April 25, 2024 • 18 mins
The world’s largest technology companies soared in late trading after stellar results from Microsoft and Google’s parent Alphabet fueled confidence in the market’s most-influential group.
For instant reaction and analysis, plus a look ahead to what's next, Bloomberg Radio hosts Carol Massar and Tim Stenovec speak with James Cakmak, Technology Analyst at Clockwise Capital.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
Chairs of Alphabet just soaring in the after hours right now,
Carol Hire after the company reported earnings up as we speak,
another thirteen point six percent in the after hours right now.
This after declaring a dividend, boosting a buyback, authorizing repurchase
of up to an additional seventy billion dollars and shares.
First quarter ad revenue coming out above expectations first quarter,
(00:31):
also declared it cash dividend of twenty cents per share.
Speaker 3 (00:33):
All right, so let's get to it. James chalk Mak
so much to talk about. He's partnering technology analyst at
Clockwise Capital. He joins us from Miami. First of all,
Alphabet feels like I can't find anything wrong here. Walk
us through. Is this just kind of firing and all
cylinders and if you will, and then just throwing on
a dividend and then throwing on an additional buyback.
Speaker 1 (00:54):
Yeah, First, thanks for having me. You know, for Alphabet,
this was a tough one. You know, we had the
meta earnings last night, you know, uncertainty as it relates
to the sustainability of the top line growth metrics, and
obviously Alphabet via Google had, you know, uncertainties around their
search business, and at the same time you had this
growth and capex spend. You know, is that going to
(01:16):
translate over? So you know, we were kind of debating
what to do and going into the quarter. We actually
rotated a portion of our Microsoft position to triple up
our Alphabet position. But thankfully that worked out. But I
tried to see you for Google. Yah, well yeah they're
both out, so yeah, I mean it worked out.
Speaker 3 (01:36):
So why did you do it? What was it that
you saw, James in the in the Alphabet story that
you said you wanted to do that.
Speaker 1 (01:44):
Well, the main thing was the relative valuations. I mean,
the expectations for Microsoft were exceedingly hot and the expectations
for Alphabet were exceedingly low. And you look at one
t trading at twenty two times earnings and the other
ones at thirty five times earnings, So you know what
kind of the risk reward is. And especially we had
some sense of how things might trade if they came
(02:06):
in on a bear because kind of narrative given how
Meta traded. So it really just boils down to that.
But the fact that Microsoft was able to exceed those
nose bleed expectations in the testament to the trends and
the force of trends that we're seeing in the in
the shift of the cloud and AAI. More broadly, Hey,
(02:27):
I just want.
Speaker 2 (02:28):
To get your thoughts on Snap, because the company you've
been covering for years.
Speaker 1 (02:32):
I would love to ask about that there through.
Speaker 2 (02:34):
The good and the bad well. And the reason I'm
asking is because shares are up, wow, surging as we
speak by more than twenty percent, twenty five percent at
this point. This is after the company reported.
Speaker 3 (02:48):
They are down thirty here today they are.
Speaker 2 (02:50):
That's important context, Chris. The company is seeing second quarter
revenue from one point two to three billion to one
point twenty six billion versus estimates of one point two
one billion dollars. As Carol mentioned, it's been a brutal
year so far for Snap. How are you reading into
these results? And do you still you don't own Snap anymore?
Do you?
Speaker 1 (03:07):
No? No? Not for a long time. You know with Snap,
you know, they were supposed to be the camera company
and transformed into you know, it's exactly what they were initially,
you know, just messaging in some content initiatives. But at
the end of the day, you know, I think it's
really really hard for these niche platforms to scale in
(03:28):
the manner in which is necessary to provide differentiation to
advertisers and the return objectives and return enhancements on the
on that ad spend. So I think that the disparity
between these niche platforms like a Snap versus the likes
of Alphabet and Meta will only increase from here. The
caveat being that you have companies like Pinterest, which we
(03:51):
used to own but sold, you know, just given the
fact that they hit our target. You know, I have
more opportunities because of the engagement that they've bring that
is likely to grow over time versus you know, stick
to more static rates, which is from the likes of Snap.
Speaker 3 (04:08):
All right, we've got to go back to Google. Forgive
me Alphabet. I keep calling it Google, but I mean
your first alphabet. I know, I know, up twelve and
a half percent here, folks, in the aftermarket, this stock
heading into it had about a twelve percent gain on
the year here in twenty twenty four. The stock was
up almost sixty percent last year. But you know, when
when you look at Alphabet James, and you look at
(04:31):
its business lines and its roles and it's play, whether
it's AI, whether it's still advertising in a big way.
You know, our own man Deep Singh saying, you know,
this company is all about engagement. That's kind of so valuable,
and that's going to be valuable certainly in terms of
machine learning and jen Ai. This is really important stuff.
I mean, how do you think about you know, Alphabet
(04:54):
in kind of its future growth trajectory and kind of
where it goes from here. I mean, these are this
is a pretty impressive report, but it's also right appeasing
investors of saying we're going to throw some cash back to.
Speaker 1 (05:04):
You absolutely, I mean any anything with respect to returning
capital to shareholders or you know, getting religion on the
cost side of their business and utilizing their cash flow
for more constructive purposes rather than throwing it into black holes,
which is the way that they have been operating for
as long as I can remember that being said. I
(05:26):
think that the future for Alphabet and Google, you know,
is still remains a question mark. We don't know, and
I don't think anyone can definitively say what that search
environment experience is going to look like in the future.
You know, when if you look out five years down
the road. Now. The good news is all of this
stuff seems to be like coming at you fast right
all the AI. It's over the Since January of twenty
(05:49):
twenty three, it's been coming hard and fast. But the
good news is on the on the behavioral aspect and
the consumer experience. You know, things have changed which GPT
and whatnot, but things aren't changing that fast overnight, which
affords Alphabet time to really figure things out, whether it's
cannibalistic to their existing search business or not. You know,
(06:11):
I think we have time. So I think extrapolating too
much too soon is a risk, you know, so as
long as they can they have the time, they might
figure it out. They may not, but they might. But
I look into twenty twenty four and twenty twenty five,
that's it.
Speaker 2 (06:27):
Could Critics argue about Alphabet that declaring a dividend and
boosting a share buyback potentially isn't the best use of
money right now. Perhaps they should be investing more in AI.
Perhaps they should be investing more and making sure this
search product is bulletproof.
Speaker 1 (06:47):
Yeah. I mean they're throwing off tremendous amounts of cash
as it is, and they're investing a lot, and and
you look at the margin disparity versus a meta you know,
they have a lot of cushion there, so and they're investing,
you know, strongly as well. So I don't think it's
(07:07):
utually exclusive. So long as the ball continues to move forward,
which is what we need to see, and we'll see
what the color commentary is on the call, I think
it'll be okay. I think the longer term is one
of the questions linger shorter term, it'll be fine, all right.
Speaker 3 (07:23):
So let's go to Microsoft, because it's also the other
big one that are one of the big ones. After
the close, it's up about five percent here in the
aftermarket this one. Sales and profit beat expectations on robust
AI demand. That's the headline on our story. So quarterly
sales and profit climbing more than projected, lifted by corporate
demand for Microsoft's cloud and AI offerings. Revenue, as we said,
(07:45):
up seventeen percent in the third quarter, sixty one point
nine billion profit two ninety four a share. Analyst on
average estimated per share earnings of two point eight three
two dollars and eighty three cents. Excuse me, on sales
of sixty point nine billion, So again outperformance here, and
we know that such an Adella has been really infusing
(08:05):
all of Microsoft's entire product line with AI technology thanks
to its partner open Ai. So thoughts on Microsoft, what
we got here in the quarter, what it tells you
about their business today and going forward.
Speaker 1 (08:20):
Yeah, what's most amazing to me is the fact that
they're able to maintain the growth rates no matter how
big their revenue base gets, and the fact that they're
able to deliver the numbers that you just cited and
do so in an efficient way where earnings are continuing
to grow at the same rate, so it's not a
(08:41):
there's no contra indicators on and you know, sales versus spending.
So I think that to me, the sustainability is the
biggest and most impressive component of their operations, and most importantly,
you know, broadly, I think you can extrapolate that the
themes on the data center spend and the semiconductors like
(09:05):
the NVIDIAs of the world, and the direction of corporate
enterprise and their appetite for shifting from analog to digital
is as strong as ever. So I think it's a
very very good omen for a lot of these companies
and being at the center of it. Because you can
make an analogy that you want in the first inning,
(09:25):
third inning, or whatever. But I think the main thing
is that the world is going to I think Sam
Altman has this quote that he said, the technological changes
that we've seen over the last five hundred years, No,
the changes over the next fifty years will be greater
(09:47):
than the technological changes over the next last five hundred, right,
you know. So that's the pace of change that we're
talking and a lot of that's going to come in
the first decade, and these companies are all at the
epicenter of it.
Speaker 3 (09:59):
Just what and point out Azure Microsoft's cloud computing unit
revenue gaining thirty one percent in the quarter, above an
average prediction of twenty nine percent, so picking up slightly
from the thirty percent growth in the previous period. So
you know that's a trend line if you're following it, right,
you want to see I.
Speaker 2 (10:14):
Mean, there's a chance we see both of the depending
on what happens. There's a chance we see both Alphabet
and Microsoft hit new records tomorrow in today's trade, depending
on what happens. Okay, I want to talk James just
a little bit about Microsoft's legacy here and the way
that it's been able to shift and embrace AI. Where's
the most important part of looking at Microsoft's growth moving forward.
(10:35):
I mean, I know, we obviously know Azure is incredibly important,
but the company has made a huge, huge bet on
AI with open Ai. Where do you start to see
that investment and its relationship with open Ai manifest in earnings.
Speaker 1 (10:51):
I think it's going to be, you know, exactly, you'll
see it in the Azure business, but more broadly in
the intelligent cloud segment. I mean, it just continued to
trans on that front, but it's not just that segment.
It's going to have It's going to feed into other
parts of their business too, you know, on the subscription
side of their software services and potentially even gaming, and
(11:15):
you know, so there's there's a lot of levers I
think that will be pulled from that relationship. And as
the world and the corporate enterprise continues to move in
that direction, more data is going to feed into it,
which is going to fuel even more efficiency with respect
to the capabilities that they do. And you know, Copilot,
you know, for instance, is just on the I don't
(11:36):
want to use saying first end of that day, day
two of its potential. So and there's a lot of
money to be paid there that you'll see that. I
don't think it is being appreciated at all, virtually at all.
Speaker 2 (11:48):
Right now, these are all different companies, but they're all
working on AI, and to a certain extent, they're competing
with each other when it comes to that technology. No question, uh.
Given what we're seeing from shareholders in reaction to micros
oft in alphabet today, and given what we saw today
in the session from reaction from investors to meta platforms
sending shares for their worst ten months, what did the
(12:10):
two companies that reported today get right? Or maybe a
better way to ask is what did meta platforms get wrong?
Speaker 1 (12:19):
What did meta platforms get wrong? I think what they
got wrong was largely related to the management of the expectations.
You know, there was no indication around the pace of
investment that's necessary to sustain the kind of growth. I mean,
they talk very qualitatively.
Speaker 4 (12:40):
About this is a big opportunity ahead, you know, all
the metaverse and YadA YadA, But you know, there was
no pushback whatsoever on the questions and commentary with respect
to you know, how we should expect the pace of
investment to ramp to justify and capitalize on the trend
(13:01):
that Zuckerberg talks about.
Speaker 1 (13:02):
So I think it was more of an expectation versus
reality in mismatch that probably could have been better managed.
Speaker 3 (13:10):
All right, let's just remind everybody the bigger earnings after
the close and those that have really outperformed here in
showing some studying moves to the upside, Microsoft among them.
That stock, as we mentioned, it is moving up just
about four point four percent here in the aftermarket, and
the company coming out sales and profit beating expectations, lifted
(13:32):
by corporate demand for the software maker's cloud and AI offerings.
We talked about Azure gaining revenue alone gaining thirty one
percent in the quarter that was above analyst expectations. Revenue
in the third quarter overall up seventeen percent to sixty
one point nine billion dollars. Profit was two dollars ninety
four cents a share. Analysts on average estimated per share
(13:53):
earnings of two to eighty three, so below what they
actually came in with, and the estimate for sales was
sixty point so again really hitting out of the park
when it comes to those estimates, and that is certainly
one reason why you're seeing the stock or a big
reason why you're seeing the stocks up. The stock of Microsoft,
I should say up at the aftermarket.
Speaker 2 (14:12):
Okay, let's worth let's repeat a little bit of what
we saw from Alphabet the company's first quarter Google AD
revenue coming in at sixty one point six six billion
versus estimates of sixty point one eight billion, in the
company author authorizing a repurchase of up to an additional
seventy billion dollars worth of shares, also declaring a dividend,
a cash dividend of twenty cents per share. First quarter
revenue excluding traffic acquisition costs sixty seven point five to
(14:36):
nine billion, beating estimates of sixty six point oh seven billion.
Speaker 3 (14:39):
To the downside, Intel shares are down more than eight
percent here, biggest maker of PC processors. Lacklow luster forecast
from the company for the current quarter, indicating it's really
still struggling to kind of find its way back to
the top, if you will. Sales in the second quarter
will be about thirteen billion. That compares with an average
analyst estimate of thirteen point six billion a quarter to
(15:00):
our data here at Bloomberg Profit Again, the outlook will
be ten cents of share minus certain items versus a
projection of twenty four cents, So that's a pretty big miss.
We're talking with James chockmock partner and tech analyst ever
at Clockwise Capital. James, is there's some underlying theme. We're
not through all the MAGS seven companies. We've got what
Amazon next week?
Speaker 2 (15:20):
Yeah, we've gotten video in a while, right, so.
Speaker 3 (15:23):
We've got some other plays to get through. But is
there any themes that you're finding, certainly for the investment
community when it comes to especially these big tech names
the mag seven often who haven't always been so magnificent
as of late, what they're saying and kind of their
impact on the overall market. Is there some big takeaway
here for you?
Speaker 1 (15:44):
I think the biggest takeaway is that the sellers of
these data center services are the best place to be,
you know, from Navidia to Dell. The server side, like
we own VRT, which helps with the cooling system comfort systems,
you know, so there's a lot of these companies that
(16:05):
play into building out the companies that are selling to
the hyperscalers. I think will continue to be in a
great position now that as far as the Max seven
is concerned, I do think, you know, the market is
still in a state of shoppiness and volatility, and I
think that's going to last until we have better clarity
(16:26):
on what the FED is going to do. And you
saw the GDP numbers today, so there's there's mixed messages
as to which direction macro is going versus tech and
which one to prioritize, because if you've prioritize the economic cycle,
then that means valuations are at risk. If you prioritize
the text cycle, that means that earnings are the focus.
And right now we're in this world where some days
(16:48):
valuations are in focus and other days earnings like today,
So I think you just got to stay nimble at
the end of the day.
Speaker 2 (16:55):
Hey, James, last question thirty seconds. Here, I'm looking at
time US Equity on the Bloomberg terminal. This is the
clockwise Core Equity and Innovation ETF. It is up this
year a whopping eighteen point three percent, out performing all
the benchmarks. Amazon is your second biggest holding after T
bills make accounting for five percent of the portfolio. We
(17:17):
got Amazon coming up. Thirty second preview of Amazon.
Speaker 1 (17:22):
Yeah. Amazon, it's it's the only of the mag seven
that we feel that we haven't cut exposure to. You know,
it's a five percent or give or take weight, and
we're maintaining that. I think the data that you saw
from Microsoft and today is the really to the cloud
is a very good omen. They're firing across all three
other businesses, you know, on the on the grocery side,
(17:44):
the retail side, the cloud side, and this is the
first time in a while that you've seen everything going
in the right direction and most especially on the margin.
So you know, we like the risk loard here. You know,
I think next year you could get the two twenty five.
This year the upwards of two hundred, So you know,
it's one that definitely keeping the portfolio for sure.
Speaker 3 (18:05):
All Right, we're going to leave it on that note. Hey, James,
thank you so much. James. Chuck Mack, partner and tech
analyst at Clockwise Capital joining us on Zoom from Miami.
A lot of names move in here in the aftermarket,
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
Chairs of Alphabet just soaring in the after hours right now,
Carol Hire after the company reported earnings up as we speak,
another thirteen point six percent in the after hours right now.
This after declaring a dividend, boosting a buyback, authorizing repurchase
of up to an additional seventy billion dollars and shares.
First quarter ad revenue coming out above expectations first quarter,
(00:31):
also declared it cash dividend of twenty cents per share.
Speaker 3 (00:33):
All right, so let's get to it. James chalk Mak
so much to talk about. He's partnering technology analyst at
Clockwise Capital. He joins us from Miami. First of all,
Alphabet feels like I can't find anything wrong here. Walk
us through. Is this just kind of firing and all
cylinders and if you will, and then just throwing on
a dividend and then throwing on an additional buyback.
Speaker 1 (00:54):
Yeah, First, thanks for having me. You know, for Alphabet,
this was a tough one. You know, we had the
meta earnings last night, you know, uncertainty as it relates
to the sustainability of the top line growth metrics, and
obviously Alphabet via Google had, you know, uncertainties around their
search business, and at the same time you had this
growth and capex spend. You know, is that going to
(01:16):
translate over? So you know, we were kind of debating
what to do and going into the quarter. We actually
rotated a portion of our Microsoft position to triple up
our Alphabet position. But thankfully that worked out. But I
tried to see you for Google. Yah, well yeah they're
both out, so yeah, I mean it worked out.
Speaker 3 (01:36):
So why did you do it? What was it that
you saw, James in the in the Alphabet story that
you said you wanted to do that.
Speaker 1 (01:44):
Well, the main thing was the relative valuations. I mean,
the expectations for Microsoft were exceedingly hot and the expectations
for Alphabet were exceedingly low. And you look at one
t trading at twenty two times earnings and the other
ones at thirty five times earnings, So you know what
kind of the risk reward is. And especially we had
some sense of how things might trade if they came
(02:06):
in on a bear because kind of narrative given how
Meta traded. So it really just boils down to that.
But the fact that Microsoft was able to exceed those
nose bleed expectations in the testament to the trends and
the force of trends that we're seeing in the in
the shift of the cloud and AAI. More broadly, Hey,
(02:27):
I just want.
Speaker 2 (02:28):
To get your thoughts on Snap, because the company you've
been covering for years.
Speaker 1 (02:32):
I would love to ask about that there through.
Speaker 2 (02:34):
The good and the bad well. And the reason I'm
asking is because shares are up, wow, surging as we
speak by more than twenty percent, twenty five percent at
this point. This is after the company reported.
Speaker 3 (02:48):
They are down thirty here today they are.
Speaker 2 (02:50):
That's important context, Chris. The company is seeing second quarter
revenue from one point two to three billion to one
point twenty six billion versus estimates of one point two
one billion dollars. As Carol mentioned, it's been a brutal
year so far for Snap. How are you reading into
these results? And do you still you don't own Snap anymore?
Do you?
Speaker 1 (03:07):
No? No? Not for a long time. You know with Snap,
you know, they were supposed to be the camera company
and transformed into you know, it's exactly what they were initially,
you know, just messaging in some content initiatives. But at
the end of the day, you know, I think it's
really really hard for these niche platforms to scale in
(03:28):
the manner in which is necessary to provide differentiation to
advertisers and the return objectives and return enhancements on the
on that ad spend. So I think that the disparity
between these niche platforms like a Snap versus the likes
of Alphabet and Meta will only increase from here. The
caveat being that you have companies like Pinterest, which we
(03:51):
used to own but sold, you know, just given the
fact that they hit our target. You know, I have
more opportunities because of the engagement that they've bring that
is likely to grow over time versus you know, stick
to more static rates, which is from the likes of Snap.
Speaker 3 (04:08):
All right, we've got to go back to Google. Forgive
me Alphabet. I keep calling it Google, but I mean
your first alphabet. I know, I know, up twelve and
a half percent here, folks, in the aftermarket, this stock
heading into it had about a twelve percent gain on
the year here in twenty twenty four. The stock was
up almost sixty percent last year. But you know, when
when you look at Alphabet James, and you look at
(04:31):
its business lines and its roles and it's play, whether
it's AI, whether it's still advertising in a big way.
You know, our own man Deep Singh saying, you know,
this company is all about engagement. That's kind of so valuable,
and that's going to be valuable certainly in terms of
machine learning and jen Ai. This is really important stuff.
I mean, how do you think about you know, Alphabet
(04:54):
in kind of its future growth trajectory and kind of
where it goes from here. I mean, these are this
is a pretty impressive report, but it's also right appeasing
investors of saying we're going to throw some cash back to.
Speaker 1 (05:04):
You absolutely, I mean any anything with respect to returning
capital to shareholders or you know, getting religion on the
cost side of their business and utilizing their cash flow
for more constructive purposes rather than throwing it into black holes,
which is the way that they have been operating for
as long as I can remember that being said. I
(05:26):
think that the future for Alphabet and Google, you know,
is still remains a question mark. We don't know, and
I don't think anyone can definitively say what that search
environment experience is going to look like in the future.
You know, when if you look out five years down
the road. Now. The good news is all of this
stuff seems to be like coming at you fast right
all the AI. It's over the Since January of twenty
(05:49):
twenty three, it's been coming hard and fast. But the
good news is on the on the behavioral aspect and
the consumer experience. You know, things have changed which GPT
and whatnot, but things aren't changing that fast overnight, which
affords Alphabet time to really figure things out, whether it's
cannibalistic to their existing search business or not. You know,
(06:11):
I think we have time. So I think extrapolating too
much too soon is a risk, you know, so as
long as they can they have the time, they might
figure it out. They may not, but they might. But
I look into twenty twenty four and twenty twenty five,
that's it.
Speaker 2 (06:27):
Could Critics argue about Alphabet that declaring a dividend and
boosting a share buyback potentially isn't the best use of
money right now. Perhaps they should be investing more in AI.
Perhaps they should be investing more and making sure this
search product is bulletproof.
Speaker 1 (06:47):
Yeah. I mean they're throwing off tremendous amounts of cash
as it is, and they're investing a lot, and and
you look at the margin disparity versus a meta you know,
they have a lot of cushion there, so and they're investing,
you know, strongly as well. So I don't think it's
(07:07):
utually exclusive. So long as the ball continues to move forward,
which is what we need to see, and we'll see
what the color commentary is on the call, I think
it'll be okay. I think the longer term is one
of the questions linger shorter term, it'll be fine, all right.
Speaker 3 (07:23):
So let's go to Microsoft, because it's also the other
big one that are one of the big ones. After
the close, it's up about five percent here in the
aftermarket this one. Sales and profit beat expectations on robust
AI demand. That's the headline on our story. So quarterly
sales and profit climbing more than projected, lifted by corporate
demand for Microsoft's cloud and AI offerings. Revenue, as we said,
(07:45):
up seventeen percent in the third quarter, sixty one point
nine billion profit two ninety four a share. Analyst on
average estimated per share earnings of two point eight three
two dollars and eighty three cents. Excuse me, on sales
of sixty point nine billion, So again outperformance here, and
we know that such an Adella has been really infusing
(08:05):
all of Microsoft's entire product line with AI technology thanks
to its partner open Ai. So thoughts on Microsoft, what
we got here in the quarter, what it tells you
about their business today and going forward.
Speaker 1 (08:20):
Yeah, what's most amazing to me is the fact that
they're able to maintain the growth rates no matter how
big their revenue base gets, and the fact that they're
able to deliver the numbers that you just cited and
do so in an efficient way where earnings are continuing
to grow at the same rate, so it's not a
(08:41):
there's no contra indicators on and you know, sales versus spending.
So I think that to me, the sustainability is the
biggest and most impressive component of their operations, and most importantly,
you know, broadly, I think you can extrapolate that the
themes on the data center spend and the semiconductors like
(09:05):
the NVIDIAs of the world, and the direction of corporate
enterprise and their appetite for shifting from analog to digital
is as strong as ever. So I think it's a
very very good omen for a lot of these companies
and being at the center of it. Because you can
make an analogy that you want in the first inning,
(09:25):
third inning, or whatever. But I think the main thing
is that the world is going to I think Sam
Altman has this quote that he said, the technological changes
that we've seen over the last five hundred years, No,
the changes over the next fifty years will be greater
(09:47):
than the technological changes over the next last five hundred, right,
you know. So that's the pace of change that we're
talking and a lot of that's going to come in
the first decade, and these companies are all at the
epicenter of it.
Speaker 3 (09:59):
Just what and point out Azure Microsoft's cloud computing unit
revenue gaining thirty one percent in the quarter, above an
average prediction of twenty nine percent, so picking up slightly
from the thirty percent growth in the previous period. So
you know that's a trend line if you're following it, right,
you want to see I.
Speaker 2 (10:14):
Mean, there's a chance we see both of the depending
on what happens. There's a chance we see both Alphabet
and Microsoft hit new records tomorrow in today's trade, depending
on what happens. Okay, I want to talk James just
a little bit about Microsoft's legacy here and the way
that it's been able to shift and embrace AI. Where's
the most important part of looking at Microsoft's growth moving forward.
(10:35):
I mean, I know, we obviously know Azure is incredibly important,
but the company has made a huge, huge bet on
AI with open Ai. Where do you start to see
that investment and its relationship with open Ai manifest in earnings.
Speaker 1 (10:51):
I think it's going to be, you know, exactly, you'll
see it in the Azure business, but more broadly in
the intelligent cloud segment. I mean, it just continued to
trans on that front, but it's not just that segment.
It's going to have It's going to feed into other
parts of their business too, you know, on the subscription
side of their software services and potentially even gaming, and
(11:15):
you know, so there's there's a lot of levers I
think that will be pulled from that relationship. And as
the world and the corporate enterprise continues to move in
that direction, more data is going to feed into it,
which is going to fuel even more efficiency with respect
to the capabilities that they do. And you know, Copilot,
you know, for instance, is just on the I don't
(11:36):
want to use saying first end of that day, day
two of its potential. So and there's a lot of
money to be paid there that you'll see that. I
don't think it is being appreciated at all, virtually at all.
Speaker 2 (11:48):
Right now, these are all different companies, but they're all
working on AI, and to a certain extent, they're competing
with each other when it comes to that technology. No question, uh.
Given what we're seeing from shareholders in reaction to micros
oft in alphabet today, and given what we saw today
in the session from reaction from investors to meta platforms
sending shares for their worst ten months, what did the
(12:10):
two companies that reported today get right? Or maybe a
better way to ask is what did meta platforms get wrong?
Speaker 1 (12:19):
What did meta platforms get wrong? I think what they
got wrong was largely related to the management of the expectations.
You know, there was no indication around the pace of
investment that's necessary to sustain the kind of growth. I mean,
they talk very qualitatively.
Speaker 4 (12:40):
About this is a big opportunity ahead, you know, all
the metaverse and YadA YadA, But you know, there was
no pushback whatsoever on the questions and commentary with respect
to you know, how we should expect the pace of
investment to ramp to justify and capitalize on the trend
(13:01):
that Zuckerberg talks about.
Speaker 1 (13:02):
So I think it was more of an expectation versus
reality in mismatch that probably could have been better managed.
Speaker 3 (13:10):
All right, let's just remind everybody the bigger earnings after
the close and those that have really outperformed here in
showing some studying moves to the upside, Microsoft among them.
That stock, as we mentioned, it is moving up just
about four point four percent here in the aftermarket, and
the company coming out sales and profit beating expectations, lifted
(13:32):
by corporate demand for the software maker's cloud and AI offerings.
We talked about Azure gaining revenue alone gaining thirty one
percent in the quarter that was above analyst expectations. Revenue
in the third quarter overall up seventeen percent to sixty
one point nine billion dollars. Profit was two dollars ninety
four cents a share. Analysts on average estimated per share
(13:53):
earnings of two to eighty three, so below what they
actually came in with, and the estimate for sales was
sixty point so again really hitting out of the park
when it comes to those estimates, and that is certainly
one reason why you're seeing the stock or a big
reason why you're seeing the stocks up. The stock of Microsoft,
I should say up at the aftermarket.
Speaker 2 (14:12):
Okay, let's worth let's repeat a little bit of what
we saw from Alphabet the company's first quarter Google AD
revenue coming in at sixty one point six six billion
versus estimates of sixty point one eight billion, in the
company author authorizing a repurchase of up to an additional
seventy billion dollars worth of shares, also declaring a dividend,
a cash dividend of twenty cents per share. First quarter
revenue excluding traffic acquisition costs sixty seven point five to
(14:36):
nine billion, beating estimates of sixty six point oh seven billion.
Speaker 3 (14:39):
To the downside, Intel shares are down more than eight
percent here, biggest maker of PC processors. Lacklow luster forecast
from the company for the current quarter, indicating it's really
still struggling to kind of find its way back to
the top, if you will. Sales in the second quarter
will be about thirteen billion. That compares with an average
analyst estimate of thirteen point six billion a quarter to
(15:00):
our data here at Bloomberg Profit Again, the outlook will
be ten cents of share minus certain items versus a
projection of twenty four cents, So that's a pretty big miss.
We're talking with James chockmock partner and tech analyst ever
at Clockwise Capital. James, is there's some underlying theme. We're
not through all the MAGS seven companies. We've got what
Amazon next week?
Speaker 2 (15:20):
Yeah, we've gotten video in a while, right, so.
Speaker 3 (15:23):
We've got some other plays to get through. But is
there any themes that you're finding, certainly for the investment
community when it comes to especially these big tech names
the mag seven often who haven't always been so magnificent
as of late, what they're saying and kind of their
impact on the overall market. Is there some big takeaway
here for you?
Speaker 1 (15:44):
I think the biggest takeaway is that the sellers of
these data center services are the best place to be,
you know, from Navidia to Dell. The server side, like
we own VRT, which helps with the cooling system comfort systems,
you know, so there's a lot of these companies that
(16:05):
play into building out the companies that are selling to
the hyperscalers. I think will continue to be in a
great position now that as far as the Max seven
is concerned, I do think, you know, the market is
still in a state of shoppiness and volatility, and I
think that's going to last until we have better clarity
(16:26):
on what the FED is going to do. And you
saw the GDP numbers today, so there's there's mixed messages
as to which direction macro is going versus tech and
which one to prioritize, because if you've prioritize the economic cycle,
then that means valuations are at risk. If you prioritize
the text cycle, that means that earnings are the focus.
And right now we're in this world where some days
(16:48):
valuations are in focus and other days earnings like today,
So I think you just got to stay nimble at
the end of the day.
Speaker 2 (16:55):
Hey, James, last question thirty seconds. Here, I'm looking at
time US Equity on the Bloomberg terminal. This is the
clockwise Core Equity and Innovation ETF. It is up this
year a whopping eighteen point three percent, out performing all
the benchmarks. Amazon is your second biggest holding after T
bills make accounting for five percent of the portfolio. We
(17:17):
got Amazon coming up. Thirty second preview of Amazon.
Speaker 1 (17:22):
Yeah. Amazon, it's it's the only of the mag seven
that we feel that we haven't cut exposure to. You know,
it's a five percent or give or take weight, and
we're maintaining that. I think the data that you saw
from Microsoft and today is the really to the cloud
is a very good omen. They're firing across all three
other businesses, you know, on the on the grocery side,
(17:44):
the retail side, the cloud side, and this is the
first time in a while that you've seen everything going
in the right direction and most especially on the margin.
So you know, we like the risk loard here. You know,
I think next year you could get the two twenty five.
This year the upwards of two hundred, So you know,
it's one that definitely keeping the portfolio for sure.
Speaker 3 (18:05):
All Right, we're going to leave it on that note. Hey, James,
thank you so much. James. Chuck Mack, partner and tech
analyst at Clockwise Capital joining us on Zoom from Miami.
A lot of names move in here in the aftermarket,
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