Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and Eva Low in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: Anthropic and Google discussing a deal for cloud computing services
Speaker 3: valued in the high tens of billions of dollars plus.
Speaker 3: We breakdown earnings, Netflix and Texas Instruments in focus while
Speaker 3: we await Tesla's results after the closing Bell and Hot
Speaker 3: on the heels of AT and T zone earnings, we
Speaker 3: discuss with the company's CEO, John Stanky. Let's get to
Speaker 3: our top story overnight, Bloomberg breaking the story that Anthropic
Speaker 3: is in talks with Alphabets, specifically Google, for cloud computing
Speaker 3: capacity high tens.
Speaker 2: Of billions of dollars. Tap user in the mix.
Speaker 3: When we broke the story, alphabet Chez jumped in after
Speaker 3: market Amazon fell. This is where we're trading right now
Speaker 3: Wednesday's session.
Speaker 2: I broke that story. We're blooming both. Rachel Mets Let's
Speaker 2: get out to her.
Speaker 3: Actually, Rachel like, the details are quite simple to understand
Speaker 3: early talks, and they're around capacity.
Speaker 2: But let's recap what we.
Speaker 4: Know Yeah, so, as you said, the two companies have
Speaker 4: been discussing a plan for Enthropic to use Google's tensor
Speaker 4: processing units TPUs. These are chips that are are can
Speaker 4: be used for a lot of things, but they also
Speaker 4: can be used for EA workloads and Nanthropic, I think
Speaker 4: it's important to remember, is already a customer of Google's
Speaker 4: for its cloud service, and also Google is an investor
Speaker 4: in Anthropic, and Aanthrotic is a similar deal with Amazon too,
Speaker 4: So that's why you sort of see these these mixed reactions.
Speaker 3: There has been a lot of reaction to our reporting.
Speaker 3: Later in the program, we're going to speaker Intelligence about
Speaker 3: their take on it. Anthropic have been busy of late, right.
Speaker 3: We've reported that Dario ami Day did this kind of
Speaker 3: tour of the Middle East seeking both money and compute capacity.
Speaker 3: The compute capacity bit is where people are trying to
Speaker 3: understand this, like is it that just Anthropic really needs
Speaker 3: as much capacity as it can get, or is this
Speaker 3: a story about how actually Google is kind of becoming
Speaker 3: the better partner for Anthropic beyond an Amazon.
Speaker 4: I think there's a couple of things that could be
Speaker 4: happening here. One is that yes, building the kind of
Speaker 4: AI models that Anthropic is building is extremely compute intensive,
Speaker 4: and you can't just use like any cloud capacity you
Speaker 4: could find anywhere, and you can't just use any ships.
Speaker 4: You have to use certain ships that are going to
Speaker 4: work well for the kinds of large language models they're
Speaker 4: building and the kinds of models that they are serving
Speaker 4: to people. So it seems like a vote confidence potentially
Speaker 4: for Google and for its chips. I mean, hardly any
Speaker 4: companies beyond Video AMD maybe one or two others have
Speaker 4: chips that people are willing to be using for these
Speaker 4: kinds of AI workloads. It also could make people a
Speaker 4: little nervous about what it sets about Amazon and its
Speaker 4: ability to provide the services that a company like Antropic needs.
Speaker 3: Bloom both racial mets, thank you very much. Let's get
Speaker 3: to the earning stories, starting with Texas Instruments in stockfell
Speaker 3: the most in three months after it gave a lackluster
Speaker 3: forecast for the current quarter. Bloomberg's chips reporter Ian King
Speaker 3: is with us actually probably more simple story than we expected.
Speaker 3: We got a lens into the health of analog devices.
Speaker 3: Texas Instruments is analog chips. You covered the earnings blow
Speaker 3: by blow. What do we need to know about this?
Speaker 5: So the first off, the numbers not too bad. Fourteen
Speaker 5: percent growth for most companies will be fine projecting something
Speaker 5: in the region of eleven percent this current quarter. But
Speaker 5: what they said was more important. What they said was
Speaker 5: things are coming back. Everything's okay, but just not at
Speaker 5: the pace that we had been expecting. There's still some
Speaker 5: uncertainty out there. This is macro related. Companies aren't investing
Speaker 5: in their factories perhaps as quickly as we had hoped.
Speaker 2: And really they.
Speaker 5: Were sort of painting this picture of a kind of
Speaker 5: an anemic kind of return to growth for the whole industry.
Speaker 3: When I was reviewing your story, the CEO said that
Speaker 3: overall the semi conductor market recovery is continuing. That seems
Speaker 3: a little bit in congruous with the market's reaction to
Speaker 3: what's going on the socks down five percent, but also
Speaker 3: kind of you know what's specific to them.
Speaker 5: Well, what they're projecting is basically seasonal, Right, what would
Speaker 5: happen normally if everything is equal in the fourth quarter.
Speaker 5: The problem is with that is that if we're in
Speaker 5: this recovery period, if we're in this bounce back from
Speaker 5: this inventory correction that we've suffered. Things should be growing
Speaker 5: quicker than that. People should be rushing to stock up,
Speaker 5: people should be rushing to build new things, and they're not.
Speaker 2: Bloomberg, se and King, thank you very much.
Speaker 3: We actually just had some breaking news at the top
Speaker 3: of the show, and it is moved shares of Google.
Speaker 2: You can see there on the screen.
Speaker 3: The company ran an algorithm on its Willow quantum computing
Speaker 3: chip that can be repeated on similar platforms and outperform
Speaker 3: classical supercomputers. A breakthrough, it said, clear as a path
Speaker 3: for useful applications of quantum technology within five years. This
Speaker 3: was detailed in a paper published Wednesday in the science
Speaker 3: journal Nature. And you can see there on the screen
Speaker 3: the right hand side of the chart. When those headlines hit,
Speaker 3: Alphabet shares, who had given up the gain they'd seen
Speaker 3: from our reporting on Anthropic, suddenly jumped in the session
Speaker 3: to a gain of around two percent. We will continue
Speaker 3: to track that story and alphabet shares throughout the show. Okay,
Speaker 3: back to earnings. Another steep share drop. Netflix disappointed investors
Speaker 3: with its results. The streaming giant blamed a tax dispute
Speaker 3: with Brazil for.
Speaker 2: A cut to its third quarter earnings.
Speaker 3: Let's get more with Bloomberg's media editor Felix Gillette. This
Speaker 3: tax issue. Like yesterday, I went on television all day
Speaker 3: long saying, maybe there'll be a foreign currency benefit to
Speaker 3: Netflix's earnings. We'll learn about advertising, but actually this tax
Speaker 3: issue is the main story.
Speaker 2: Just explain it.
Speaker 1: Ah.
Speaker 6: This is a long ago in dispute that Netflix has
Speaker 6: warned about in violence before. They didn't factor it into
Speaker 6: the forecast. They ended up having to pay several hundred
Speaker 6: million dollars more to Brazil. They're saying it's a one
Speaker 6: time deal, it's not going to be material impact moving forward.
Speaker 6: They're trying to steer the attention back to the growth.
Speaker 6: You know, seventeen point five percent growth in sales for
Speaker 6: the quarter, and you know profit growth also up.
Speaker 3: You know, we were talking Felix about the idea that
Speaker 3: Netflix wants to be judged by its sort of traditional
Speaker 3: financial metrics. Those were quite good generally speaking, right.
Speaker 6: Yeah, yeah, I mean a fine at this point. You know,
Speaker 6: I think investors were looking for more than fine. They
Speaker 6: were looking for a complete blowout quarter, in part because
Speaker 6: you know, they had such a strong slate of program
Speaker 6: in the third quarter. You know, Wednesday new episodes, Quid Game,
Speaker 6: new episodes, k Pop Demon Hunters. So at this point, yeah,
Speaker 6: the programming looked good, the growth and sales look good.
Speaker 2: But investors one and one.
Speaker 3: Bloomberg's Felix Jellette really appreciate your time.
Speaker 2: Thank you very much. A.
Speaker 3: Yoko Yoshioka is a portfolio consulting director at the Wealth
Speaker 3: Enhancement Group, which holds some of the major Magnificent seven
Speaker 3: names Texas Instruments and I think we can also talk
Speaker 3: a little bit about Netflix. That's where I quite like
Speaker 3: to start earning. Season in technology can bring all kinds
Speaker 3: of beautiful stories. Did you have a tax dispute with
Speaker 3: Brazil on your Bingo card? For Netflix would tell us
Speaker 3: about the world of streaming.
Speaker 7: I did not have Brazil tax issues on my Bingo card.
Speaker 7: But I think the Netflix earnings were actually pretty decent.
Speaker 7: You know, we forget that Netflix has actually come a
Speaker 7: long way from a free cash flow growth perspective. They
Speaker 7: were only generating about one point six billion about two
Speaker 7: and a half years ago, and now they're generating close
Speaker 7: to eight billion dollars in free cash flow, and that's
Speaker 7: slated to go to eleven billion dollars so we'd like
Speaker 7: to focus on that metric versus the Brazilian tax issue.
Speaker 3: Okay, team, let's leave the shares up, Ayoka, we're showing
Speaker 3: shares on the screen. This stocks down almost ten percent,
Speaker 3: on track for its biggest drop since April twenty twenty two.
Speaker 3: What was the big picture story about the health of
Speaker 3: streamers and streaming here and when Netflix sits in that landscape?
Speaker 7: Sure, I think from a consumer standpoint, you know, Netflix
Speaker 7: is one of those go to programs that consumers are
Speaker 7: going to continue to go to. I think that, you know,
Speaker 7: for Netflix, the content you mentioned has been very solid,
Speaker 7: and even if the macro environment is a little shaky
Speaker 7: out there, I think Netflix will continue to see subscriber
Speaker 7: growth and that's what we'd like to see over time.
Speaker 3: But Yoko, let's get back to our top story today. Overnight,
Speaker 3: Rachel Davey and I broke the story that Google is
Speaker 3: in early talks with Anthropic for a cloud computing deal
Speaker 3: capacity in the high tens of billions of dollars. When
Speaker 3: we broke that story, Alphabet shares really jumped in after market.
Speaker 3: They've given up some of that gain in the market
Speaker 3: open this morning, and Amazon fell wealth enhancement has some exposure,
Speaker 3: particularly to Alphabet. What is your reaction to that reporting
Speaker 3: and what does it signal to you for those companies involved.
Speaker 7: Yeah, I think in general, the sort of clue to
Speaker 7: me is just the infrastructure buildout is still in its
Speaker 7: early phases, right. You know, we've heard so many announcements
Speaker 7: over the last several months, and yet here we are
Speaker 7: with another one. And just when you thought you weren't
Speaker 7: going to get another announcement related to AI infrastructure buildouts,
Speaker 7: you here we are Google and Anthropic. I think that
Speaker 7: the race is clearly on and we'll have to see
Speaker 7: who's really going to win, But the build out is
Speaker 7: sort of still in its early phases.
Speaker 3: The cloud computing market, as we've always understood it and
Speaker 3: talked about it is AWS number one player, Google Cloud
Speaker 3: number three player. In the specifics of this story, both
Speaker 3: of those companies as it relates to AI workloads have
Speaker 3: some questions to answer here. Right, So Amazon is also
Speaker 3: a significant investor in Anthropic. Our reporting says that Anthropic
Speaker 3: wants to use TPUs. What are you learning about the
Speaker 3: competitive nature of Alphabet's cloud offering or Google's cloud offering
Speaker 3: versus Amazon's in the AI domain.
Speaker 7: Sure, so, I think we have to really dig into
Speaker 7: this in terms of, you know, what are the TPUs
Speaker 7: offering in terms of optimizing workflows that GPUs aren't, and
Speaker 7: how is this better suited for you know, Google's sort
Speaker 7: of overall workflow, and how they're going to be using
Speaker 7: AI through Gmail and Google Maps and a lot of
Speaker 7: their applications that they have in house. And then how
Speaker 7: does that fit related to Amazon and how you know,
Speaker 7: some of the algorithms are working for Amazon's you know,
Speaker 7: suggestions for retail as well as advertising. I think there's
Speaker 7: still a lot to dig into here in terms of
Speaker 7: how this is all going to work out.
Speaker 3: Texas Instruments is worth lingering on. I think, you know,
Speaker 3: sometimes it's seen as almost like a crystal ball of
Speaker 3: what all kinds of end markets around the world will
Speaker 3: do coming up next because of how many analog chips
Speaker 3: go into all kinds of things.
Speaker 2: What was your read on the print there?
Speaker 8: Sure?
Speaker 7: So, I think in general, the you know, as Ian said,
Speaker 7: the overall quarter and earnings were actually pretty decent fourteen
Speaker 7: percent growth. But I think the bread through into industrial markets,
Speaker 7: into autumn motive, into some of the consumer electronics that
Speaker 7: are more basic really shows that we're not in a
Speaker 7: macro environment that is growing gangbusters. So outside of all
Speaker 7: of the AI investments that we're seeing in the economy,
Speaker 7: we're not seeing that sort of economic growth takeoff as
Speaker 7: much as I think people had hoped for.
Speaker 2: We're in it.
Speaker 3: This is it technology earning season, my super Bowl. I
Speaker 3: don't know if it's your super Bowl. What was it
Speaker 3: that we were expecting to hear and what do you
Speaker 3: need to hear from the technology sector specifically the mag
Speaker 3: seven I suppose to keep the direction of travel that
Speaker 3: we have seen in equity markets.
Speaker 7: Sure, so next week will be the big week for
Speaker 7: all of this, including a FED meeting to cap it
Speaker 7: all off too. So I think for us, we're always
Speaker 7: going to be looking at commentary around CAPEX spend. I mean,
Speaker 7: this is what really set it off years ago, and
Speaker 7: we're going to continue to see whether or not that
Speaker 7: spend continues from the hyperscalers or whether or not they
Speaker 7: need to, you know, take a little bit of a pause.
Speaker 7: But I think we're going to continue to see that spend.
Speaker 7: I mean, we're seeing announcements left and right, and so
Speaker 7: we'd like to kind of dig into that during earning season.
Speaker 3: Do you expect that tariff specifically or any other Trump
Speaker 3: administration policy will play out on the calls or in
Speaker 3: the statements in.
Speaker 7: The tech side. Maybe a little bit, but I don't
Speaker 7: think it's going to be as prominent as some of
Speaker 7: the consumer names have talked about with with tariffs and goods.
Speaker 7: I think it's going to be a less of an issue,
Speaker 7: you know. I think we've we've seen all of this
Speaker 7: talk about exporting that has had a little bit more
Speaker 7: of an impact, and the sort of tit for tat
Speaker 7: with China that's probably going to be a little bit
Speaker 7: more of an impact. But overall, I really do think
Speaker 7: that investors are going to be focused on general CAPPAC
Speaker 7: spend ROI around AI and you know how that's playing out.
Speaker 3: O Yoka, Yoshioka, the Wealth Enhancement Group really appreciate you
Speaker 3: rolling with the use of the day and a big
Speaker 3: tech earning season coming up. At and T CEO John
Speaker 3: Stankey joins us to talk about the company's earnings and
Speaker 3: it was a big one. Investors still making up their minds.
Speaker 3: That's next. This is Bloomberg Tech. Welcome to our Bloomberg
Speaker 3: TV and radio audiences. Worldwide. We bring in AT and
Speaker 3: T CEO John Stanky, the company reporting results this morning
Speaker 3: that showed higher than expected subscriber growth, though some analysts
Speaker 3: noting customer churn and average revenue per user showing signs
Speaker 3: of strain.
Speaker 2: John, it's great to have you back with us. You
Speaker 2: know the story. Thanks for having You're welcome. It's like
Speaker 2: a simple story.
Speaker 3: You know, the data from the quarter is very clear
Speaker 3: there was an element of promotion and marketing and deals
Speaker 3: that drove it.
Speaker 2: But how would you summarize it?
Speaker 9: Look, we had really strong growth, as you indicated, and
Speaker 9: we're really comfortable with our growth. As I think you're
Speaker 9: probably aware, we've been focusing on customers that want to
Speaker 9: buy both wireless and broadband from us, and when we
Speaker 9: can do that, even if it's promotional, that's a good
Speaker 9: customer to pick up because they have great lifetime values
Speaker 9: and over time they'll churn less and they'll address that
Speaker 9: very issue that you alluded to, which is the increasing
Speaker 9: churn in the industry. And we kind of anticipate as
Speaker 9: we acquire these customers, we're going to see a little
Speaker 9: bit of hardpoop pressure, partly because we obviously give them
Speaker 9: a better price for their loyalty, and over time we
Speaker 9: move them up on the continuumus services we sell, so
Speaker 9: excuse me, buy and largs.
Speaker 8: We feel really good about it.
Speaker 2: Oh, John, I don't know.
Speaker 3: If you have some water there with you, Let me
Speaker 3: give you a second, just to take a quick drink
Speaker 3: if you need it. Of course in the quarter, and
Speaker 3: we've discussed this with a number of the carriers. It
Speaker 3: was iPhone set team. You know, I was there at
Speaker 3: Kupatino Apple Park on the day.
Speaker 2: Of its release.
Speaker 3: Can you give us a real term sense, even if
Speaker 3: it's from the promotion perspective, of how big a fact
Speaker 3: of the iPhone seventeen was for you?
Speaker 9: Well, I think it's not a huge factor, but clearly
Speaker 9: there was a little bit of suppressed activity after the
Speaker 9: last iPhone cycle a year ago. Maybe some folks anticipated
Speaker 9: it was going to be a little bit larger customers
Speaker 9: were seeing if it was really frame breaking and change
Speaker 9: and concluded possibly that it wasn't and delayed waiting for
Speaker 9: the next cycle. And I think, you know, you can
Speaker 9: only suppress that activity for so long, and now the
Speaker 9: new device comes out, people see what it is. So
Speaker 9: there has been an increase over last year and maybe
Speaker 9: some other previous years. It's not a record breaking cycle,
Speaker 9: but it's strong and we're seeing that as a result.
Speaker 9: But I don't think it's anything dramatically out of pattern,
Speaker 9: given the suppression we've seen in the market, and we
Speaker 9: were very effective at working through at four hundred thousan
Speaker 9: in over four hundred thousand postpai vone netads. It shows
Speaker 9: we can compete in that space and do well with it.
Speaker 3: If you're joining us on Bloomberg Television Radio, we're speaking
Speaker 3: to AT and Tco John Stanky final on the iPhone seventeen.
Speaker 3: Will it be more of a factor in the three
Speaker 3: month period that ends in December?
Speaker 9: The holidays, well, the holiday season moving through the fourth
Speaker 9: quarter is always a peak season for everybody in the industry.
Speaker 9: I expect that's going to continue to be the case
Speaker 9: this year. I don't see anything what we've had over
Speaker 9: the first couple of weeks of the introduction to suggest
Speaker 9: we're going to see a step function change from current
Speaker 9: rate and pace. So all of our forward guidance that
Speaker 9: we've given expects that it's going to be competitive, that
Speaker 9: we're going to compete and continue to earn our fair
Speaker 9: share of service revenues on those converged customers I talked about,
Speaker 9: and I expect that it'll be as rambunctious in the
Speaker 9: industry as it has been and we'll do just fine.
Speaker 2: John.
Speaker 3: If I turn on my division and watch a show
Speaker 3: that has ads or a scroll on any given social
Speaker 3: media timeline, I keep seeing AT and T talking about
Speaker 3: itself as a home internet provider. I know that's been
Speaker 3: a priority. Have you any evidence that that push has
Speaker 3: been a success and that you have positioned AT and
Speaker 3: T in that domain?
Speaker 9: Well, I'm glad you're seeing those mean we must be
Speaker 9: getting our right market and targets out there, and I
Speaker 9: think this quarter was an excellent example of it. We
Speaker 9: had our best broadband gain on our strategic products and
Speaker 9: services fixed, wireless and fiber that we've had in eight years,
Speaker 9: and so over five hundred and fifty thousand ADS on
Speaker 9: those strategic products and a net gain of over two
Speaker 9: hundred and thirty thousand of broadband total. It's the best
Speaker 9: we've done in eight years. I think that's a good,
Speaker 9: strong indication that it's working, especially when you consider the
Speaker 9: industry has been rife with examples of our competitors adjusting
Speaker 9: their offers trying to do different things to stem the
Speaker 9: momentum we've had. So I feel really good about where
Speaker 9: we're going on that front, and to the effect, we
Speaker 9: can add that with wireless subscribers, which we're showing that
Speaker 9: we can do over fifty percent of the time when
Speaker 9: somebody buys our fixed wireless product and we're over forty
Speaker 9: one percent penetrated on our fiber base. That's a winning
Speaker 9: combination economically, and what kind of differentiates us from everybody
Speaker 9: else in the industry.
Speaker 3: Okay, shares a down a touch more than one percent,
Speaker 3: which in the grand scheme of today is modest, is
Speaker 3: a decline. The back and forth you had with the
Speaker 3: analyst was, yes, churn is up and arpus are down,
Speaker 3: but you seem not to be concerned about that. Why
Speaker 3: Why is that not the metrics by which we should
Speaker 3: should look to progress?
Speaker 9: Yeah, part of it, I think ed as well, as
Speaker 9: we've got a little bit of churn going on in
Speaker 9: the industry from CEO changeouts and there's a little uncertainty
Speaker 9: around what the competitive posture is going to and then
Speaker 9: you look at the data points you just reference, and
Speaker 9: we're the first to report, and people are asking what's
Speaker 9: going to happen when we hear from everybody else, And
Speaker 9: my answering your question is, we're going to talk about
Speaker 9: the fact that we're focused on putting customers together with
Speaker 9: wireless and broadband, and part of that dynamic is go
Speaker 9: penetrate segments that we've not been successful at penetrating or
Speaker 9: as successful.
Speaker 8: So when we go to value.
Speaker 9: Segments that were maybe a little under shared in, you're
Speaker 9: going to naturally have a little bit less arpoo or
Speaker 9: average revenue per user when you pick that customer up,
Speaker 9: and when you combine wireless and broadband together, you may
Speaker 9: be giving initially a little bit better deal to do that,
Speaker 9: but that's designed into the plan. We want to grow
Speaker 9: and aggregate service revenues, which we've demonstrated that we can
Speaker 9: do that. We indicated we're going to see some strengthening
Speaker 9: of that as we move through the year from where
Speaker 9: we were this quarter. And I'm okay with a little
Speaker 9: bit lower urpoo if we actually execute on the consolidated
Speaker 9: customer strategy and are more successful and penetrating some of
Speaker 9: these segments that we haven't been as active in.
Speaker 3: John Stankey at and t CEO, it's great to have
Speaker 3: you back here on Bloomberg Tech.
Speaker 2: Thank you very much. Okay.
Speaker 3: Coming up, ARM could be on the way to providing
Speaker 3: full chips because customers demand faster pass to market.
Speaker 2: We have more on that next. This is Bloomberg Tech.
Speaker 3: ARM is exploring an expansion into producing full complete chips
Speaker 3: as AI customers seek faster routes to marketsfo Jason Child
Speaker 3: discuss the plans with Bloomberg Tech's Tom McKenzie in London.
Speaker 10: We're actually exploring building full chips and the reason why
Speaker 10: is we are actually having customers in this AI cycle
Speaker 10: basically asking us can you help us be able to
Speaker 10: get products to market faster, which means instead of us
Speaker 10: just taking an ip from you, can you actually just
Speaker 10: really help us design the chip.
Speaker 2: So it's something we're exploring. Coming up.
Speaker 3: Netflix drops as a tax dispute with Brazil cuts into
Speaker 3: its earnings, which on the whole were pretty good, but
Speaker 3: that is quite a drop on track, in fact, for
Speaker 3: his biggest drop in a couple of years. We will
Speaker 3: have more in that story with a key analyst and
Speaker 3: some of the sound from the earnings call coming up next.
Speaker 2: What a day, What a show? Stay with us.
Speaker 3: This is Bloomberg Tech. Welcome back to Bloomberg Tech. One
Speaker 3: of our top earning stories is Netflix stock down significantly
Speaker 3: ten percent, putting it on track for its biggest drop
Speaker 3: since April of twenty twenty two.
Speaker 2: The story isn't the one we were expecting.
Speaker 3: Necessarily, a tax dispute with Brazil hit the company in
Speaker 3: the quarter. But Netflix the streamer has been saying for
Speaker 3: quite a long time, judge us by traditional financial metrics,
Speaker 3: Please Wall Street look beyond the content, look beyond the
Speaker 3: subscribe account, which they don't disclose in the same way anymore.
Speaker 3: There's still a lot to talk about when it comes
Speaker 3: to Netflix. So let's get to Alisha Reese Webbush, Senior
Speaker 3: VP of Equity Research, and let's start with what is
Speaker 3: the headline. The Brazil tax dispute idiosyncratic to the quarter
Speaker 3: and Netflix itself, let alone the sort of broader streaming landscape.
Speaker 2: What did you make of that?
Speaker 11: Well, they took the tax from twenty twenty two to present,
Speaker 11: and so if you look at it on a holistic basis,
Speaker 11: it was over three hundred basis points impacted to operating
Speaker 11: margin in the quarter. So that's why there was such
Speaker 11: a huge miss. But if you look forward. If you
Speaker 11: extrapolate that, it's only going to be about twenty basis
Speaker 11: points hit annually going forward. So there's a pretty big
Speaker 11: difference having had to take that over that long period
Speaker 11: of time. The legislation in Brazil, you know, it was
Speaker 11: unclear and made them, you know, think and many other companies,
Speaker 11: not just Netflix think that they didn't need to pay
Speaker 11: that up until recently, so they had to kind of
Speaker 11: back back pay that or at least set aside the
Speaker 11: money for that, you know, again idiosyncratic. As you say,
Speaker 11: there are a lot of other interesting highlights and maybe
Speaker 11: some disappointments on the revenue line given the cap pop
Speaker 11: demon Hunters phenomenon.
Speaker 3: Oh okay, So so dig into some of those disappointments,
Speaker 3: you know, is that you disappointed in this sense you
Speaker 3: had higher expectations.
Speaker 11: Slightly higher expectations. The thing is that Netflix is trading
Speaker 11: at such a higher it was trading at such a
Speaker 11: high multiple. Netflix has to continually knock it out of
Speaker 11: the park, and revenue was in line roughly, and the
Speaker 11: fourth quarter guidance didn't impress, you know, extravagantly as Netflix
Speaker 11: typically does. And that's one of the big reasons I
Speaker 11: think the stock's trading down. That being said, I think
Speaker 11: there's still plenty that you could pick out of the
Speaker 11: earnings call and the shareholder letter. They're very exciting for
Speaker 11: the future, you.
Speaker 3: Know, Like I've been super fixated on programming. I've been
Speaker 3: watching Black Rabbit, which interesting piece of television. Despite the
Speaker 3: kind of spend and commitment to the slate, the free
Speaker 3: cash flow figures were really interesting. Like what do you
Speaker 3: make of the balance between like committing to content but
Speaker 3: also those traditional financial metrics.
Speaker 11: Yeah, yeah, the free cash flow is so impressive. They
Speaker 11: pulled back on the content spend just a little bit.
Speaker 11: I think they didn't need to spend quite as much,
Speaker 11: and they don't need to in the fourth quarter, just
Speaker 11: given the slate that they already have and how sticky
Speaker 11: it already is. I think the most important thing, though,
Speaker 11: is to really dig into the advertising opportunity right now
Speaker 11: in the third quarter. I think the thing that made
Speaker 11: the u CAN region not quite as exciting as it
Speaker 11: typically would be is that Netflix, while they're getting a
Speaker 11: lot of advertisers and they're getting all the bookings and
Speaker 11: their CPMs have probably leveled off. From all the data
Speaker 11: we've gathered, what it looks like is that their ad
Speaker 11: delivery rates are just so incredibly low that they're not
Speaker 11: booking all of it. You have a lot of people
Speaker 11: on the ad tier. You just need to give them
Speaker 11: a little bit more ads to really get that revenue
Speaker 11: to ramp up. In the fourth quarter, you have more
Speaker 11: live events and they can issue ads across all tiers,
Speaker 11: and so they'll start to pick up on that in
Speaker 11: the fourth quarter and certainly through twenty twenty six.
Speaker 3: You know, I'm the generation, the lost generation where you
Speaker 3: had to have ads when you watch shows on television,
Speaker 3: So you know, I'm trying to process that look. Bloomberg
Speaker 3: and others reported that Netflix is one of the companies
Speaker 3: circling for a part of Warner Brothers Discovery. Ted Surrandos
Speaker 3: addressed this idea of M and A on the call.
Speaker 3: Listen to what he said.
Speaker 12: We've been very clear in the past that we have
Speaker 12: no interest in owning legacy media networks, so there is
Speaker 12: no change there. But in general, we believe that we
Speaker 12: can be and we will be choosy. We have a
Speaker 12: great business. We're predominantly focused on growing organically, investing aggressively
Speaker 12: and responsibly into the growth, and returning access cash flow
Speaker 12: to shareholders through our shot to share repurchase.
Speaker 2: Your interpretation of what Ted Sarandos was saying.
Speaker 11: Look, ten years ago, HBO was the top content that
Speaker 11: everyone wanted, and Netflix was did not shy away retastings,
Speaker 11: did not shy away from saying that that was what
Speaker 11: they were shooting for. Netflix was shooting to be like
Speaker 11: HBO Max or HBO at the time. They've since surpassed
Speaker 11: them their leagues ahead. Now that being said, you know,
Speaker 11: Warner Brothers still has some really excellent content, and if
Speaker 11: Netflix has an opportunity to kick the tires and see
Speaker 11: if they can get a piece of that and not
Speaker 11: the legacy media piece, sure of course they're going to
Speaker 11: look at it. And if they can get it for
Speaker 11: a good price, of course they will. However, they're not
Speaker 11: the only ones looking at it, and they're certainly the
Speaker 11: only one who's looking at it just piecemeal and trying
Speaker 11: to take the best bits and not the rest of it.
Speaker 11: So I don't think they're going to be as competitive
Speaker 11: as the other bidders in you know, looking at this ultimately.
Speaker 11: You know what Ted also said that was really important
Speaker 11: is that they don't need to use M and A
Speaker 11: to reach their targets. They don't need to do that
Speaker 11: to reach all of their you know, their growth group
Speaker 11: of goals, and so you know, it would be a
Speaker 11: nice It's a nice to have, not a must have
Speaker 11: for Netflix.
Speaker 3: Alicia Reese Webbush, thank you very much. Okay, let's stick
Speaker 3: with the earning story. Tesla will report its results after
Speaker 3: the closing bell. Let's get the preview. Bloomber's Cray Trudel
Speaker 3: our Global Auto Zer joins us the quarter gone was
Speaker 3: record breaking, a number that I don't think many of
Speaker 3: us saw coming in terms of delivering evs to customers.
Speaker 3: But as you know, it came with the asterisk that
Speaker 3: it was against the expiring of a federal tax credit
Speaker 3: in the United States. Is that the story tonight with
Speaker 3: Tesla or is there something much bigger here that we're
Speaker 3: bracing for.
Speaker 13: Yeah, I think there may be some possibility that we
Speaker 13: get some surprise about, you know, maybe some of the
Speaker 13: costs that it took to achieve those results. And because
Speaker 13: I think, you know, we heard Tesla itself executives on
Speaker 13: the call a quarter ago kind of saying contradictory things.
Speaker 13: Right of you know, we've we've got a fair amount
Speaker 13: of demand, and yet we do have some incentives on
Speaker 13: offer on top of the seventy five hundred dollars tax credit,
Speaker 13: and you know, sort of go out and buy your
Speaker 13: Tesla now before it's too late.
Speaker 2: You know.
Speaker 13: The big question though, I think, and the big point
Speaker 13: of emphasis for everybody is going to be do we
Speaker 13: hear elon, you know say again, you know what, Yes,
Speaker 13: we may be in for a few rough quarters because
Speaker 13: of these credits going away, and just how tough the
Speaker 13: sledding is going to be, particularly in the US market.
Speaker 13: And also I think, you know, outside of the US,
Speaker 13: we are just seeing Chinese manufacturers really give Tesla a
Speaker 13: run for its money.
Speaker 2: And how how concerning is that? Really?
Speaker 3: Quick Craig is tonight's earning score a precursor for the
Speaker 3: compensation package vote on November sixth.
Speaker 13: It does feel like a topic that will be difficult
Speaker 13: to completely ignore, even if if with any other CEO
Speaker 13: they would shy away from addressing the issue of their
Speaker 13: own you know, payday, and yet I would expect it
Speaker 13: absolutely to come up.
Speaker 2: There's so much anticipation for this next month.
Speaker 3: We're going to be running the blog on the Bloomberg termino.
Speaker 3: I think online as well, either way, you know where
Speaker 3: to find us. Bloomberg's Creatrudel, thank you very much. Meta
Speaker 3: is set to see on almost thirty billion dollar financing
Speaker 3: package for its data center site in rural Louisiana, marking
Speaker 3: the final step for the largest private capital deal on record.
Speaker 3: Blue Out Capital and Meta will split ownership of the
Speaker 3: data center site, with the tech giant retaining just twenty
Speaker 3: percent of it. That's according to sources. Blue Out co
Speaker 3: CEO Mark Libschultz sat down with Bloomberg's Danny Berger to
Speaker 3: discuss the challenges of getting this still done.
Speaker 14: It was difficult to i'd say innovate together with Meta.
Speaker 14: That is to say, it's new, it's groundbreaking. As you observe,
Speaker 14: it's a scale no one has dealt with. But Meta
Speaker 14: is an incredibly innovative company, right, So this is this
Speaker 14: is a beautiful marriage of a deeply innovative company meets
Speaker 14: this sort of need for innovative capital solutions, which certainly
Speaker 14: we think of as our calling card in blue Owel.
Speaker 14: And so together we're able to craft something really bespoke
Speaker 14: at a scale that nobody has seen before. And that
Speaker 14: is exciting, and you know they have a great team
Speaker 14: there you know the CFO Susan Lee and the team
Speaker 14: top Todd Hesse and Michael Hart. They're really good at
Speaker 14: what they do, and working together, we're able to do
Speaker 14: something that really worked for them and creates a great
Speaker 14: investment for us.
Speaker 15: There's a lot of the excitement around AI, and I
Speaker 15: think a lot of players would also look at Meta
Speaker 15: as a counterparty and also be excited by that.
Speaker 2: How competitive was this deal?
Speaker 14: So I do think at the end of the day,
Speaker 14: partnerships will define this industry for the foreseeable future, and
Speaker 14: that it's because it isn't just about capital. I mean, yes,
Speaker 14: capital is a necessary and important component, and in quantums.
Speaker 8: That people are not used to. But it isn't just capital.
Speaker 14: It's capital married with knowledge, capital married with skills to
Speaker 14: be able to craft a solution. It's not just a
Speaker 14: generic building. You have to picture the magnitude of what
Speaker 14: we're all talking about.
Speaker 8: Right.
Speaker 14: This is a two gigawatt complex, So just to frame that,
Speaker 14: that's more than a big city in America consumes in
Speaker 14: power in one site. This is the largest data center
Speaker 14: complex being built as far as you know, in the
Speaker 14: world today. But remember it's bigger than the one we
Speaker 14: announced three weeks ago, the Borderplex project. That's twenty two
Speaker 14: billion dollars, which is bigger than the one we had
Speaker 14: before that, which is Abilene, Texas, which is fifteen billion
Speaker 14: through phases.
Speaker 8: One and two. All of those are blue all solutions.
Speaker 14: All of them are different because in the case of
Speaker 14: say Abilene, you have Cruse so who's a fantastic developer partner.
Speaker 14: So there we're partnered to a developer and putting together
Speaker 14: that massive and successful project for Oracle. In Borderplex, we're
Speaker 14: building it internally. We have our own business called Stack
Speaker 14: thousand people captive that does the development's very complex projects.
Speaker 8: So Stack is developing Blue Owl as the capital partner
Speaker 8: the Borderplex project.
Speaker 14: Here Meta is going to build and going to operate
Speaker 14: the data centers themselves. So it's three different flavors, all
Speaker 14: of them require a different customized solution, all of which
Speaker 14: require really deep knowledge on the one hand, and really
Speaker 14: deep access to capital. And we have uniquely brought those
Speaker 14: two together, and so I think people know if they
Speaker 14: come to us, we can deliver all the capital, one
Speaker 14: stop shop with the knowledge you need to do it right.
Speaker 15: So as the deals get bigger and bigger again, this
Speaker 15: one twenty seven billion dollars. How do you make sure,
Speaker 15: just given the sheer size of it, that Blue Owl
Speaker 15: as a whole is an overly dependent and exposed to
Speaker 15: be just this individual deal or these aid deals you're making.
Speaker 14: Yeah, well, so people that here at blue outl like
Speaker 14: our business is built on risk management, diversification.
Speaker 8: In fact, our old business is about downside protection.
Speaker 14: So it actually comes natural for us to be thinking about,
Speaker 14: you know, where are all the different pockets of risk
Speaker 14: and how do we manage them? Now very importantly in
Speaker 14: this space different from most others. You to remember, we're
Speaker 14: dealing with the companies that are the biggest companies in
Speaker 14: the world, with the best credit ratings in the world.
Speaker 14: So there is a different question when it comes to concentration,
Speaker 14: you know. That is to say, having a lot of
Speaker 14: exposure to Microsoft, a lot of exposure to Meta, a
Speaker 14: lot of exposure to Amazon.
Speaker 8: Those are pretty darn good exposures.
Speaker 3: Blue Out co CEO market Libschaltz, along with Gleenberg's Danny Berger,
Speaker 3: in other Meta used the tech giant is cutting roughly
Speaker 3: six hundred positions from its AI unit to move more
Speaker 3: quickly in the AI race. The cuts won't affect Meta
Speaker 3: is newly formed lab unit, though the company says it
Speaker 3: will continue to hire for ai eforts, and some of
Speaker 3: those hires in the hundreds of millions of dollars when
Speaker 3: it comes to comp okay, Coming up, Apple faces a
Speaker 3: few wrinkles and its plans for a giant foldable iPad.
Speaker 2: We're more on the Bloomberg exclusive. Next. This is Bloomberg Tech.
Speaker 3: Samsung and Google have launched a new mixed reality headset,
Speaker 3: a precursor to smart glasses that the companies say are
Speaker 3: coming pretty soon. Bloomberg's consumer tech reporter Sam Kelly joins us. Now,
Speaker 3: tell me about this project. It's a first step, right,
Speaker 3: But you've been able to get an insight into Samsung
Speaker 3: and Google's mixed reality capabilities.
Speaker 4: That's right.
Speaker 16: Yeah, so Samsung's been working on this for quite a while,
Speaker 16: or directly compete with Apple's Vision Pro headset. You know,
Speaker 16: it works very similar you put it on. There are
Speaker 16: two different main areas ways to sort of engage with
Speaker 16: the device. One is sort of a pass through experience
Speaker 16: where you kind of see your home screen apps in
Speaker 16: front of you, using gestures to point and touch your
Speaker 16: fingers together, almost like pinching to open up apps and
Speaker 16: experience things that way. You can also have a more
Speaker 16: immersive experience, such as you know, watching Netflix or watching
Speaker 16: an NBA game where you feel like you're immersed. They're also,
Speaker 16: you know, because Google is involved too, you can experience
Speaker 16: Google Maps in a certain way where you're on street
Speaker 16: view and kind of go into different restaurants. And of
Speaker 16: course the big thing here is AI. AI hasn't really
Speaker 16: had a major place on headsets before, and now you
Speaker 16: can communicate with Gemini, ask it questions. If you're watching
Speaker 16: a movie, you could circle an actor's face and say,
Speaker 16: who's this actor? Where do I know him from? So
Speaker 16: that adds a new layer to headsets in general.
Speaker 2: Let's turn our attentions to Apple.
Speaker 3: Bloomberg has some reporting around Apple's plan for a foldable iPad.
Speaker 2: Quickly it's hit some snags. What do we know?
Speaker 16: Yes, so Apple's been working on this for a while.
Speaker 16: Was projected to come out in twenty twenty eight. Now
Speaker 16: Bloomberg is hearing that will be pushed back to twenty
Speaker 16: twenty nine or even beyond. So the concept is just
Speaker 16: an iPad that will it opens up, It folds kind
Speaker 16: of look more like a Macwok whenfolded, but some challenges
Speaker 16: around the engineering related to the display, also related to
Speaker 16: the weight.
Speaker 8: You know, to keep these things.
Speaker 16: Light is a big challenge now Apple's trying to make
Speaker 16: it lighter. It also comes at a time when Apple's
Speaker 16: trying to you know, drum up sales around iPad and
Speaker 16: also just bring new innovation into its product lines.
Speaker 8: In general.
Speaker 2: We're seeing it experiment.
Speaker 16: The iPhone Air just came out recently too, so new
Speaker 16: form factors, but we might have to wait a little
Speaker 16: bit longer.
Speaker 3: Bloomberg, Sam Kelly, thank you very much. Let's get some
Speaker 3: more news in talking tech. First up, China's demanding some
Speaker 3: US chip FIRN submit sensitive data about their sales as
Speaker 3: part of a probe of American suppliers. Companies have been
Speaker 3: asked to provide further details, including costs, profits, customer names,
Speaker 3: and transaction details. Plus SpaceX CEO Elon Musk took ain
Speaker 3: at NASA's interim administrator Sean Duffy. Must took to X
Speaker 3: to insult Duffy, criticizing his proposal of folding NASA into
Speaker 3: the Department of Transportation and potentially staying on as the
Speaker 3: administrator instead of fintech billionaire Jared isaacmanb An Only Fan
Speaker 3: CEO Kylie Blair says the platform has paid out more
Speaker 3: than twenty five billion dollars to its content creators since
Speaker 3: it was founded. She spoke with Bloomberg's Caroline Hide at
Speaker 3: the Bloomberg Tech conference in London.
Speaker 17: We've paid out twenty five billion to creators since twenty sixteen.
Speaker 17: So there's not very many tech companies that can talk
Speaker 17: about creating wealth for others rather than just profiteering essentially.
Speaker 17: And so for us as a company, that makes us
Speaker 17: very proud. And we talk to our content creators and
Speaker 17: we understand the difference that it's made to their lives,
Speaker 17: the way that they continue to challenge themselves, or build
Speaker 17: their fan base, or try something new, be a bit disruptive,
Speaker 17: be a bit you know, reinvent themselves in some way.
Speaker 17: And so for us as a business, providing a platform
Speaker 17: and enabling creators to have the tools to do that
Speaker 17: and to connect with their global fan base is really
Speaker 17: the thing that makes us very proud.
Speaker 3: Coming up more on Google and Unpropposite and thropics talks
Speaker 3: that could be worth tens of billions.
Speaker 2: This is Bloomberg Tech.
Speaker 3: Open AI and build its first AI powered web browser,
Speaker 3: trying to take on Google in that new front. The browser,
Speaker 3: called chat gpt Atlas, is designed to be a more
Speaker 3: personalized web experience and also feel tasked, such as booking
Speaker 3: flights or editing documents on a user's behalf back to
Speaker 3: our top story sources saying and Thropic and Googling discussions
Speaker 3: for a potential deal that would have Google providing cloud
Speaker 3: computing services to Anthropic high tens of billions of dollars.
Speaker 3: Mandep seeing a Bloomberg Intelligent wrote Google's expanded Anthropic deal
Speaker 3: may speed TPU commercialization and cloud growth, echoing Oracle's multi
Speaker 3: year Open AI partnership that's driving its infrastructure revenue toward
Speaker 3: one hundred and six billion by twenty thirty. Let's get
Speaker 3: to bi's Anna rag Rana, who's joining us from Chicago.
Speaker 3: What is your take here in your thesis on what
Speaker 3: this reporting about Anthropic and Google represents.
Speaker 18: See there are two aspects of it. Nthropic has been
Speaker 18: working closely with Amazon Web Services. It also has an
Speaker 18: investment from Google, so it is logical that they will
Speaker 18: be using some cloud capacity from Google as well. But
Speaker 18: the big question is whether this, you know, talks a
Speaker 18: little bit about awus's infrastructure, or this is just a
Speaker 18: matter of looking for capacity at this point because everybody
Speaker 18: is constrained. Microsoft recently signed some new deals with a
Speaker 18: couple of neoclouds, which gives us some insight that there
Speaker 18: may be more of an issue of they're not being
Speaker 18: able to build infrastructure as the demand is coming in.
Speaker 18: And that's no different than what's happening with you know,
Speaker 18: open AI also, so it could be just a capacity issue.
Speaker 18: Longer term, we anticipate all large language models to work
Speaker 18: with almost every hyperscale cloud provider that's out there because
Speaker 18: of the size of you know, the expectations whence this
Speaker 18: gets to the enterprise level.
Speaker 2: So that let's linger on that last point.
Speaker 3: We'd reported just last week that Anthropic executives are doing
Speaker 3: this tour of the Middle East to secure money, but
Speaker 3: also just like more capacity as a case study. Like
Speaker 3: a lot of people react to our reporting with a
Speaker 3: lack of understanding of how Anthropic can need that much capacity,
Speaker 3: like is it justified?
Speaker 18: Yeah, I mean if you look at the economic projections
Speaker 18: or the growth projections for both these vendors, whether it's
Speaker 18: Opening I or entropic. I mean, we are just in
Speaker 18: a very early innings of enterprise applications being built using
Speaker 18: some of these models, so we have this is a
Speaker 18: multi year trend. The big question obviously is whether the
Speaker 18: GPUs that they are getting from aw US are they
Speaker 18: good enough or not. That will find out over time.
Speaker 18: I can't make that prediction today whether you're going to
Speaker 18: Google only for tech reasons, but if you look at
Speaker 18: what even Microsoft is doing, you know they have allowed
Speaker 18: Opening Eye to go out and sign deals with Oracle
Speaker 18: with you know, other New York clouds, or Vive be
Speaker 18: one of them. So you know everybody is going and
Speaker 18: trying to find capacity right now, and that's the state
Speaker 18: we are in at this point.
Speaker 3: One source did tell me that the talks are about TPUs,
Speaker 3: but we'll keep reporting and we'll get the analysis from
Speaker 3: blooming Intelligence and ANAA Rana thank you very much. Indeed,
Speaker 3: that does it for this edition of Bloomberg Tech. A
Speaker 3: lot of breaking news, a lot of it originating from
Speaker 3: Bloomberg's newsroom, but we are like right in the thick
Speaker 3: of earning season, so recap on the podcast. You know
Speaker 3: where to find it on the Bloomberg terminal as well
Speaker 3: as online on Apple, Spotify, and iHeart. I appreciate all
Speaker 3: of you that tune in live every single day, but
Speaker 3: I know so many of you listen to this show
Speaker 3: in the form of a podcast, whether it's here in
Speaker 3: sid can Alley or beyond.
Speaker 2: Have a great week. This is Bloomberg Tech