. a lot of this has to do with answering the investor question, is this a low-margin ditch -- niche payment processor? i think the past few quarters have emphatically answered, no, it is not just a payment processor. it is something that provides a full slate of business services for small and medium-sized business.

now these newer products like loans, inventory, invoices, food delivery, have proven to be very fast-growing, higher profitability and higher-margin. square is showing it can continue to invest in growth while growing at scale, and continuing to improve profitability. emily: you just had a call with the square cfo. i will be speaking to her tomorrow on television. what did she say? reporter: she gave interesting color on how they are able to beat competition and go upmarket. one of the big questions is what value add do they bring to larger merchants? they have show they are not only able to maintain the take and get larger merchants, but cross sell products. the cfo seemed pretty surprised at how well her message resonated. larger merchants also care about having the new technology and being able to quickly get invoices, and be able to analyze sales. they appreciate the full suite of products they offer.

emily: shares are soaring after hours. what about the turnaround seems to be working? reporter: i wouldn't say the turnaround is working yet. this is a very volatile stock. they beat earnings on very low expectations. sales dropped a whopping 41%. that is a very large amount, it just happened to be less than investors were expecting. they faced structural headwinds like a shrinking fitness tracker market, as well as competition. the apple watch continues to get better with more fitness features, and we also don't see any competition from cheaper makers in china letting up anytime soon. so yes, this is better than expected, but better than bad expectations. emily: apple ceo tim cook talked about how the wearable market is such a challenging market. it is no surprise we have seen players drop out. talk to us about the long-term trajectory for fitbit. reporter: you are right.

even the leader in hardware saying wearables is a difficult space to be in. the ceo of fitbit has said his goal is to make wearables a must-have, not nice to have. we have seen them start to move into that direction with newest upgrades. they started to add in better analytics and sleep tracking. they are slated to roll out a smart watch later this year as well as other products. there has been reports they may come out with bluetooth headphones. the bright spot is although they do have growth, they still have a massive installed base of users. a big proportion of them are loyal. they will probably be likely to move on to the smart watch and purchase the upgraded products. emily: bloomberg tech reporter selina wang, thank you for joining us. that does it for this edition of "bloomberg technology." remember, we are live streaming

on twitter. check us out at bloomberg tech tv, weekdays, 5 p.m. in new york, 2 p.m. in san francisco. that is it for now. this is bloomberg. ♪

stride down. korean equities climbed to a record high. to theey and russia move trade standoff. they discussed the possibility of safe zones in syria. yousef: libya edges closer to a national agreement. potentially flooding the markets with even more oil. anchor: we are just moments away from hsbc's