Even food delivery is flailing
Image: Deliveroo

Even food delivery is flailing

Protocol Index

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Today: The trends set to dominate this earnings season, even food-delivery startups are struggling, and Marc Andreessen wants you to BUILD.


  • 2 p.m. PDT: IBM reports its earnings. Analysts expect a 20% year-on-year decline in EBITDA, according to Koyfin, and will be looking to see what new CEO Arvind Krishna has to say about the months ahead.
  • Later this week: The earnings calendar is busy, with Netflix, Snap, SAP, and Texas Instruments reporting tomorrow; AT&T Wednesday; Intel Thursday; and Verizon and T-Mobile Friday. In economic data, South Korea trade numbers for April are out tomorrow, which will indicate how the Asian recovery is going. On Thursday, preliminary April PMIs for the U.S. and much of Europe will show how lockdown is affecting businesses, while jobless claims should hopefully start to plateau.

Today's News

As of 4:15 a.m. PDT: Nasdaq Futures: -0.90% | Euro 600: -0.38% | Nikkei: -1.15% | Hang Seng: -0.21%




Everyone's Thinking About

What to make of earnings season

I hope you like numbers, because you're about to be bombarded with them. Tech earnings season kicks off in earnest this week, with Netflix, IBM, Intel and Snap all reporting. Many other big names publish theirs next week.

Here, I'm going to focus on what the results tell us about the tech industry as a whole, particularly when it comes to startups. Here's what I'll be looking out for:

  • The most important thing will likely be companies' Q2 guidance. With three weeks of data in already, they've got a decent sense of what the economy's like right now — and whether the worst is behind us or yet to come. As StockTwits wrote, "it will probably be a great quarter to listen to the earnings conference calls and a poor one to attend to earnings numbers."
  • We'll get clarity on China's supply chain issues, particularly in Apple's earnings. That has huge ramifications across the industry, particularly in the hardware space.
  • Cloud's big boost will be quantified: IBM, which reports today, will presage what's coming for the larger cloud providers. And chipmakers, which also report this week, could give a sense of whether the cloud providers are preparing for further growth in demand this year.
  • We'll find out how much ad revenue has dropped by. Analysts expect the biggest hit to be in Q2, but there was likely some pullback towards the end of March, when average daily ad spending fell over 20%, according to Pathmatics.
  • And we'll see if consumers are still spending. Some analysts expect Netflix and Amazon to report an uptick in demand from quarantiners: JPMorgan's Doug Anmuth said last week that Netflix is a "a clear beneficiary of stay-at-home." But a tanking global economy and soaring unemployment could lead consumers to cut back on spending. We'll get our first sense of that soon.

As a sector, tech's expected to fare relatively well: Investors broadly expect flat earnings growth, compared to huge plunges in other sectors. If that materializes, it means that tech valuations could remain relatively insulated from this crisis, as investors flock to its relative safety in a time of disaster everywhere else.


  • "The real pain is Q1 of next year." — Upfront Ventures' Mark Suster told Protocol's Biz Carson to expect bankruptcies when startups can't raise next year.
  • "You and other people in Silicon Valley aren't thinking about [leases] like debt. And you need to, because the music is going to stop." — A Wall Street executive told Lyric CEO Andrew Kitchell to rethink the real estate rental startup's strategy.
  • "Existing users will keep devices longer and choose less expensive Apple options when they do buy a new device." — Goldman Sachs, forecasting a 36% decline in Apple's Q2 sales, downgraded its stock to "sell."
  • Netflix "has seen an influx of pitches from movie studios in recent weeks." — Sources told the Financial Times that Netflix could solve its content problem by picking up films whose producers are reeling as movie theaters remain closed.
  • "While in early to mid-March expectations were that we would see life normalize over the summer, now 60% of respondents do not believe we will return to normal until September at the earliest." — Deutsche Bank's market sentiment survey respondents are getting more pessimistic.

Diving Deeper

Even food delivery is flailing

On Friday, the U.K.'s Competition and Markets Authority provisionally approved Amazon's investment in food-delivery startup Deliveroo. That's great news for Deliveroo — but the reasons the CMA gave for approving the deal are sobering for everyone else.

  • "Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment," the CMA's report said.
  • That's … bad. With restaurants off-limits for the foreseeable future, food delivery should be booming. But according to Deliveroo — and its finances, which the CMA reviewed — that's not the case.
  • A "significant decline in revenues" is because so many restaurants are closed, reducing the food options available to consumers on the app. And a renewed price war with Uber Eats probably isn't helping matters either.

This doesn't bode well for the big U.S. delivery companies. GrubHub, DoorDash, and the like are probably in a similar position to Deliveroo. Growth in Uber Eats might also not offset the parent company's massive drop in rides.

  • And startups across the board should worry, too. The chair of the CMA's inquiry group said investment "is only realistically available from Amazon," hinting at how the VC market is drying up.

The big takeaway (sorry) is this: Deliveroo, despite its $1 billion in other fundraising, needs an extra $575 million to get through this crisis. What happens to everyone who doesn't have access to that kind of cash?

Closing Bell


So said Marc Andreessen — in all caps! — in a widely-shared blog post published this weekend. He lambasted institutions for underfunding hard problems like healthcare, education, and housing. The problem isn't money, he argued: "We have the money to wage endless wars in the Middle East and repeatedly bail out incumbent banks, airlines, and carmakers." (Apropos of nothing, Andreessen Horowitz has $2.7 billion under management, some of which is invested in … Soylent, Lime, and that site you use to look up song lyrics?)

Look, maybe this does mark a change in what Silicon Valley is interested in. Maybe VCs have woken up to the biggest societal problems. And maybe they'll start funding companies that can help solve them! But equally, VC Twitter also spent the weekend fawning over an invite-only group phone call app called "Clubhouse." So let's just say I'm not getting my hopes up yet.

Thoughts/feedback/tips? Email me — shakeel@protocol.com — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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