October 30, 2025 • 32 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss earnings from Alphabet, Microsoft and Meta as Apple and Amazon prepare to report after the bell. Plus, Roblox CEO David Baszucki discusses the platform’s user growth which added to the company’s costs. And President Trump and China's Xi Jinping discussed trade and chips during a meeting in South Korea.
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hide in New York
and Vla Lowe in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up.
Speaker 3 (00:24):
Alphabet, Microsoft and Meta all outward results showing heavy spending
on AI and data center construction.
Speaker 4 (00:31):
Plus Roebrock CEO David Zooki joins us to discuss the
company's earnings as users and jumping, but so are costs.
Speaker 3 (00:38):
And we'll break down what was said during the meeting
between President Trump and China's Jugen King, what wasn't discussed
and vidiots, blackweld chips.
Speaker 5 (00:46):
Let's turn our attention to these markets.
Speaker 4 (00:48):
And after record high, after record high, we take a breather.
Then that's that one hundred HUNDERD pressure off by almost
a percentage point. This as we think about the FED
maybe not baking in that December cut as much as
the market had anticipated.
Speaker 5 (01:00):
You add to that some concerns about AI spending. You
add to that a.
Speaker 4 (01:03):
China US trade deton for a year that many felt
were priced in ed and we just come down some
across all asset classes. But you're looking under what's in
the ecty moves yep.
Speaker 3 (01:13):
Let's get through the top stories, and Video is down
two percent. Blackwell, its latest processor was not discussed in
the meeting between President Trump ands Ujenping. Later in the
show out to South Korea to get the details of
that meeting. Then there's earnings Microsoft thirty nine percent top
line growth in Azure, the cloud computing unit, the only
unit that mattered, but the stock selling off high bar
(01:34):
for investors.
Speaker 2 (01:34):
Alphabet is the one that's higher.
Speaker 3 (01:36):
It told us what its capital expenditures are this year,
but it also told us about growth a real number
on AI or generatorve AI related products. Then Meta, it
is the biggest decliner and the biggest drag capital expenditure concern.
Then this morning, coming to market with an up to
six part bond sale maturities ranging five to forty years.
The forty year note one point four percent over treasury
(02:00):
above treasuries. There's a lot to discuss in Meta's capital
requirements and then what it has to show for it.
Let's do that with Brent. Phil Jeffrey's analyst joins us.
Right now, let's start with Meta. That's kind of the equation, right, Okay,
Capital expenditures will be higher next year than they were
this year. Then what give us more, give us some
longer term outlook. There just wasn't a formal guidance. Is
(02:21):
that what spooked the market.
Speaker 6 (02:25):
Yeah, Meta was just in a period of being really comfortable.
Zuck had been very comfortable. The company had executed, they
had invested, and they were harvesting those investments, and now
they're going back into invest mode. So I think at
the beginning of the year, advertisers were seeing that Meta
was more sheltered because they didn't know what Google was
(02:47):
going to do with AI, and we didn't know what
was going to happen to TikTok. And then halfway through
the year, everyone realized, hey, Google's got their act together
and AI, and we know that TikTok now has more
of the foundation. So I think, as I call it,
there's less.
Speaker 2 (03:03):
Of a tailwind for Meta.
Speaker 6 (03:05):
It's not a headwind, but it's less of a tailwind
that they had at the beginning of the year when
you talk to advertisers, and I think what Zuck said
last night on the call was the investments in AI
are paying off, and they just need more of them
because everything they built, they felt like they had overbuilt
and they sold out of what they built.
Speaker 2 (03:24):
Yeah, so they have to build more and so yeah.
Speaker 6 (03:28):
It doesn't have anything to do with the fundamental position.
It's are we going to see margin compression and then
when does that return come back? But we already know that.
Then they have a return. We've saw with Microsoft. They've
given this margin expansion even in the face of AI.
So this whole concept that AI doesn't pay off is silly,
you see, because but the.
Speaker 5 (03:49):
Stock move is so big that we question.
Speaker 4 (03:53):
Yes, we see Zuck on the call saying, look, I'm
worried about underinvesting. We hear once again from Susan Lee
that they're going to make notable investments. Everyone new Capex
is going to go up into the right. Why is
there such an air pocket on this stage?
Speaker 6 (04:07):
You think, well, I think the outperformance of Google, I
think you have money chasing weren't a momentum market. I mean,
look at yesterday before any year, Needs everything and applications
went down aing, and AI went straight up in infrastructure.
So if you have Capex going this high, the pushback
is why do I invest in internet and software right now?
(04:27):
I should be invested in energy and land, and it
all the enabling infrastructure, and the infrastructure goes up every day.
Look at all the energy names, they're all ripping. And
so I think there's a common pattern with tech investors
right now.
Speaker 2 (04:40):
They're just broader.
Speaker 6 (04:42):
Investors are moving their investments to other categories, and then
they're chasing momentum. It's just the market's so narrow and
you're seeing this. So there was nothing that was fundamentally offline.
They're making any investment. They've done this before. How many
times have we seen mat to do this and then
return the stock goes hired. They're going to do thirty
(05:02):
dollars running to power, put a thirty multiple on it.
You're nine hundred dollars on the stock. It's a buy
on the pullback, Brent.
Speaker 3 (05:12):
The name of momentum is Alphabet and Google. Right, they
gave us two data points cap too Expenditch is ninety
one billion to ninety three billion dollars. But revenue from
products that are built on Google's generaty of AI models
grew more than two hundred percent from a year earlier.
That second part your reaction to it.
Speaker 6 (05:33):
I mean AI is working, and I think the fear
that investors have had is what happens when I go
from a world of search to AI. And I think
Google is showing they can do the high wire act.
Speaker 2 (05:45):
Very well between search to AI.
Speaker 6 (05:48):
Everyone thought search would implode in the last two quarters,
they beat the search number.
Speaker 2 (05:52):
This quarter they accelerated their search number. So what they're
seeing is that search can be anywhere. It can be
inside AI, can be in their own.
Speaker 6 (06:00):
Engine, it could be a YouTube, it could be across
different properties. And I think what what Google is demonstrating.
And we've said this kind of for a while. They
have better AI underneath the hood than they're articulating, and
it's now coming out.
Speaker 7 (06:15):
You can see it.
Speaker 2 (06:16):
We said, you know, they kind of pulled up.
Speaker 6 (06:18):
To the I race, you know, on a Toyota Camry
body that they have the biggest engine and they pop
the hood and everyone's like, whoa, this is incredible. And
so I think everyone was realizing. When you look at Gemini,
I mean we ran bench tests, it's almost equivalent to
chet GPT. And then you look at the breadth of
(06:39):
their offering. And again remember they own the world's Internet data,
so you need data users in capital for AI to work,
and they have all of those almost better than Meta, Microsoft,
many of the others. They have more data on anything
in the world than anyone.
Speaker 2 (06:56):
So I think they're proving that this engine's working.
Speaker 6 (06:59):
The body didn't look great, you know, they're upgrading the body,
but the engine look is really really good.
Speaker 4 (07:05):
But what's so interesting is clearly Microsoft is still working.
When you're looking at asure growth of thirty nine percent,
that was better than the market I anticipated. Sure it
might not be much of a growth uplift, but what
was it? What was the fly in the ointment for Microsoft?
Where Aimyhood again is saying, my issue is supply, not demand.
Speaker 6 (07:23):
I don't understand the market because they just put up
over fifty percent RPO backlog growth and one hundred and
ten one hundred eleven percent commercial bookings.
Speaker 2 (07:32):
Those numbers are insane, and that.
Speaker 6 (07:33):
Didn't even include opening eyes two hundred and fifty billion
incremental dollars. So I think the market's got this wrong honestly,
that you got to look at the backlog. The backlog
is leaning indicator of health. The reported AZURE number does
not matter. When you're putting those backlog numbers up, that
tells you their capacity constrained. You can't book that kind
(07:55):
of revenue and not take it to Azure. And the
differential is they just can't get the capacity up right now.
But their customers want to spend, and their customers are
spending and they know that what Microsoft has. So I
think this is a common pattern where you're seeing massive
(08:16):
backlog growth commitments to AI from their customers, but Microsoft
can't literally physically provision it fast enough. And when we
talk to Microsoft offline, like the Azure number would be
way higher if we now have the capacity constraints. So
this is not a demand issue, This isn't a competitive issue.
(08:38):
This is an issue that the industry is facing right
now across the board is they can't get enough of
it to their customers. That number of have been way
higher because you can't describe the math of the backlog
being so high and Azure where it's at.
Speaker 2 (08:53):
So I think again, we look at it.
Speaker 6 (08:56):
It's important Wall Street cares like Wall Street should care
more about backlog and bookings. This is again what all
Oracle trades on. They don't care about revenue. Why does
everyone just care about revenue now? So I think again,
I think the Street's got it wrong.
Speaker 4 (09:11):
Streets got it wrong. Brent phil and Jeffrey's putting it right.
We thank you so much. But coming up more about earnings.
Roblock CEO David Zuki joining us to discuss the company's
numbers daily active users for the gaming platform and toping
one hundred and fifty one million ED.
Speaker 2 (09:25):
Let's look at Core.
Speaker 3 (09:26):
We've shares down more than six percent. Core Scientific investors
have voted no on Core We've acquiring the company. You'll
remember that Core. We've tried to buy Core Scientific in
July nine billion dollars and the advisory firm said that
undervalued it. BI reacting saying it actually won't impact operations
of Coreweed but another headline on the terminal. As soon
(09:47):
as that vote was decided, Core weave to buy Marimo
terms not discos, maybe a sense that it's moving on
very quickly. We'll have more when we can. This is
Beningberg Tech.
Speaker 4 (09:59):
Grow regard ninety nine Nights in the Forest, still a
brain rot three games, propelling Roadblocks to its highest level
of daily active users, a company also posting nearly two
billion dollars in bookings in the third quarter. Still shares
of the company trading lower after the earnings. Let's talk
all through all of this with Dave Zuki foundacy of
Roadblocks and Dave this growth, this is real playing commitment
(10:22):
comes at a cost, an infrastructure cost, and we see
costs go up because of safety that you're enacting.
Speaker 5 (10:26):
But also the cloud compute.
Speaker 4 (10:28):
How do you start to monetize to make up for
some of those costs.
Speaker 7 (10:32):
Yeah, thanks for noting the amazing quarter we just had.
Both bookings growth was up seventy percent year on year
at one point nine billion, and as you noted, our
daily active users passed one hundred and fifty million, which
is up seventy percent year on year. In addition to
those three games you mentioned, we had seven games on
(10:53):
Roadblocks in the last quarter, past ten million daily active
users and a really healthy content ecosystem. Five of those
seven experiences were created in the last year. We've hit
some really peak numbers. We had forty five million concurrent
players all at the same time. What we said on
(11:13):
the earnings call is with all of this growth, which
is cumulatively averaging thirty seven percent over the last two years,
we are going to be spending on infra. What we
said is the continued decreases in costs for infra, we
may slow that down a bit as we spend, But
the final thing I want to generate is the cash
(11:35):
flow that we generated on the platform. We generated over
four hundred and forty million of free cash flow in
Q four.
Speaker 2 (11:43):
DAVE.
Speaker 3 (11:44):
Looking forward, then, how are you managing out some of
the technology plays that you made age verification technology in
a way that doesn't impact or slow the growth of
both active users in the bookings.
Speaker 7 (11:57):
We've made a commitment a while by to what we
believe will be the cold standard for safety on platforms
like Roadblocks and throughout the industry. With new advances in AI,
we're going to use facial age estimation to estimate the
age of everyone on our platform. And in addition to
(12:17):
the text filtering we do the critical harms monitoring the
prevention of any image sharing. We're going to use that
to help gate who communicates and who they communicate with.
I was just in an executive staff meeting on Tuesday
playing with the role out of this product. It's really
elegant and we of course want to highlight there may
(12:38):
be some friction, but I'm really optimistic this is the
long term good play for Roadblocks, which is really establishing
the standard of how we believe safety and civility is
going to run in the future.
Speaker 4 (12:49):
And that your CFO made the point that's going to
have long term value for shareholders. You make it again, Dave,
talk to us there for about the new technology, not
just in safety, but also in how you build gate
and high fidelity feeling of a game. But some of
these big winners that we've had, we just them at
the top. They are kind of more old school feeling
in many ways, but they're the ones breaking records, grow
(13:11):
a garden, more classic and blockie.
Speaker 5 (13:13):
How do you compromise on that.
Speaker 7 (13:16):
We've highlighted our vision of getting the ten percent of
all the global gaming content market running on roadblocks. In
this quarter we pass three percent, so there's a lot
of room to go. We have an enormous amount of
new technology coming to support more diverse experiences, to support
different types of avatars, to support competitive gaming and genres
(13:38):
like racing or sports, to support role playing games and
other types. And we really do have a vision for
genre expansion, but in a really future looking way, and
that when creators make experiences on roadblocks, they run well
either on low end Android devices like a two gigabyte
Android phone, or on high end gaming piecs and they
(13:59):
run around the world. So we're optimistic. With the new technology,
our economics and discovery, we're going to see a diversification
of the types of experiences we see on our platform.
Speaker 3 (14:13):
Dave, you want ten percent of the gaming content market?
That changed in the quarter. I saw layoffs at Amazon
and Microsoft's gaming divisions. Electronic Arts elected to go private.
The big publicly traded peer that you have private with
the saudis. React with your interpretation of what that signals
for the market you're trying to grow in well.
Speaker 7 (14:35):
People estimate the global gaming market somewhere between one eighty
and two hundred billion. What we've seen on Roadblocks is
really a future forward optimistic look at gaming. We've seen
new types of genres given the Roadblocks platform, the ability
to play with friends on different devices.
Speaker 1 (14:55):
You know.
Speaker 7 (14:55):
Addressed to Impress last year was a whole new type
of experience. People competing in a fashion show grow a garden.
I'm really proud of because hitting those top numbers, making
new records for over twenty million. Concurrence is literally a
game you can play either while you're there or when
you're not there. Your garden keeps growing when you're not playing.
(15:18):
So I think the way to think about this is
not just protecting a bunst the history of gaming, but
looking at whole new types of games that are going
to be built on platforms like Roadblocks and accelerated with
AI as every game starts to have access to AI
as well.
Speaker 3 (15:36):
David Zuoki, Roadblock CEO, thank you very much. Let's stick
with earnings in tech. Comcast was also out before the
bell this morning, the company managing to slow the tide
of broadbanding cable TV customer defections in the third quarter
with help from an Internet price lock guarantee and some
bundle plans. Let's get out to Bloomberg's entertainment reporter Kelsey
Griffiths and DC give us the need to know on Comcast.
Speaker 8 (15:59):
Ist tenth straight quarter of broadband losses. So the company
came into this quarter knowing that they had to do
something to start stemming this tide. Like you just said,
they did in fact succeed in kind of slowing some
of those losses, even though those numbers weren't positive. Necessarily,
(16:20):
they were losing customers at a slower rate than usual,
and so the executives were saying that some of the
changes they've made over this year earlier seemed to be working.
Speaker 5 (16:30):
Seeming working, but the share price is still lower.
Speaker 4 (16:32):
And what's interesting maybe in some of the analyst notes
there is a concern that maybe they'll spend more, particularly
when they're thinking making a bid for parts of Warner Brothers.
Speaker 5 (16:40):
What do you make of that, Kelsey, that's right.
Speaker 8 (16:44):
Warner Brothers is one piece of the strategy that Comcasts
said they're looking at, although they didn't express a really
high level of interest. They said, when something like this
in our industry comes on the market, it is something
that we have to take a look at. But look,
we're good with our content strategy even without M and A.
They just succeeded in Laurene Taylor Sheridan over from Paramount
(17:06):
Plus and he is going to be a really big
part of that content links get going forward for them.
They also have NBA TV rights and those are things
that they're really excited about in the nearer term.
Speaker 5 (17:18):
Great roundup, Kelsey Griffiths.
Speaker 4 (17:20):
We appreciate you on Comcast, and let's just stick with
the Warner Brothers story a little bit more. Because CEO
David Sazov said that the board would need a higher
bid to justify a sale at the company. He said
those comments during a town hall meeting for employees yesterday,
according to sources. Now Sazadov also told the staff that
the board had rejected three.
Speaker 5 (17:39):
Offers from Paramount Skydin send.
Speaker 2 (17:42):
Okay coming up.
Speaker 3 (17:43):
President Trump and China Jijingping attempt to ease trade tensions
inside their high stakes talks on the future of the
global supply chain. We have all the details. Next, this
is bloom Bag Tech. M H.
Speaker 9 (18:13):
We did discuss chips and he's going to be They're
going to be talking to the video and others about
taking chips. We're not talking about the black one that
just came out yesterday, but.
Speaker 2 (18:28):
A lot of chips, you know, a lot of the chips,
and that's good for us.
Speaker 3 (18:33):
I was President Trump speaking to reporters on board Air
Force one after meeting with Chinese President Jijingping, saying chips
were in discussion, but in Nvidia's latest blackwell was left
off the table.
Speaker 2 (18:45):
Blueboks.
Speaker 3 (18:45):
Tyler Kendall has been traveling with the President and joins
us from South Korea.
Speaker 2 (18:49):
What is the absolute latest?
Speaker 3 (18:50):
What do we need to know about that came out
of those talks between Trump and Jijingping.
Speaker 10 (18:55):
Yeah, hey, Ed, Well, when it comes to in video chips,
it certainly dampens a speculation that Washington would go on
to approve the sale of such chips to China. President
Trump went on in that gaggle on Air Force one
to be asked specifically whether or not anything was brought
up about the potential for a downgraded version of the
Blackwell processor. He said that it was not, but that
(19:16):
ultimately in Vidia the company itself, is going to continue
direct talks with Washington, as you well know, and Vidia
has been trying to regain market access in China since
twenty twenty two, after going from a ninety five percent
market share peak down to zero. But I have to
say this was welcome news in Washington this morning for
those defense hawks who have previously advocated against such sales
(19:38):
over national security concerns, Which brings us to the broader
issue of the general trade talks, because while we are
getting this easing intentions, our own analysts at Bloomberg Economics
say those more fundamental issues, including national security, were not
ultimately addressed. But Ed and Caroline, of course, a welcome
news that we are seeing what appears to be at
least a year extension when it comes to the broader
(19:59):
trade troops.
Speaker 3 (20:00):
Yes, blueboth, Tyler Kendall, thank you so much. That's the
latest from South Korea. Let's get more news, Carol.
Speaker 4 (20:05):
Yeah, it's time now aired for talking tech and first up.
Open Ai is said to be preparing to file for
an IPO as soon as next year that could value
the company at one trillion dollars. But it's all according
to a report from Reiters. The company is said to
be considering finding the paperwork with regulators soon as second
half of twenty twenty six plus. Microsoft says its cloud
(20:25):
services are recovering from an outage that disrupted workplace software
products and impacted several companies. For the outage prevented people
from checking into Alaska Airline flights, for example, and disrupted
features in Microsoft's own copilot AI. We are ex consultants
from McKinsey, from Bain, from BCG are recently contracted to
train AI models on entry level consulting work for open Ai.
(20:49):
Now bluemeggers learn that our gentum project is run by
the same third party firm using ex bankers to train
open ai on financial.
Speaker 2 (20:57):
Models, said Okay coming out.
Speaker 3 (20:59):
We have more magnificent seven earnings coming up after the
bell today with Apple and Amazon, and we're going to
have what to expect from those giants next. Apple up
treading water three ten percent, Amazon down nine tens to
one percent. Maybe there's more read through there from the
other cloud names and what that might or might not
spell for Amazon or at least investors attitude towards it.
Speaker 2 (21:19):
Elsewhere. We know what the story is.
Speaker 3 (21:21):
And the top stories of the day stops moving in
different directions on the earnings context. Met Us down twelve percent,
really interesting, notably higher capex in twenty twenty six and
twenty twenty five. Alphabet gave us the same number of capex,
but they also told us how revenues directly tied to
AI are growing, and right now the market's rewarding that
with the Google pairing up five percent.
Speaker 11 (21:42):
This is Bloomberg Tech. Welcome back to Bloomberg Tech.
Speaker 3 (21:56):
Let's recap the three magnificent names that already reported last night.
Speaker 2 (22:00):
Different stories.
Speaker 3 (22:01):
Microsoft down three percent, as your growth was thirty nine
percent above consensus, but it was a high bar quarter.
Same story across all three of them, as we know
the capital expenditures environment. Meta told us that capital expenditures
would be notably larger next year than they were this year.
But the investor bases spooked a little bit because we
don't have this kind of longer term outlook for how
(22:21):
that translates to sales apart from we do from Alphabet
the parent of Google. So they told us what the
capital expenditures picture looks like, but also that they're products
that result from investment in data center capacity. AI models generative.
AI grew two hundred percent year in year, and that
name is up five percent in direct reaction, and there.
Speaker 2 (22:42):
Are so many more earnings out there current.
Speaker 4 (22:44):
There are, and another one on the rise is Service
now ed it gave an outlook for strong revenue growth,
said AI of course is helping the company reduce its
own costs. We spoke with Service Now CEO Bill McDermott
a little while ago.
Speaker 12 (22:57):
The most important thing is to reinvent and all of
these back office operations and companies. So for example, in
our company, whether it's IT support or customer support or
security and risk, ninety percent of this work now is
being done by agents, but not at the expense of people.
(23:18):
The people in our company now have an AI teammate
on their shoulder to do the things.
Speaker 2 (23:24):
That they'd really never really liked very much.
Speaker 3 (23:29):
Earning cities and continues with both Amazon and Apple reporting
later today. Let's talk about what to expect, Bloomberg Execute's
reporter Ryan Vastellika. Let's start with Amazon. Then it's down
a percentage point. Maybe this read through from what we
learned about cloud computing from the three that went last night.
Speaker 2 (23:47):
What are we expecting at.
Speaker 13 (23:48):
Yeah, absolutely, I'd say there's absolutely people looking at the
results we saw last night from Microsoft and Alphabet and
kind of extrapolating into what we could expect from Amazon.
I will say that there has been growing concern about
the strength of AWS, that's Amazon Web Services, the cloud
computing business. There some concern that it is falling behind,
maybe losing some market share, not as quite well positioned
(24:12):
for the AI era, and maybe the fact that we
saw such strong results, especially out of Alphabet, maybe indicates
that maybe it's going to be on the back foot
a little bit here. There also continues to be a
lot of focus on how much these companies are spending. Amazon,
of course has very high CAPBAX levels, not only with
building out its data center, and cloud business, but all
(24:32):
of US logistics operations. I'll be very curious to see
there if we get any sort of improvement on the
margin front, especially when it comes to commerce. I say
that those are the two major things people are looking
at there.
Speaker 4 (24:42):
A I use deployment all about for Amazon, almost for Apple,
it's ignored. We're just wondering how iPhones seventeen in air
are doing.
Speaker 2 (24:50):
Yeah, absolutely so.
Speaker 13 (24:51):
So far, it seems like the iPhone seventeen is selling
pretty well, especially the higher end model. So that is
atail one, especially when it looks at average selling prices
right there. People I spoke to have said that maybe
a lot of people who bought phones during the start
of COVID and the pandemic five years ago, maybe they're
just at a point right now where they're starting to upgrade,
even without AI features, even without the foldable phone that's
(25:12):
expected next year. So there is a lot of optimism
that the strong iPhone sales that we've been seeing indications
of so far, maybe there's room for this to grow
over the coming quarters, especially as we get new designs,
more AI features and so forth. Of course, now the
question is you have a stock that's valued at four
trillion dollars. It's in hitting record levels. Is all this
optimis is going to be justified by the results that
(25:34):
come out this afternoon.
Speaker 4 (25:35):
I mean, while Amazon languishes only about two and a
half turning Bloomberg ran Plastelica, thank you very much, And
let's just talk about where investors' heads are at, how
they're reacting to this really busy week of earnings. Ibek
oskodeshkay is with our senior market's analysts over at Swiss Quote.
We had Brent sil from Jeffrey's on the top of
the show, and he said he doesn't.
Speaker 5 (25:52):
Understand the market right now.
Speaker 4 (25:54):
Do you understand the market if you're looking at Meta
being sold off so hard, Alphabet rising after earnings. We'll
get back to her in a minute. Technology on technology
shows and this many years into zoom, sometimes we don't
press the right button, head, but really, I do think
the one cell coming from Meta is a key one
to be discussing because we have got this five vocated
market where we're selling off certain names, in particular when
(26:15):
we're worried about capital expenditure.
Speaker 5 (26:17):
But what more was better.
Speaker 4 (26:19):
To do twenty six percent growth in terms of revenue
record numbers. We're also thinking about what therefore that pushes
forward to Amazon and how much they have to vindicate
the spend on capital expenditure too.
Speaker 3 (26:29):
Yeah, one thing I'd say is we go back to
Epek Deshkai, who I think is now good, and back
with us is with respect?
Speaker 2 (26:35):
Do investors have short memories?
Speaker 3 (26:37):
Because Meta told us in the prior quarter that CAFTO
expenditures would be higher in the next fiscal year, they
used a different language this time around, which was notably
larger in fiscal twenty six and twenty five.
Speaker 2 (26:49):
But maybe it's what they didn't say.
Speaker 3 (26:51):
They didn't tell us what top line or bottom line
growth directly from AI investments looks like what's your read?
Speaker 14 (26:57):
Well, actually, for Meta, the investments look more more riskcared
than they are for Microsoft or Amazon.
Speaker 15 (27:02):
We do have these data centers and they say that
if we over invest, we will have the option to
sell this excess capacity.
Speaker 14 (27:10):
And if you're looking at the market reaction and the
mixed reaction there, we also think that macraeconic context is
here is very important.
Speaker 15 (27:18):
Important in the sense that just before these.
Speaker 14 (27:21):
Earnings came out yesterday, the Federal Reserves said that they're
not sure that they will be cutting the interest raised
by twenty five bases point. So I think that that
also dumpened the mood just before the earnings came in.
Looking at the spending these companies must spend in order
to keep up with the man and Microsoft has been
very clear about the fact that they have not been
able to catch up with the significantly higher demand. So
(27:43):
they must invest. They do have the free cash to invest,
and if they do not invest and miss the turn,
the AI turned that that would be worse for.
Speaker 15 (27:51):
Investors then seeing them over investing.
Speaker 14 (27:54):
So I think that in the in the context of
the actual growth, these companies must invest and it doesn't
really bother us as long as there are no concerns
about oversupply, and this is not the case right now.
Speaker 4 (28:05):
You got Meta said if they have too much compute,
they can start selling it to others.
Speaker 5 (28:09):
So is this an air pocket?
Speaker 4 (28:11):
Is this just where people buy into weakness or is
there going to be a significant pullback in questioning of
the market rit large if the FED isn't going to
be cut in come December.
Speaker 14 (28:20):
Well, I think that the FED situation could eventually lead
to a certain pullback in valiations. But I don't think
that that's going to be a bubble pop kind of
a market's reaction, because these companies must invest now in
order to make sure that they don't hit into capacity
constraints one year, one and a half year from now.
I believe that investors understand that there is a bpoort
(28:43):
showing that or claiming that the data capacity computing needs
will be doubling every nine to eighteen months due to
our AI application, So these companies must keep up with
that pace. And again I believe that these fending plants
have been almost in fairly you know.
Speaker 15 (29:00):
Put out there, so they have being revised higher. But
this is not this is not a surprise coming in
right now.
Speaker 14 (29:07):
Looking at the deals and the strength of the demand
that we see in the sector, these companies are out
there trying to keep up with the demand. And I
believe that again, as the executives are also saying, not
keeping up with the demand or risking to head into
capacity constraints is worse than over investing right now.
Speaker 4 (29:26):
What's interesting is, of course, perhaps just to show the
amount of spend that was necessary, Meta comes to market
with a ginormous twenty five billion dollar bond sale and
talk to us about demand across assets for AI related companies.
Should we pull back inequities that their record highs. How
is demand looking for the bond side of the equation.
Speaker 15 (29:47):
Well, I think the bond side is also looking well.
Speaker 14 (29:49):
Especially right now we have seen that the bond sales
are have been quite interesting for these companies. I believe
that in the actual environment as well, the bond sales
are going to be interesting. So the investors who are
not necessarily willing to take the equator risk at the
higher valuations, they will be plugging into the bond side
of the market. You are not expecting them to move separately.
You expect them to do to move in tandem. But
(30:12):
on the bond side the potential of rises less and
the risk that we're taken for.
Speaker 15 (30:17):
It is also less.
Speaker 14 (30:18):
So this is another way of taking exposure and passive
exposure to these companies without however, taking the risk of
the equity fluctuations.
Speaker 2 (30:27):
Epeck.
Speaker 3 (30:28):
If I take the earning statements and cool transcripts of
all the tech earnings we have so far, run them
through chat GPT and ask chat GPT to cross reference
for a theme that is not capital expenditures what would
I get. What else do you see that they have
common between them?
Speaker 15 (30:44):
Well, the couple of expenditures are actually rising.
Speaker 10 (30:47):
I don't know.
Speaker 15 (30:47):
I have an ass chat.
Speaker 14 (30:48):
Topt what he thinks about it. But what we see
is that this is growing exponentially and there is investment
worries about that. But if you do not invest today
again a year and a year and a half from now,
you might into bigger capacity constraints. What's happening right now
is if today, for man one prosoft for example, you
are not able to catch up with the demand, then
(31:08):
tomorrow is going to be a harder because you know,
we're just going divergently because the demand is going to
be exponentially rising.
Speaker 15 (31:15):
And that's the main issue.
Speaker 14 (31:16):
That's why these companies are investing so badly or so highly.
Speaker 15 (31:20):
And this is I think what chatteropt will tell you.
Speaker 14 (31:23):
Because as AI applications will be and running, demand for
competing is going to rise exponentially. And this is exactly
why Nvidia is also not only concentrating today on the
AI applications, but all on the networks and intelligence networks
as well, to make sure that even the networks and
the pipelines will be able to handle all that data
(31:44):
flow down the road.
Speaker 3 (31:46):
We did get a FED cut quarter point for a
second consecutive meeting, and we did get a warning that
a December rate cut is not a foregone, foregone conclusion.
Ipek Oskar Deshkaya Senior Markets and list at Swiss Quote
having earnings and FED story ic
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
from coast to coast with Caroline Hide in New York
and Vla Lowe in San Francisco.
Speaker 2 (00:22):
This is Bloomberg Tech coming up.
Speaker 3 (00:24):
Alphabet, Microsoft and Meta all outward results showing heavy spending
on AI and data center construction.
Speaker 4 (00:31):
Plus Roebrock CEO David Zooki joins us to discuss the
company's earnings as users and jumping, but so are costs.
Speaker 3 (00:38):
And we'll break down what was said during the meeting
between President Trump and China's Jugen King, what wasn't discussed
and vidiots, blackweld chips.
Speaker 5 (00:46):
Let's turn our attention to these markets.
Speaker 4 (00:48):
And after record high, after record high, we take a breather.
Then that's that one hundred HUNDERD pressure off by almost
a percentage point. This as we think about the FED
maybe not baking in that December cut as much as
the market had anticipated.
Speaker 5 (01:00):
You add to that some concerns about AI spending. You
add to that a.
Speaker 4 (01:03):
China US trade deton for a year that many felt
were priced in ed and we just come down some
across all asset classes. But you're looking under what's in
the ecty moves yep.
Speaker 3 (01:13):
Let's get through the top stories, and Video is down
two percent. Blackwell, its latest processor was not discussed in
the meeting between President Trump ands Ujenping. Later in the
show out to South Korea to get the details of
that meeting. Then there's earnings Microsoft thirty nine percent top
line growth in Azure, the cloud computing unit, the only
unit that mattered, but the stock selling off high bar
(01:34):
for investors.
Speaker 2 (01:34):
Alphabet is the one that's higher.
Speaker 3 (01:36):
It told us what its capital expenditures are this year,
but it also told us about growth a real number
on AI or generatorve AI related products. Then Meta, it
is the biggest decliner and the biggest drag capital expenditure concern.
Then this morning, coming to market with an up to
six part bond sale maturities ranging five to forty years.
The forty year note one point four percent over treasury
(02:00):
above treasuries. There's a lot to discuss in Meta's capital
requirements and then what it has to show for it.
Let's do that with Brent. Phil Jeffrey's analyst joins us.
Right now, let's start with Meta. That's kind of the equation, right, Okay,
Capital expenditures will be higher next year than they were
this year. Then what give us more, give us some
longer term outlook. There just wasn't a formal guidance. Is
(02:21):
that what spooked the market.
Speaker 6 (02:25):
Yeah, Meta was just in a period of being really comfortable.
Zuck had been very comfortable. The company had executed, they
had invested, and they were harvesting those investments, and now
they're going back into invest mode. So I think at
the beginning of the year, advertisers were seeing that Meta
was more sheltered because they didn't know what Google was
(02:47):
going to do with AI, and we didn't know what
was going to happen to TikTok. And then halfway through
the year, everyone realized, hey, Google's got their act together
and AI, and we know that TikTok now has more
of the foundation. So I think, as I call it,
there's less.
Speaker 2 (03:03):
Of a tailwind for Meta.
Speaker 6 (03:05):
It's not a headwind, but it's less of a tailwind
that they had at the beginning of the year when
you talk to advertisers, and I think what Zuck said
last night on the call was the investments in AI
are paying off, and they just need more of them
because everything they built, they felt like they had overbuilt
and they sold out of what they built.
Speaker 2 (03:24):
Yeah, so they have to build more and so yeah.
Speaker 6 (03:28):
It doesn't have anything to do with the fundamental position.
It's are we going to see margin compression and then
when does that return come back? But we already know that.
Then they have a return. We've saw with Microsoft. They've
given this margin expansion even in the face of AI.
So this whole concept that AI doesn't pay off is silly,
you see, because but the.
Speaker 5 (03:49):
Stock move is so big that we question.
Speaker 4 (03:53):
Yes, we see Zuck on the call saying, look, I'm
worried about underinvesting. We hear once again from Susan Lee
that they're going to make notable investments. Everyone new Capex
is going to go up into the right. Why is
there such an air pocket on this stage?
Speaker 6 (04:07):
You think, well, I think the outperformance of Google, I
think you have money chasing weren't a momentum market. I mean,
look at yesterday before any year, Needs everything and applications
went down aing, and AI went straight up in infrastructure.
So if you have Capex going this high, the pushback
is why do I invest in internet and software right now?
(04:27):
I should be invested in energy and land, and it
all the enabling infrastructure, and the infrastructure goes up every day.
Look at all the energy names, they're all ripping. And
so I think there's a common pattern with tech investors
right now.
Speaker 2 (04:40):
They're just broader.
Speaker 6 (04:42):
Investors are moving their investments to other categories, and then
they're chasing momentum. It's just the market's so narrow and
you're seeing this. So there was nothing that was fundamentally offline.
They're making any investment. They've done this before. How many
times have we seen mat to do this and then
return the stock goes hired. They're going to do thirty
(05:02):
dollars running to power, put a thirty multiple on it.
You're nine hundred dollars on the stock. It's a buy
on the pullback, Brent.
Speaker 3 (05:12):
The name of momentum is Alphabet and Google. Right, they
gave us two data points cap too Expenditch is ninety
one billion to ninety three billion dollars. But revenue from
products that are built on Google's generaty of AI models
grew more than two hundred percent from a year earlier.
That second part your reaction to it.
Speaker 6 (05:33):
I mean AI is working, and I think the fear
that investors have had is what happens when I go
from a world of search to AI. And I think
Google is showing they can do the high wire act.
Speaker 2 (05:45):
Very well between search to AI.
Speaker 6 (05:48):
Everyone thought search would implode in the last two quarters,
they beat the search number.
Speaker 2 (05:52):
This quarter they accelerated their search number. So what they're
seeing is that search can be anywhere. It can be
inside AI, can be in their own.
Speaker 6 (06:00):
Engine, it could be a YouTube, it could be across
different properties. And I think what what Google is demonstrating.
And we've said this kind of for a while. They
have better AI underneath the hood than they're articulating, and
it's now coming out.
Speaker 7 (06:15):
You can see it.
Speaker 2 (06:16):
We said, you know, they kind of pulled up.
Speaker 6 (06:18):
To the I race, you know, on a Toyota Camry
body that they have the biggest engine and they pop
the hood and everyone's like, whoa, this is incredible. And
so I think everyone was realizing. When you look at Gemini,
I mean we ran bench tests, it's almost equivalent to
chet GPT. And then you look at the breadth of
(06:39):
their offering. And again remember they own the world's Internet data,
so you need data users in capital for AI to work,
and they have all of those almost better than Meta, Microsoft,
many of the others. They have more data on anything
in the world than anyone.
Speaker 2 (06:56):
So I think they're proving that this engine's working.
Speaker 6 (06:59):
The body didn't look great, you know, they're upgrading the body,
but the engine look is really really good.
Speaker 4 (07:05):
But what's so interesting is clearly Microsoft is still working.
When you're looking at asure growth of thirty nine percent,
that was better than the market I anticipated. Sure it
might not be much of a growth uplift, but what
was it? What was the fly in the ointment for Microsoft?
Where Aimyhood again is saying, my issue is supply, not demand.
Speaker 6 (07:23):
I don't understand the market because they just put up
over fifty percent RPO backlog growth and one hundred and
ten one hundred eleven percent commercial bookings.
Speaker 2 (07:32):
Those numbers are insane, and that.
Speaker 6 (07:33):
Didn't even include opening eyes two hundred and fifty billion
incremental dollars. So I think the market's got this wrong honestly,
that you got to look at the backlog. The backlog
is leaning indicator of health. The reported AZURE number does
not matter. When you're putting those backlog numbers up, that
tells you their capacity constrained. You can't book that kind
(07:55):
of revenue and not take it to Azure. And the
differential is they just can't get the capacity up right now.
But their customers want to spend, and their customers are
spending and they know that what Microsoft has. So I
think this is a common pattern where you're seeing massive
(08:16):
backlog growth commitments to AI from their customers, but Microsoft
can't literally physically provision it fast enough. And when we
talk to Microsoft offline, like the Azure number would be
way higher if we now have the capacity constraints. So
this is not a demand issue, This isn't a competitive issue.
(08:38):
This is an issue that the industry is facing right
now across the board is they can't get enough of
it to their customers. That number of have been way
higher because you can't describe the math of the backlog
being so high and Azure where it's at.
Speaker 2 (08:53):
So I think again, we look at it.
Speaker 6 (08:56):
It's important Wall Street cares like Wall Street should care
more about backlog and bookings. This is again what all
Oracle trades on. They don't care about revenue. Why does
everyone just care about revenue now? So I think again,
I think the Street's got it wrong.
Speaker 4 (09:11):
Streets got it wrong. Brent phil and Jeffrey's putting it right.
We thank you so much. But coming up more about earnings.
Roblock CEO David Zuki joining us to discuss the company's
numbers daily active users for the gaming platform and toping
one hundred and fifty one million ED.
Speaker 2 (09:25):
Let's look at Core.
Speaker 3 (09:26):
We've shares down more than six percent. Core Scientific investors
have voted no on Core We've acquiring the company. You'll
remember that Core. We've tried to buy Core Scientific in
July nine billion dollars and the advisory firm said that
undervalued it. BI reacting saying it actually won't impact operations
of Coreweed but another headline on the terminal. As soon
(09:47):
as that vote was decided, Core weave to buy Marimo
terms not discos, maybe a sense that it's moving on
very quickly. We'll have more when we can. This is
Beningberg Tech.
Speaker 4 (09:59):
Grow regard ninety nine Nights in the Forest, still a
brain rot three games, propelling Roadblocks to its highest level
of daily active users, a company also posting nearly two
billion dollars in bookings in the third quarter. Still shares
of the company trading lower after the earnings. Let's talk
all through all of this with Dave Zuki foundacy of
Roadblocks and Dave this growth, this is real playing commitment
(10:22):
comes at a cost, an infrastructure cost, and we see
costs go up because of safety that you're enacting.
Speaker 5 (10:26):
But also the cloud compute.
Speaker 4 (10:28):
How do you start to monetize to make up for
some of those costs.
Speaker 7 (10:32):
Yeah, thanks for noting the amazing quarter we just had.
Both bookings growth was up seventy percent year on year
at one point nine billion, and as you noted, our
daily active users passed one hundred and fifty million, which
is up seventy percent year on year. In addition to
those three games you mentioned, we had seven games on
(10:53):
Roadblocks in the last quarter, past ten million daily active
users and a really healthy content ecosystem. Five of those
seven experiences were created in the last year. We've hit
some really peak numbers. We had forty five million concurrent
players all at the same time. What we said on
(11:13):
the earnings call is with all of this growth, which
is cumulatively averaging thirty seven percent over the last two years,
we are going to be spending on infra. What we
said is the continued decreases in costs for infra, we
may slow that down a bit as we spend, But
the final thing I want to generate is the cash
(11:35):
flow that we generated on the platform. We generated over
four hundred and forty million of free cash flow in
Q four.
Speaker 2 (11:43):
DAVE.
Speaker 3 (11:44):
Looking forward, then, how are you managing out some of
the technology plays that you made age verification technology in
a way that doesn't impact or slow the growth of
both active users in the bookings.
Speaker 7 (11:57):
We've made a commitment a while by to what we
believe will be the cold standard for safety on platforms
like Roadblocks and throughout the industry. With new advances in AI,
we're going to use facial age estimation to estimate the
age of everyone on our platform. And in addition to
(12:17):
the text filtering we do the critical harms monitoring the
prevention of any image sharing. We're going to use that
to help gate who communicates and who they communicate with.
I was just in an executive staff meeting on Tuesday
playing with the role out of this product. It's really
elegant and we of course want to highlight there may
(12:38):
be some friction, but I'm really optimistic this is the
long term good play for Roadblocks, which is really establishing
the standard of how we believe safety and civility is
going to run in the future.
Speaker 4 (12:49):
And that your CFO made the point that's going to
have long term value for shareholders. You make it again, Dave,
talk to us there for about the new technology, not
just in safety, but also in how you build gate
and high fidelity feeling of a game. But some of
these big winners that we've had, we just them at
the top. They are kind of more old school feeling
in many ways, but they're the ones breaking records, grow
(13:11):
a garden, more classic and blockie.
Speaker 5 (13:13):
How do you compromise on that.
Speaker 7 (13:16):
We've highlighted our vision of getting the ten percent of
all the global gaming content market running on roadblocks. In
this quarter we pass three percent, so there's a lot
of room to go. We have an enormous amount of
new technology coming to support more diverse experiences, to support
different types of avatars, to support competitive gaming and genres
(13:38):
like racing or sports, to support role playing games and
other types. And we really do have a vision for
genre expansion, but in a really future looking way, and
that when creators make experiences on roadblocks, they run well
either on low end Android devices like a two gigabyte
Android phone, or on high end gaming piecs and they
(13:59):
run around the world. So we're optimistic. With the new technology,
our economics and discovery, we're going to see a diversification
of the types of experiences we see on our platform.
Speaker 3 (14:13):
Dave, you want ten percent of the gaming content market?
That changed in the quarter. I saw layoffs at Amazon
and Microsoft's gaming divisions. Electronic Arts elected to go private.
The big publicly traded peer that you have private with
the saudis. React with your interpretation of what that signals
for the market you're trying to grow in well.
Speaker 7 (14:35):
People estimate the global gaming market somewhere between one eighty
and two hundred billion. What we've seen on Roadblocks is
really a future forward optimistic look at gaming. We've seen
new types of genres given the Roadblocks platform, the ability
to play with friends on different devices.
Speaker 1 (14:55):
You know.
Speaker 7 (14:55):
Addressed to Impress last year was a whole new type
of experience. People competing in a fashion show grow a garden.
I'm really proud of because hitting those top numbers, making
new records for over twenty million. Concurrence is literally a
game you can play either while you're there or when
you're not there. Your garden keeps growing when you're not playing.
(15:18):
So I think the way to think about this is
not just protecting a bunst the history of gaming, but
looking at whole new types of games that are going
to be built on platforms like Roadblocks and accelerated with
AI as every game starts to have access to AI
as well.
Speaker 3 (15:36):
David Zuoki, Roadblock CEO, thank you very much. Let's stick
with earnings in tech. Comcast was also out before the
bell this morning, the company managing to slow the tide
of broadbanding cable TV customer defections in the third quarter
with help from an Internet price lock guarantee and some
bundle plans. Let's get out to Bloomberg's entertainment reporter Kelsey
Griffiths and DC give us the need to know on Comcast.
Speaker 8 (15:59):
Ist tenth straight quarter of broadband losses. So the company
came into this quarter knowing that they had to do
something to start stemming this tide. Like you just said,
they did in fact succeed in kind of slowing some
of those losses, even though those numbers weren't positive. Necessarily,
(16:20):
they were losing customers at a slower rate than usual,
and so the executives were saying that some of the
changes they've made over this year earlier seemed to be working.
Speaker 5 (16:30):
Seeming working, but the share price is still lower.
Speaker 4 (16:32):
And what's interesting maybe in some of the analyst notes
there is a concern that maybe they'll spend more, particularly
when they're thinking making a bid for parts of Warner Brothers.
Speaker 5 (16:40):
What do you make of that, Kelsey, that's right.
Speaker 8 (16:44):
Warner Brothers is one piece of the strategy that Comcasts
said they're looking at, although they didn't express a really
high level of interest. They said, when something like this
in our industry comes on the market, it is something
that we have to take a look at. But look,
we're good with our content strategy even without M and A.
They just succeeded in Laurene Taylor Sheridan over from Paramount
(17:06):
Plus and he is going to be a really big
part of that content links get going forward for them.
They also have NBA TV rights and those are things
that they're really excited about in the nearer term.
Speaker 5 (17:18):
Great roundup, Kelsey Griffiths.
Speaker 4 (17:20):
We appreciate you on Comcast, and let's just stick with
the Warner Brothers story a little bit more. Because CEO
David Sazov said that the board would need a higher
bid to justify a sale at the company. He said
those comments during a town hall meeting for employees yesterday,
according to sources. Now Sazadov also told the staff that
the board had rejected three.
Speaker 5 (17:39):
Offers from Paramount Skydin send.
Speaker 2 (17:42):
Okay coming up.
Speaker 3 (17:43):
President Trump and China Jijingping attempt to ease trade tensions
inside their high stakes talks on the future of the
global supply chain. We have all the details. Next, this
is bloom Bag Tech. M H.
Speaker 9 (18:13):
We did discuss chips and he's going to be They're
going to be talking to the video and others about
taking chips. We're not talking about the black one that
just came out yesterday, but.
Speaker 2 (18:28):
A lot of chips, you know, a lot of the chips,
and that's good for us.
Speaker 3 (18:33):
I was President Trump speaking to reporters on board Air
Force one after meeting with Chinese President Jijingping, saying chips
were in discussion, but in Nvidia's latest blackwell was left
off the table.
Speaker 2 (18:45):
Blueboks.
Speaker 3 (18:45):
Tyler Kendall has been traveling with the President and joins
us from South Korea.
Speaker 2 (18:49):
What is the absolute latest?
Speaker 3 (18:50):
What do we need to know about that came out
of those talks between Trump and Jijingping.
Speaker 10 (18:55):
Yeah, hey, Ed, Well, when it comes to in video chips,
it certainly dampens a speculation that Washington would go on
to approve the sale of such chips to China. President
Trump went on in that gaggle on Air Force one
to be asked specifically whether or not anything was brought
up about the potential for a downgraded version of the
Blackwell processor. He said that it was not, but that
(19:16):
ultimately in Vidia the company itself, is going to continue
direct talks with Washington, as you well know, and Vidia
has been trying to regain market access in China since
twenty twenty two, after going from a ninety five percent
market share peak down to zero. But I have to
say this was welcome news in Washington this morning for
those defense hawks who have previously advocated against such sales
(19:38):
over national security concerns, Which brings us to the broader
issue of the general trade talks, because while we are
getting this easing intentions, our own analysts at Bloomberg Economics
say those more fundamental issues, including national security, were not
ultimately addressed. But Ed and Caroline, of course, a welcome
news that we are seeing what appears to be at
least a year extension when it comes to the broader
(19:59):
trade troops.
Speaker 3 (20:00):
Yes, blueboth, Tyler Kendall, thank you so much. That's the
latest from South Korea. Let's get more news, Carol.
Speaker 4 (20:05):
Yeah, it's time now aired for talking tech and first up.
Open Ai is said to be preparing to file for
an IPO as soon as next year that could value
the company at one trillion dollars. But it's all according
to a report from Reiters. The company is said to
be considering finding the paperwork with regulators soon as second
half of twenty twenty six plus. Microsoft says its cloud
(20:25):
services are recovering from an outage that disrupted workplace software
products and impacted several companies. For the outage prevented people
from checking into Alaska Airline flights, for example, and disrupted
features in Microsoft's own copilot AI. We are ex consultants
from McKinsey, from Bain, from BCG are recently contracted to
train AI models on entry level consulting work for open Ai.
(20:49):
Now bluemeggers learn that our gentum project is run by
the same third party firm using ex bankers to train
open ai on financial.
Speaker 2 (20:57):
Models, said Okay coming out.
Speaker 3 (20:59):
We have more magnificent seven earnings coming up after the
bell today with Apple and Amazon, and we're going to
have what to expect from those giants next. Apple up
treading water three ten percent, Amazon down nine tens to
one percent. Maybe there's more read through there from the
other cloud names and what that might or might not
spell for Amazon or at least investors attitude towards it.
Speaker 2 (21:19):
Elsewhere. We know what the story is.
Speaker 3 (21:21):
And the top stories of the day stops moving in
different directions on the earnings context. Met Us down twelve percent,
really interesting, notably higher capex in twenty twenty six and
twenty twenty five. Alphabet gave us the same number of capex,
but they also told us how revenues directly tied to
AI are growing, and right now the market's rewarding that
with the Google pairing up five percent.
Speaker 11 (21:42):
This is Bloomberg Tech. Welcome back to Bloomberg Tech.
Speaker 3 (21:56):
Let's recap the three magnificent names that already reported last night.
Speaker 2 (22:00):
Different stories.
Speaker 3 (22:01):
Microsoft down three percent, as your growth was thirty nine
percent above consensus, but it was a high bar quarter.
Same story across all three of them, as we know
the capital expenditures environment. Meta told us that capital expenditures
would be notably larger next year than they were this year.
But the investor bases spooked a little bit because we
don't have this kind of longer term outlook for how
(22:21):
that translates to sales apart from we do from Alphabet
the parent of Google. So they told us what the
capital expenditures picture looks like, but also that they're products
that result from investment in data center capacity. AI models generative.
AI grew two hundred percent year in year, and that
name is up five percent in direct reaction, and there.
Speaker 2 (22:42):
Are so many more earnings out there current.
Speaker 4 (22:44):
There are, and another one on the rise is Service
now ed it gave an outlook for strong revenue growth,
said AI of course is helping the company reduce its
own costs. We spoke with Service Now CEO Bill McDermott
a little while ago.
Speaker 12 (22:57):
The most important thing is to reinvent and all of
these back office operations and companies. So for example, in
our company, whether it's IT support or customer support or
security and risk, ninety percent of this work now is
being done by agents, but not at the expense of people.
(23:18):
The people in our company now have an AI teammate
on their shoulder to do the things.
Speaker 2 (23:24):
That they'd really never really liked very much.
Speaker 3 (23:29):
Earning cities and continues with both Amazon and Apple reporting
later today. Let's talk about what to expect, Bloomberg Execute's
reporter Ryan Vastellika. Let's start with Amazon. Then it's down
a percentage point. Maybe this read through from what we
learned about cloud computing from the three that went last night.
Speaker 2 (23:47):
What are we expecting at.
Speaker 13 (23:48):
Yeah, absolutely, I'd say there's absolutely people looking at the
results we saw last night from Microsoft and Alphabet and
kind of extrapolating into what we could expect from Amazon.
I will say that there has been growing concern about
the strength of AWS, that's Amazon Web Services, the cloud
computing business. There some concern that it is falling behind,
maybe losing some market share, not as quite well positioned
(24:12):
for the AI era, and maybe the fact that we
saw such strong results, especially out of Alphabet, maybe indicates
that maybe it's going to be on the back foot
a little bit here. There also continues to be a
lot of focus on how much these companies are spending. Amazon,
of course has very high CAPBAX levels, not only with
building out its data center, and cloud business, but all
(24:32):
of US logistics operations. I'll be very curious to see
there if we get any sort of improvement on the
margin front, especially when it comes to commerce. I say
that those are the two major things people are looking
at there.
Speaker 4 (24:42):
A I use deployment all about for Amazon, almost for Apple,
it's ignored. We're just wondering how iPhones seventeen in air
are doing.
Speaker 2 (24:50):
Yeah, absolutely so.
Speaker 13 (24:51):
So far, it seems like the iPhone seventeen is selling
pretty well, especially the higher end model. So that is
atail one, especially when it looks at average selling prices
right there. People I spoke to have said that maybe
a lot of people who bought phones during the start
of COVID and the pandemic five years ago, maybe they're
just at a point right now where they're starting to upgrade,
even without AI features, even without the foldable phone that's
(25:12):
expected next year. So there is a lot of optimism
that the strong iPhone sales that we've been seeing indications
of so far, maybe there's room for this to grow
over the coming quarters, especially as we get new designs,
more AI features and so forth. Of course, now the
question is you have a stock that's valued at four
trillion dollars. It's in hitting record levels. Is all this
optimis is going to be justified by the results that
(25:34):
come out this afternoon.
Speaker 4 (25:35):
I mean, while Amazon languishes only about two and a
half turning Bloomberg ran Plastelica, thank you very much, And
let's just talk about where investors' heads are at, how
they're reacting to this really busy week of earnings. Ibek
oskodeshkay is with our senior market's analysts over at Swiss Quote.
We had Brent sil from Jeffrey's on the top of
the show, and he said he doesn't.
Speaker 5 (25:52):
Understand the market right now.
Speaker 4 (25:54):
Do you understand the market if you're looking at Meta
being sold off so hard, Alphabet rising after earnings. We'll
get back to her in a minute. Technology on technology
shows and this many years into zoom, sometimes we don't
press the right button, head, but really, I do think
the one cell coming from Meta is a key one
to be discussing because we have got this five vocated
market where we're selling off certain names, in particular when
(26:15):
we're worried about capital expenditure.
Speaker 5 (26:17):
But what more was better.
Speaker 4 (26:19):
To do twenty six percent growth in terms of revenue
record numbers. We're also thinking about what therefore that pushes
forward to Amazon and how much they have to vindicate
the spend on capital expenditure too.
Speaker 3 (26:29):
Yeah, one thing I'd say is we go back to
Epek Deshkai, who I think is now good, and back
with us is with respect?
Speaker 2 (26:35):
Do investors have short memories?
Speaker 3 (26:37):
Because Meta told us in the prior quarter that CAFTO
expenditures would be higher in the next fiscal year, they
used a different language this time around, which was notably
larger in fiscal twenty six and twenty five.
Speaker 2 (26:49):
But maybe it's what they didn't say.
Speaker 3 (26:51):
They didn't tell us what top line or bottom line
growth directly from AI investments looks like what's your read?
Speaker 14 (26:57):
Well, actually, for Meta, the investments look more more riskcared
than they are for Microsoft or Amazon.
Speaker 15 (27:02):
We do have these data centers and they say that
if we over invest, we will have the option to
sell this excess capacity.
Speaker 14 (27:10):
And if you're looking at the market reaction and the
mixed reaction there, we also think that macraeconic context is
here is very important.
Speaker 15 (27:18):
Important in the sense that just before these.
Speaker 14 (27:21):
Earnings came out yesterday, the Federal Reserves said that they're
not sure that they will be cutting the interest raised
by twenty five bases point. So I think that that
also dumpened the mood just before the earnings came in.
Looking at the spending these companies must spend in order
to keep up with the man and Microsoft has been
very clear about the fact that they have not been
able to catch up with the significantly higher demand. So
(27:43):
they must invest. They do have the free cash to invest,
and if they do not invest and miss the turn,
the AI turned that that would be worse for.
Speaker 15 (27:51):
Investors then seeing them over investing.
Speaker 14 (27:54):
So I think that in the in the context of
the actual growth, these companies must invest and it doesn't
really bother us as long as there are no concerns
about oversupply, and this is not the case right now.
Speaker 4 (28:05):
You got Meta said if they have too much compute,
they can start selling it to others.
Speaker 5 (28:09):
So is this an air pocket?
Speaker 4 (28:11):
Is this just where people buy into weakness or is
there going to be a significant pullback in questioning of
the market rit large if the FED isn't going to
be cut in come December.
Speaker 14 (28:20):
Well, I think that the FED situation could eventually lead
to a certain pullback in valiations. But I don't think
that that's going to be a bubble pop kind of
a market's reaction, because these companies must invest now in
order to make sure that they don't hit into capacity
constraints one year, one and a half year from now.
I believe that investors understand that there is a bpoort
(28:43):
showing that or claiming that the data capacity computing needs
will be doubling every nine to eighteen months due to
our AI application, So these companies must keep up with
that pace. And again I believe that these fending plants
have been almost in fairly you know.
Speaker 15 (29:00):
Put out there, so they have being revised higher. But
this is not this is not a surprise coming in
right now.
Speaker 14 (29:07):
Looking at the deals and the strength of the demand
that we see in the sector, these companies are out
there trying to keep up with the demand. And I
believe that again, as the executives are also saying, not
keeping up with the demand or risking to head into
capacity constraints is worse than over investing right now.
Speaker 4 (29:26):
What's interesting is, of course, perhaps just to show the
amount of spend that was necessary, Meta comes to market
with a ginormous twenty five billion dollar bond sale and
talk to us about demand across assets for AI related companies.
Should we pull back inequities that their record highs. How
is demand looking for the bond side of the equation.
Speaker 15 (29:47):
Well, I think the bond side is also looking well.
Speaker 14 (29:49):
Especially right now we have seen that the bond sales
are have been quite interesting for these companies. I believe
that in the actual environment as well, the bond sales
are going to be interesting. So the investors who are
not necessarily willing to take the equator risk at the
higher valuations, they will be plugging into the bond side
of the market. You are not expecting them to move separately.
You expect them to do to move in tandem. But
(30:12):
on the bond side the potential of rises less and
the risk that we're taken for.
Speaker 15 (30:17):
It is also less.
Speaker 14 (30:18):
So this is another way of taking exposure and passive
exposure to these companies without however, taking the risk of
the equity fluctuations.
Speaker 2 (30:27):
Epeck.
Speaker 3 (30:28):
If I take the earning statements and cool transcripts of
all the tech earnings we have so far, run them
through chat GPT and ask chat GPT to cross reference
for a theme that is not capital expenditures what would
I get. What else do you see that they have
common between them?
Speaker 15 (30:44):
Well, the couple of expenditures are actually rising.
Speaker 10 (30:47):
I don't know.
Speaker 15 (30:47):
I have an ass chat.
Speaker 14 (30:48):
Topt what he thinks about it. But what we see
is that this is growing exponentially and there is investment
worries about that. But if you do not invest today
again a year and a year and a half from now,
you might into bigger capacity constraints. What's happening right now
is if today, for man one prosoft for example, you
are not able to catch up with the demand, then
(31:08):
tomorrow is going to be a harder because you know,
we're just going divergently because the demand is going to
be exponentially rising.
Speaker 15 (31:15):
And that's the main issue.
Speaker 14 (31:16):
That's why these companies are investing so badly or so highly.
Speaker 15 (31:20):
And this is I think what chatteropt will tell you.
Speaker 14 (31:23):
Because as AI applications will be and running, demand for
competing is going to rise exponentially. And this is exactly
why Nvidia is also not only concentrating today on the
AI applications, but all on the networks and intelligence networks
as well, to make sure that even the networks and
the pipelines will be able to handle all that data
(31:44):
flow down the road.
Speaker 3 (31:46):
We did get a FED cut quarter point for a
second consecutive meeting, and we did get a warning that
a December rate cut is not a foregone, foregone conclusion.
Ipek Oskar Deshkaya Senior Markets and list at Swiss Quote
having earnings and FED story ic
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