Affirm’s Q4 & Big Tech in Court: Meta & Anthropic Rulings 8/28/26

0:00As a small business owner, sometimes it feels like no matter how much planning you do, there's always surprises, like an urgent, expensive repair. But here's a surprise you'll like. With Progressive, small business owners save 10 % or more on their commercial auto insurance when they pay in full. So enjoy a surprise for once. Get a quote in as little as 8 minutes at ProgressiveCommercial.com. Progressive Casualty Insurance Company and Affiliates. Discounts not available in all states or situations. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

0:32Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Bring in show music, please. This is Squawk Pod, and I'm CNBC producer Cameron Costa. On today's episode, big tech in the courtroom. Meta reached an$18 billion settlement in its social media addiction trial. And a judge ruled in favor of Anthropic, saying the government had illegally punished the company by labeling it a supply chain risk.

1:22It is possible that maybe they would have had a stronger case. if they had not made these public comments about their views about Anthropics politics. I think the administration didn't like some of the comments of Modi made. And shares of FinTech Affirm are riding high after impressive quarterly and fiscal year results. CEO Max Levchin, also a co-founder of PayPal, says the consumer is strong, at least from where he's sitting. There's still strong demands. There's nothing profoundly wrong. Let me start with that. I do think that sustained pressure on prices isn't great in the long term, and so I can't ignore that either.

2:02And then, more tech. The information editor-in-chief and CEO, Jessica Lesson, and the next big thing in IPOs, Anthropic. My colleagues at The Information are reporting prospectus right after Labor Day, most likely. I think we're looking at October. It is Friday, August 28th, and Squawk Pod begins right now. Stand to Andrew By in three, two, one, cue Andrew. Good morning. Welcome to Squawk Box right here on CNBC on this Friday morning. We are live at the NASDAQ market site in Times Square. I'm Andrew Ross Sorkin, along with Joe Kern. And Becky is off today. But this is not just a summer Friday.

2:42It's an important summer Friday because of what we're going to probably be hearing from Kevin Warsh today. And we'll see how equities move on the back of that. I won't ask you if you would raise in September because we're data dependent. And we don't know what the data between now and September will be. So I'm going to give you an out. Would you raise in September? I'm not sure. But I am sure about this and I have been sure about this pretty much the whole time. So I will I will say it loud and I'll say it proud. A San Francisco federal judge ruling for Anthropocans fight against the Pentagon.

3:14The judge found the Defense Department violated the First Amendment by designating Anthropica supply chain risk based on a desire to make a public example out of the company. The designation came back in March after Anthropoc asked for government assurances that its technology wouldn't be used for domestic mass surveillance for fully autonomous weapons. The case in Washington, D.C., on the exact, or I don't know if it's the exact same, but very similar case, is ongoing. And there's a view that there was a friendlier judge in California than maybe a less friendly judge in Washington. But nonetheless, as you know, I have argued throughout this that...

3:51A lot of the arguments that's made. Is this done or does this go further? The San Francisco, okay. When you said San Francisco, I said, well, San Francisco. Although it is, you know, out there where all these great things are happening. The question now is how does the government decide to play this? So they could try to appeal this decision. They could try to wait for the other decision. To see. And see, and then we'll see where it goes next. But I've always made the argument, and I will make it until the cows come home, that at the time, given that the government continues, and the judge made this point, continues to interact with Anthropic, continues to use mythos, continues to do all of the things, and also was vociferous publicly about their either hate or upset by some of the comments and other things that Anthropic has made about either this administration or others.

4:45And by the way, it is possible that maybe they would have had a stronger case if they had not made these public comments about their views about anthropics politics. But that once you start criticizing people's politics and their public statements, it becomes a First Amendment story. Right. I think the administration didn't like some of the comments Amodi made. I know. The TDS comments and just the perception that the Biden administration has all these plants and the former Biden administration has all these plants in Anthropoc. So it looks like it was just, it looks like it was political. Correct.

5:27You're right. I would just say that just because a San Francisco judge agrees with you doesn't mean you're going to be right. And we will see where this all... And it's not a shocker that he does agree with you. And by the way, when it gets to the Supreme Court and they lose, it won't be a shocker either. Well, that's because there's only nine judges and we're going to change all that. Well, I wish you luck with that. I wish you luck with that. Yeah, in due time. I wish you luck with that. I just don't know. It's like seven-minute ads. I mean, do we go 13 judges? How do we get enough liberals on there to make sure we win every case?

6:03I mean, is it 24? Is there a number that you know that they're looking for? How many companies, by the way, do you think the government should invest in before we consider ourselves a true socialist? How did that, how did that, that is such a non sequitur. I mean, that's, no, no, that is, we have moved. Go back. Let's go back in time and go back in time. Come up, come up with something else. Cause we're talking about this. It has nothing to do with. Anthropic is reported. You just needed a way to defend the left somehow. You cannot, you cannot defend stacking the Supreme Court. Just leave it at that.

6:42Say that's absurd. Or defunding police or getting rid of the presidency or the Senate. I think all of that is absurd. You don't have to come back and say we're invested. I think all of that is absurd. You always accuse me of whataboutism. You know what? I'll give you that. What's the aura ring? I'll give you that. I'm going to give you that. All right, thank you. I'm going to give you that. What's the aura ring today? I don't know. You always give it to me. I don't know where the aura ring is. We're going to get you an aura ring. You didn't check? I didn't check yet. What time did you go to bed last night?

7:13I will get you some details. How did you get to bed early? I did well last night. Good for you. There was a storm. There was a big storm. Did you hear the thunder? I did not hear the thunder. That woke up my corgi and he's such a great watchdog. He was mad at the thunder. Anthropic is reportedly considering allowing existing shareholders to sell some of their stock when the company goes public. But the report in the information also says that Anthropic stockholders could be subject to a lockup period longer than the typical 180 days following an IPO. The company said to be planning to unveil its IPO prospectus after Labor Day, with a public offering potentially being held in late September or early October.

7:58Don't we have the founder and CEO and everything of the information on today? We do. So we're not going to mention that? We can get this right from the person. We get to talk to Jessica Lesnar in just a little bit. You bet. OK. Is the world ready for Grand Theft Auto 6? Well, Netflix aired 27 minutes of gameplay last night. This is the biggest reveal yet from Take Two. Shares of the stock moving higher this morning. CEO Strauss Zelnick told us earlier this month the game was on track to exceed expectations. It is due out November 19th. Though I should tell you my son was telling me that there may be a leak of the game.

8:38I don't know if you've seen. I thought it was today. So it's not. When is it? When is it coming? It's coming, I believe, on the 19th of November. But GTA, there's some leak that people were talking about online. And it has been a big problem. Well, that's the other. When I read it, when was the last one? Is that possible? Do you remember when the last one was? I thought I read. Has it been 13 years? That's impossible, isn't it? Are you listening? Has it been 13 years? Yeah, it's been a long time. I don't know if it's been 13 years. Is that with the numbers? You're doing better than I am. Yeah, that's what I mean.

9:12It's hard for me to believe it's been 13 years because we've talked about it so much. President Trump just posting on True Social has to do with beef, etc. Ranchers and farmers have always been a number one priority for me. They work very hard, are smart, efficient, and immaculately clean. Capital C-L-E-A-N. But for years, I've heard that they have had a tremendous problem with the big processors, who many say are a nasty monopoly. There are essentially four of them, a very non-competitive number, and they make life miserable for our wonderful farmers and ranchers. And I can't let that happen, can I?

9:56So in order to break this powerful monopoly with much of its ownership based outside of the United States, I am authorizing legal documents to be drawn in order to allow farmers and ranchers to be given the right to process their own food. This should move quickly. Thank you for your attention to this matter, President Donald J. Trump. Hmm. I got to think. I need to think. So there's four companies that do this. Yep. We know some of them. We know some of them. The sense that they push these guys around, which I think is true, probably. Probably. It would be better to have more competition. We always talk about, but four sounds like a lot, or at least four sounds more like more than two or three.

10:40And then the question is, what are the benefits of allowing them to do this on their own? What are the implementations for safety? Right. All of the other things that would come with it. The implications for safety is what I thought of. That is the biggest thing. And by the way, I will say that whenever you get a look into these places that you've seen in the past, it's kind of frightening, right? And I've never visited one, and you don't even want to be anywhere near hog processing plants, really. I mean, put all the data centers you want near me, but don't put a hog processing plant. Cheese will be next.

11:21Coming up on SquawkPod, huge aftermarket moves from Affirm. The Buy Now, Pay Later company, which now has credit cards, impressed Wall Street with its fourth quarter results. CEO Max Levchin says the growth will stay despite what happens in the economy. We've grown for 30 plus percent for the last 11 straight quarters and showed no signs of slowing down. I think we'll be here for all economies. The Savvy CIO is a podcast for IT leaders who know the future moves fast and that budget moves just a little bit slower. The CIO is one of the loneliest roles in the company. And yet, now more than ever, we're turning the pressure into practical takeaways you can use, whether it's Monday morning or Sunday at 2 a.m.

12:04Brought to you by Park Place Technologies, people who understand that innovation isn't about spending more money. It's about spending smarter and freeing up budget where it counts. So innovation doesn't have to wait. Quince is all about fewer, better pieces. Their clothes are made with premium materials built to last and designed to become the ones you reach for day after day. Quince specializes in everyday staples that work harder, like their ultra-soft organic cotton teas and premium Mongolian cashmere sweaters. They're versatile, timeless, and transition seamlessly from a casual workday to dinner out.

12:37Everything at Quince is priced 50 % to 80 % less than similar brands. They work directly with ethical factories and cut out the middlemen, so you're paying for high-quality, not brand markup. And it's not just apparel. Quince also brings that same everyday elevation to everything they offer, from hotel-quality bedding and bath to kitchen staples, essentials, and thoughtfully designed furniture. Upgrade your everyday. Download the Quince app for app-exclusive offers or go to quince.com slash squawk. Get free shipping on your order and 365-day returns. Now available in Canada and the UK, too. That's quince.com slash squawk.

13:15This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts.

13:47Welcome back to Squawk Pod from CNBC with Joe Kernan and Andrew Ross-Sorkin. Stand by, Joe. Here's Mike. Q. I'm finally figuring out how Affirm works. I'm late to the party. You're late to the party? Well, this guy knows a lot how it works. It's working. Look at the chart. Shares of Affirm are surging on better than expected results. Join us now. Affirm CEO Max Levchin. Levchin. And Max, I guess I would just ask you, what are the best what's the best environment for for doing what you do for people with the buy now, pay later? Is there something are you in a sweet spot right now in this, you know, what people constantly call K-shaped or K-shaped or affordability crisis economy?

14:32Is that just play into your to what you do? yeah i'd like to believe we are a product for all seasons um obviously anytime someone is thinking about money they're trying to figure out how to get the most out of it they're stretching their budget they're contemplating a purchase that you know is noticeable to them we are we believe certainly revised uh the best possible tool for that we give you full transparency we give you a plan that shows you when you're going to start and stop when you'll be totally out of debt whether that's six weeks or six months or longer and we're completely transparent with whatever the true costs are and they do not change whatever it is you agree up front to you will pay us or less we reward prepayment because we love when our consumers are financially responsible and in times of inflation we see more demand because folks are budgeting they're more thoughtful about how they want to use their money and we're there to help and in times of faster growth in the economy, more feelings of abundance.

15:35People come to us for more discretionary purchases. So we see demand. We're growing for 30 plus percent for the last 11 straight quarters and showing no signs of slowing down. I think I think we'll be here for all economies. And the ability for a consumer to be able to do it through a firm is it must be so attractive that merchants are willing to farm it out to you. They'll sell more stuff and they'll share with you what are pretty slim margins a lot of times. That surprises me that it's that positive for them to bring you in. You know, that's exactly right. Merchants do love us and we are a network.

16:18That is to say, as more consumers show up to merchants saying, hey, I'd like to use a firm to buy this, merchants hear their customer feedback. They turn to us as we show up at more points of sale, more consumers learn about us, more consumers say, wait a second, that's a fantastic alternative to what I got right now. And they use us more. And so the flywheel keeps going. And that's where the growth comes from, really. The sharing of the margin is a really good point. So merchants love the idea of not discounting because the price should be the price instead of telling you the price will be maybe 10 or 20 % off over time.

16:52the typical incremental margin they pay us to offer a zero percent loan for example to consumers with a fantastic deal as a matter of you're independently wealthy or trying to make ends meet getting a zero percent loan or six months 12 months to buy a thing that your family needs is an unbeatable deal especially with no late fees no deferred interest no compounding interest so that is what the merchants share with us the majority of that money comes to the consumer in a form of no interest or a reduced interest they are paying for it a lot less than a 10 % or 20 % discount. So there's actually a great deal for merchants.

17:24And we love working with them on these extraordinary 0 % deals, which is at this event called the Big Nothing, which is where lots and lots of merchants all pitched in to offer these 0 % deals to our consumers and went off really well. When rates go up, I would figure you'd be more attractive to people to use. But then again, does your opportunity loss? I mean, you could be making a lot more money when rates go up, right? If you were able to try, how does it, what would you, you said you're good in any environment. So you don't care whether rates go up or come down. Isn't it worse if rates are headed higher for you?

18:03We're not a depository. So we eventually fund our book through relationships with many different funding sources. You know, we very successfully lived through the last round of rates going up. And so I think at this point, the market has very ample, demonstrable results to show that as the rates went up, our results didn't really change very much. So we have contracts with our financial suppliers, if you will, that are long-term. We're very thoughtful about how we stagger the timelines. And so as the Fed moves the rates up and down, our ability to operate is really not impacted all that much in the short term.

18:38And in the long term, we're really well-planned. But in terms of profitability, I think if you compare us to our peer set or just about anybody else in FinTech, we're quite profitable. If anything, the theme over the last couple of years has been this sustained profitable growth. We're not just growing at 30 percent plus plus year over year. We're posting very, very healthy margins. We've been profitable for 12 months and only showing better and better signs. Just as a neophyte in all this, I was asking my mentor, Sorkin, exactly. How do you make sure you're not getting a bunch of deadbeats? And he said, you have a way.

19:21They've done a masterful job. Well, you can ask Max how they do it, but they've done a masterful job of sort of rewriting the idea of a FICO score even. Yeah. That's right. Thank you, Andrew. That is the core DNA of the company is sort of based on fundamentally two ideas. We can underwrite each consumer better by getting a little bit more data, being smarter about what we use, asking for a little bit of data from merchants, essentially just getting smart about data. And these days, I think that's actually easier to understand for most folks, just given how AI has expanded people's minds of what you can do with data is extraordinary.

19:58And we've been at it for 15 years. We were an AI company when AI was kind of, what does that even mean? The other thing that's really powerful about our business is every transaction is underwritten separately. So each time someone comes to the point of sale, because we can do it in real time, because we can do it so quickly, we actually say, wait a second, is this still a good idea for you financially? Part of why we don't charge late fees is to create a perfect alignment of incentives. If you are going to be late, if our models tell us you're going to be late, we should not be lending to you.

20:26We'll just lose money because you will not be able to pay us back. And so we will very politely, but very firmly tell you we're so sorry, but the answer is no, if we don't believe you can pay us back. And we'll take more data and we'll reverse our decision if we suddenly realize that we're made a mistake. But underwriting every transaction really helps us keep our credit results it's exactly where they must be. And we've been doing really, really well there, highly consistent over the last many, many years now. And you must have a pretty good idea about whether you're seeing stress with any of your customers.

21:00Is it increasing or are we okay? So the firm consumer is healthy. And the thing that's worth knowing, as big and great as we are, we're still a sliver of the S economy. And because we underwrite every transaction, We have a lot to say as to how our consumer is doing because we invite them in when we say, yes, here's a loan for you at this point of sale. U.S. consumer undoubtedly sees the higher gas prices, so can't ignore that. They're also coming to us to help manage those prices across all the various inflationary points. But so far, so good. U.S. consumer is or a firm consumer is paying us back on time every time.

21:38And in that sense, I think we're doing very well. Okay. Amazing. I also was trying to figure out the that big spike during the COVID. So it can told me everyone that's the shift from Peloton. Everyone's buying Pelotons. And it's it's more than that. It's the temporary shift of offline commerce to online. We are much, much, much more prominent online, although we've been growing very rapidly offline over the last couple of years since COVID. But during COVID, there was such a big pull into online shopping. We answered that call very loud. Max, before you came, just so you know, before you came on, Joe and I had a whole conversation about this interview because you wanted to really understand.

22:23That's what I just said. I said I'm talking to my mentor. I think you did a great job. Really? Yeah, I think you got to all of the big issues with Max. I'll come to you when I, you know, need. Why don't you come to me for political things? Well, that's more complicated. Where I could be a huge help. I go to Max for things like that. I go to Max for things like that. He's not even. Oh, he is laughing. Yeah, it is. It is fun. We need an off. I appreciate the compliments, but I feel like I'm sitting in the middle of a family fight here. Well, yeah, and that's what Kevin Worse likes, too. Well, we need, I think the off, you know, during breaks, there should be our.

23:00We got to get a camera going. I just have one final question for Max, just broadly speaking. Just give us, since we are talking Kevin Worsley crazy all day and just where the economy is and what you're actually seeing underneath all of these great results. Take yourself out of this. What are you actually seeing just from the consumer right now? I think there's still strong demands. There's nothing profoundly wrong. Let me start with that. I do think that sustained pressure on prices isn't great in the long term. And so can't ignore that either. I think as much as taking myself out, there's definitely still demand for many goods and services.

23:37We are here to make sure consumers have everything they need and are able to pay for it without being worried about late fees and weird gimmicks. But I think things are, generally speaking, healthy. But I'm going to listen to Kevin's speech like everybody else. Great. All right. Good. Thank you, Max. Appreciate it. Thanks, Max. Nice move today. Next on Squawk Pod, we're catching up on the latest tech headlines with the CEO and editor-in-chief of The Information. It's Jessica Lesson. These companies are selectively leaking numbers to try and counter the narrative. And they're giving their thickets of investors very specific pieces of information, probably exactly to do this, to muddy the picture.

24:22The IPOs of Anthropic and OpenAI, their growth numbers, and so much more right after this break. A morning walk, some bird watching. It's another easy Sunday. UnitedHealth Group makes these ordinary days possible with partners like the University of Tennessee Health Sciences, helping communities manage their health closer to home. 54 % of participants have lowered their blood pressure, meaning fewer heart attacks and more Sundays at the park. This might feel like an ordinary day. To UnitedHealth Group, it's the healthcare system working better for everyone. Learn more at unitedhealthgroup.com slash commitment.

25:01The Savvy CIO is a podcast for IT leaders who know the future moves fast and that budget moves just a little bit slower. The CIO is one of the loneliest roles in the company. And yet, now more than ever, we're turning the pressure into practical takeaways you can use, whether it's Monday morning or Sunday at 2 a.m. Brought to you by Park Place Technologies. People who understand that innovation isn't about spending more money. It's about spending smarter and freeing up budget where it counts. So innovation doesn't have to wait. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills.

25:38Access new online courses, insightful webcasts, articles, engaging videos, and more. All curated just for traders. Plus, guided learning paths with content designed to fit your unique interests. and no sifting to find exactly what you need, so you can spend your time learning to trade brilliantly. Learn more at schwab.com slash trading.