1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on applecar Play and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,080 Speaker 1: or watch us live on YouTube. 6 00:00:23,520 --> 00:00:26,200 Speaker 2: All right, I've been following the railroad stocks, folks. That's 7 00:00:26,200 --> 00:00:29,200 Speaker 2: where I started my career, covering the railroad stocks. Here's 8 00:00:29,240 --> 00:00:31,520 Speaker 2: a headline I never thought i'd see, and that's like 9 00:00:31,600 --> 00:00:35,120 Speaker 2: nineteen eighty six Union Pacific Northern Southern. 10 00:00:34,800 --> 00:00:36,879 Speaker 3: In advanced talks. I never thought i'd see that. 11 00:00:36,920 --> 00:00:40,680 Speaker 2: Lee Klascow, Senior transport analyst for Bloomberg Intelligence. 12 00:00:41,200 --> 00:00:42,600 Speaker 3: Lee putting a. 13 00:00:42,520 --> 00:00:47,720 Speaker 2: West western railroad Union Pacific together with a eastern railroad 14 00:00:47,720 --> 00:00:51,720 Speaker 2: at Norfolk Southern, creating a east to west true railroad. 15 00:00:51,880 --> 00:00:54,160 Speaker 3: Can that happen? Will the regulators allow that to happen? 16 00:00:55,680 --> 00:00:59,920 Speaker 4: I mean it's possible, given where the surface transport to 17 00:01:02,120 --> 00:01:06,240 Speaker 4: rules are now as it relates to large acquisitions, you know, 18 00:01:06,280 --> 00:01:10,199 Speaker 4: we give it a relatively low probability, maybe twenty five 19 00:01:10,280 --> 00:01:14,720 Speaker 4: thirty five percent chance of happening. The STV is actually 20 00:01:14,720 --> 00:01:19,000 Speaker 4: in August reviewing some of its rules to streamline some 21 00:01:19,040 --> 00:01:21,080 Speaker 4: of the processes that it deals with. 22 00:01:21,760 --> 00:01:23,160 Speaker 5: But you know, it's not impossible. 23 00:01:23,280 --> 00:01:25,920 Speaker 4: But again, you know, we think that the probability is 24 00:01:25,959 --> 00:01:29,000 Speaker 4: below fifty percent. If it were to happen, it would 25 00:01:29,080 --> 00:01:32,399 Speaker 4: create the first transcon railroad, and that. 26 00:01:32,360 --> 00:01:33,000 Speaker 5: Could be good. 27 00:01:33,440 --> 00:01:37,240 Speaker 4: It could be good because a railcar would be touched 28 00:01:37,319 --> 00:01:40,160 Speaker 4: less because it would wouldn't have to maybe be interchanged 29 00:01:40,200 --> 00:01:43,280 Speaker 4: with other railroads, and that does you know, the more 30 00:01:43,319 --> 00:01:47,320 Speaker 4: time a railcar is touched, the more times something could 31 00:01:47,360 --> 00:01:51,960 Speaker 4: go wrong, and so that would would would probably reduce 32 00:01:53,920 --> 00:01:58,240 Speaker 4: I would have to say it probably could reduce some accidents. 33 00:01:58,640 --> 00:02:02,640 Speaker 4: It could also reduce car for the railroads in general. 34 00:02:02,720 --> 00:02:03,880 Speaker 5: So it could be a good thing. 35 00:02:04,080 --> 00:02:06,240 Speaker 4: You know, shippers might have an issue with it because 36 00:02:06,280 --> 00:02:09,360 Speaker 4: they might be afraid, you know, even though that Norfolk, 37 00:02:09,400 --> 00:02:15,480 Speaker 4: Southern Union, Pacific don't necessarily compete, you know, against each 38 00:02:15,520 --> 00:02:18,320 Speaker 4: other directly, you know, they might be concerned that, you know, 39 00:02:18,400 --> 00:02:21,800 Speaker 4: losing one of the large Class one rails would result 40 00:02:21,880 --> 00:02:26,080 Speaker 4: in less competition. And the railroads for the STB hurdle 41 00:02:26,360 --> 00:02:29,160 Speaker 4: have to prove that this deal is in the public interest. 42 00:02:29,240 --> 00:02:30,800 Speaker 4: So you know, you're going to have a lot of 43 00:02:30,840 --> 00:02:35,000 Speaker 4: constituency and stakeholders voice their opinions both for the deal 44 00:02:35,040 --> 00:02:37,440 Speaker 4: and against the deal. And again that's all assuming that 45 00:02:37,520 --> 00:02:41,040 Speaker 4: these two parties can come to an agreement. You know, 46 00:02:41,080 --> 00:02:43,600 Speaker 4: we put out a note last week where we thought, 47 00:02:43,639 --> 00:02:46,440 Speaker 4: you know, the enterprise value for that transaction could be 48 00:02:46,440 --> 00:02:49,400 Speaker 4: in the high eighty eighty billion, So we'll see, you know, 49 00:02:49,639 --> 00:02:52,560 Speaker 4: what kind of deal the two can hammer out. 50 00:02:52,720 --> 00:02:54,200 Speaker 6: All right, But you're kind of going along the track 51 00:02:54,240 --> 00:02:56,640 Speaker 6: that I was. I was thinking of LA track. 52 00:02:56,720 --> 00:02:57,079 Speaker 3: I get it. 53 00:02:57,680 --> 00:02:58,200 Speaker 5: I got. 54 00:03:00,160 --> 00:03:02,480 Speaker 3: Little railroad humor, railroad humor. 55 00:03:03,360 --> 00:03:06,320 Speaker 6: Can you go more into the regulations because you started 56 00:03:06,360 --> 00:03:08,640 Speaker 6: talking about that, But what are some more of those 57 00:03:08,960 --> 00:03:12,280 Speaker 6: sticking points that could cause this maybe not to go through? 58 00:03:13,400 --> 00:03:17,320 Speaker 4: Well, you know, we've seen a couple large mergers. The 59 00:03:17,400 --> 00:03:21,160 Speaker 4: last large one was Canadian Pacific and Kansas City Southern. 60 00:03:21,520 --> 00:03:25,560 Speaker 4: Kansas City Southern was the smallest Class one railroad and 61 00:03:25,600 --> 00:03:27,840 Speaker 4: they were exempt from these new rules that went to 62 00:03:27,919 --> 00:03:30,480 Speaker 4: an effect in two thousand and one. And the rules 63 00:03:30,560 --> 00:03:34,040 Speaker 4: kind of came about because Burlington Northern and Canadian National 64 00:03:34,080 --> 00:03:37,920 Speaker 4: were looking to merge, and so even though they had 65 00:03:38,720 --> 00:03:41,520 Speaker 4: a lower bar, it took quite some time for the 66 00:03:41,560 --> 00:03:42,240 Speaker 4: deal to close. 67 00:03:42,280 --> 00:03:43,800 Speaker 5: I think it was about eighteen months. 68 00:03:44,040 --> 00:03:48,240 Speaker 4: You know, we suspect that under the current rules, a 69 00:03:48,320 --> 00:03:52,080 Speaker 4: deal between Union Pacific and Norfolk Southern could take about 70 00:03:52,120 --> 00:03:55,520 Speaker 4: two years to get STP approval, So it's going to 71 00:03:55,560 --> 00:03:56,560 Speaker 4: be a long process. 72 00:03:56,600 --> 00:03:57,480 Speaker 5: So even if the. 73 00:03:57,440 --> 00:04:00,320 Speaker 4: Two come out tomorrow and say hey, we're in a 74 00:04:00,360 --> 00:04:03,560 Speaker 4: deal and the shareholders approve it, you know, this could 75 00:04:03,600 --> 00:04:06,800 Speaker 4: be two years until we see an actual trans con railroad. 76 00:04:07,280 --> 00:04:09,960 Speaker 2: So Lee, I'm going to go get my floppy disc 77 00:04:09,960 --> 00:04:12,520 Speaker 2: out circle nineteen eighty eight. I got my Union Pacific 78 00:04:13,120 --> 00:04:15,400 Speaker 2: and my Norfolk Southern earnings models there. I'm going to 79 00:04:15,480 --> 00:04:19,880 Speaker 2: put them together like they're merging. What cost do I 80 00:04:19,920 --> 00:04:21,880 Speaker 2: take out? What are the synergies do you think? What's 81 00:04:21,920 --> 00:04:25,320 Speaker 2: the reason for doing this deal? So it's pretty interesting. 82 00:04:25,360 --> 00:04:28,359 Speaker 4: So, you know, Norfolk Southern went through its own cost 83 00:04:28,400 --> 00:04:32,640 Speaker 4: cutting process as it started to embrace precision scheduling railroading. 84 00:04:32,760 --> 00:04:35,160 Speaker 4: For those that aren't familiar with it, it's pretty much 85 00:04:35,160 --> 00:04:37,480 Speaker 4: six sigma for the rail industry. So it's just about 86 00:04:37,520 --> 00:04:41,880 Speaker 4: sweating assets and they laid off people and so you know, 87 00:04:42,440 --> 00:04:44,000 Speaker 4: it's not like there's a lot of fat there. 88 00:04:44,040 --> 00:04:46,080 Speaker 5: But you know, what I suspect is that. 89 00:04:45,960 --> 00:04:49,120 Speaker 4: They maybe you know, they'll maybe Lean laying off some 90 00:04:49,680 --> 00:04:53,760 Speaker 4: people in corporate, you know, because you don't need two CEOs, 91 00:04:53,800 --> 00:04:57,480 Speaker 4: you don't need two CFOs, you don't need necessarily as 92 00:04:57,480 --> 00:05:00,960 Speaker 4: many salespeople and accountants. So there's the there's that aspect 93 00:05:01,040 --> 00:05:04,680 Speaker 4: of it. And also, you know, if they are able 94 00:05:04,760 --> 00:05:09,320 Speaker 4: to provide a lower cost service, they might be able 95 00:05:09,360 --> 00:05:13,200 Speaker 4: to even though they can raise rates, provided at a 96 00:05:13,200 --> 00:05:16,200 Speaker 4: lower costs to shippers. So I think that's going to 97 00:05:16,240 --> 00:05:19,480 Speaker 4: be the big What can they do for shippers is 98 00:05:19,560 --> 00:05:23,200 Speaker 4: can they lower the cost curve because of the fact 99 00:05:23,279 --> 00:05:26,279 Speaker 4: that you know, again the railcar is being touched less, 100 00:05:26,480 --> 00:05:28,799 Speaker 4: and are they able to pass that on to shippers. 101 00:05:28,920 --> 00:05:30,960 Speaker 4: I think if they can make a case for that, 102 00:05:31,680 --> 00:05:35,520 Speaker 4: they'll have an easier time of getting getting a deal done. 103 00:05:35,800 --> 00:05:38,560 Speaker 6: All right, Lean the last like twenty seconds. Second quarter 104 00:05:38,560 --> 00:05:39,680 Speaker 6: results anything stand out. 105 00:05:41,320 --> 00:05:45,599 Speaker 4: Pacifics did really well. Their network is operating well. You know, 106 00:05:45,640 --> 00:05:48,080 Speaker 4: they had some issues during the pandemic that seems well 107 00:05:48,120 --> 00:05:52,599 Speaker 4: behind it. You know, their goal is to have the 108 00:05:52,640 --> 00:05:55,960 Speaker 4: lowest operating ratio, which is an inverse to an EBIT margin, 109 00:05:56,040 --> 00:05:58,200 Speaker 4: to lower the better, and it seems like they're going. 110 00:05:58,200 --> 00:05:59,279 Speaker 5: To deliver on that. 111 00:06:00,160 --> 00:06:01,800 Speaker 3: Thanks so much for joining us, really appreciate it. 112 00:06:01,880 --> 00:06:03,920 Speaker 2: This could be a really cool time in the railroad 113 00:06:03,920 --> 00:06:06,240 Speaker 2: industry if you can get a East West railroad for 114 00:06:06,279 --> 00:06:08,680 Speaker 2: the first time in the United States. Lead classical senior 115 00:06:08,720 --> 00:06:11,960 Speaker 2: transport antls for Bloomberg Intelligence again the news for US 116 00:06:12,080 --> 00:06:16,839 Speaker 2: railroad geeks, Union, Pacific, Norfolk Southern in advanced talks. 117 00:06:16,880 --> 00:06:17,280 Speaker 3: How did they? 118 00:06:17,279 --> 00:06:19,080 Speaker 2: I mean, if you're in advanced talks, you must have 119 00:06:19,200 --> 00:06:21,640 Speaker 2: some layers somewhere telling you, yeah, we can pass this thing. 120 00:06:21,520 --> 00:06:22,800 Speaker 5: We can get this past the regulators. 121 00:06:22,920 --> 00:06:26,000 Speaker 2: I don't know that, but two years oh yeah, oh boy, 122 00:06:26,080 --> 00:06:28,120 Speaker 2: this is These are railroad people. They're not like the 123 00:06:28,120 --> 00:06:30,120 Speaker 2: fastest out there. 124 00:06:30,800 --> 00:06:34,520 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 125 00:06:34,600 --> 00:06:37,640 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 126 00:06:37,680 --> 00:06:41,000 Speaker 1: Auto with the Bloomberg Business app, Listen on demand wherever 127 00:06:41,040 --> 00:06:44,160 Speaker 1: you get your podcasts, or watch us live on YouTube. 128 00:06:44,520 --> 00:06:47,960 Speaker 6: You're listening to Bloomberg Intelligence. I'm Lise Matteo alongside Paul Sweeney, 129 00:06:48,240 --> 00:06:50,200 Speaker 6: and let's get to Tesla right. It posted one of 130 00:06:50,200 --> 00:06:54,080 Speaker 6: its worst quarters in years, revenue falling twelve percent, and 131 00:06:54,160 --> 00:06:56,800 Speaker 6: there could be even more tough times ahead. So let's 132 00:06:56,839 --> 00:06:59,039 Speaker 6: find out more. Dig into this with Steve Manny's Bloomberg 133 00:06:59,080 --> 00:07:01,920 Speaker 6: Intelligence Global Autos and Industrials Research Matter. 134 00:07:02,160 --> 00:07:02,920 Speaker 3: See why don't you start? 135 00:07:02,920 --> 00:07:04,920 Speaker 6: I we're telling us what the biggest portion of that 136 00:07:04,960 --> 00:07:07,400 Speaker 6: revenue drop? Where did it come from? 137 00:07:07,640 --> 00:07:11,320 Speaker 7: Well, the revenue drop drop was mainly from you know, 138 00:07:11,360 --> 00:07:14,640 Speaker 7: weaker sales in Europe, you know, still the model y 139 00:07:14,840 --> 00:07:18,320 Speaker 7: ramping up. I think on the call with I think 140 00:07:18,360 --> 00:07:20,480 Speaker 7: the reason why the stock is down the most is 141 00:07:20,560 --> 00:07:25,080 Speaker 7: really the outlook. You know, nothing, nothing, you know, earth 142 00:07:25,160 --> 00:07:28,360 Speaker 7: shattering from the outlook. Uh, you know, and they also 143 00:07:28,520 --> 00:07:30,720 Speaker 7: kind of be kind of they were kind of cautious 144 00:07:31,200 --> 00:07:33,200 Speaker 7: about the rest of the year and maybe into the 145 00:07:33,240 --> 00:07:34,200 Speaker 7: twenty twenty. 146 00:07:33,920 --> 00:07:38,640 Speaker 2: Six Steve, what do we know about the the position 147 00:07:38,720 --> 00:07:38,960 Speaker 2: of the. 148 00:07:38,920 --> 00:07:40,760 Speaker 3: Tesla brand right now? 149 00:07:40,800 --> 00:07:42,920 Speaker 2: And is it something that can be to the extent 150 00:07:42,960 --> 00:07:45,200 Speaker 2: it's been harmed, say in Europe where they have seen 151 00:07:45,240 --> 00:07:46,600 Speaker 2: some weakness, can it be repaired. 152 00:07:46,720 --> 00:07:47,360 Speaker 3: What's the feeling. 153 00:07:48,960 --> 00:07:52,520 Speaker 7: Uh, it's it's tough. It's gonna take time. I think 154 00:07:52,520 --> 00:07:55,840 Speaker 7: it's It would be really helpful if Elon must uh 155 00:07:56,000 --> 00:07:59,760 Speaker 7: kind of walk, uh, stay away from the politics for 156 00:07:59,840 --> 00:08:04,720 Speaker 7: the moments and really focus on the business and marketing 157 00:08:04,760 --> 00:08:08,240 Speaker 7: its vehicles. You know, it is a nice vehicle model. 158 00:08:08,280 --> 00:08:13,320 Speaker 7: Why the man has picked back up after the changeover 159 00:08:13,480 --> 00:08:16,520 Speaker 7: earlier this year. The volume is not there yet. But 160 00:08:17,360 --> 00:08:20,720 Speaker 7: the issue here is, you know, they've just launched a 161 00:08:20,760 --> 00:08:24,680 Speaker 7: new vehicle, but the seventy five hundred tax credit in 162 00:08:24,720 --> 00:08:28,720 Speaker 7: the US is going away, So the trajectory, the growth 163 00:08:28,760 --> 00:08:33,319 Speaker 7: trajectory for that new vehicle and gross margin has been 164 00:08:34,280 --> 00:08:38,280 Speaker 7: you know, has been derailed. And look, we're actually looking 165 00:08:38,800 --> 00:08:41,720 Speaker 7: for twenty twenty five deliveries to be you know, about 166 00:08:41,760 --> 00:08:45,280 Speaker 7: five percent lower than what consensus is saying at one 167 00:08:45,320 --> 00:08:48,400 Speaker 7: point five to seven sou and we're probably going to 168 00:08:48,480 --> 00:08:53,600 Speaker 7: see you know, the revision on consensus deliveries in twenty 169 00:08:53,640 --> 00:08:56,880 Speaker 7: twenty six by another five percent. So it's going to 170 00:08:56,920 --> 00:09:00,880 Speaker 7: be some tough time for the automaker. I mean, the 171 00:09:01,040 --> 00:09:05,079 Speaker 7: one one couple of bright spot that could offset it's 172 00:09:05,160 --> 00:09:07,559 Speaker 7: gonna be you know, the extended version of the Model 173 00:09:07,679 --> 00:09:11,439 Speaker 7: Y in China, you know, no longer vehicles a lot 174 00:09:11,559 --> 00:09:14,880 Speaker 7: more space in the back seat does help sales over there. 175 00:09:15,520 --> 00:09:18,400 Speaker 7: And there's you know, there's a new cheaper vehicle that 176 00:09:18,400 --> 00:09:22,320 Speaker 7: they're supposed to launch in the second half, so hopefully 177 00:09:22,440 --> 00:09:26,680 Speaker 7: that could offset. But you know, execution is key. Execution 178 00:09:26,840 --> 00:09:27,200 Speaker 7: is key. 179 00:09:27,559 --> 00:09:30,120 Speaker 6: Yeah, people were waiting to hear more about that affordable vehicle. 180 00:09:30,400 --> 00:09:33,280 Speaker 6: So speaking of which is Tesla? Is it an auto business? 181 00:09:33,360 --> 00:09:35,960 Speaker 6: Is it an AI robotics company? Is it a tech company? 182 00:09:36,040 --> 00:09:36,120 Speaker 8: Like? 183 00:09:36,200 --> 00:09:39,480 Speaker 6: What is Tesla? And could we possibly see it maybe 184 00:09:39,480 --> 00:09:41,520 Speaker 6: even break up like some of these bigger companies have. 185 00:09:42,400 --> 00:09:45,640 Speaker 7: Oh, I think as a combination. They I don't think 186 00:09:45,679 --> 00:09:48,160 Speaker 7: they're going to break that up. You know, you know, 187 00:09:48,200 --> 00:09:52,800 Speaker 7: Elon Musk and Tesla is very focused on physical AI, 188 00:09:53,280 --> 00:09:56,240 Speaker 7: you know, very different than the ll ms that you 189 00:09:56,320 --> 00:10:00,920 Speaker 7: hear from Google. You know, they're actually you know, building robots, 190 00:10:01,040 --> 00:10:05,520 Speaker 7: robots on wheels and humanoid robots with optimists. So it's 191 00:10:05,520 --> 00:10:06,400 Speaker 7: it's quite different. 192 00:10:06,880 --> 00:10:06,960 Speaker 1: Uh. 193 00:10:07,080 --> 00:10:10,520 Speaker 7: You know, for them to actually build out physical AI, 194 00:10:11,000 --> 00:10:13,360 Speaker 7: they knew they do need the hardware they need to 195 00:10:13,400 --> 00:10:16,480 Speaker 7: continue to build cars, right, and cars is a critical 196 00:10:16,520 --> 00:10:22,199 Speaker 7: component of their success, especially even in early days of autonomy. 197 00:10:22,640 --> 00:10:25,800 Speaker 7: You know, there's still it's still a cash generator for them, 198 00:10:26,480 --> 00:10:29,920 Speaker 7: you know, even though you know, free cash flow has dropped, 199 00:10:30,080 --> 00:10:34,400 Speaker 7: but it's still an important business for them to generate 200 00:10:34,480 --> 00:10:38,120 Speaker 7: cash invest in in physical AI. So I don't see 201 00:10:38,120 --> 00:10:41,400 Speaker 7: that breaking apart. It's you know, it's a critical component 202 00:10:41,440 --> 00:10:43,040 Speaker 7: of their entire business. 203 00:10:44,200 --> 00:10:46,000 Speaker 2: I don't know, Steve, I'm putting on my banker hat 204 00:10:46,120 --> 00:10:47,760 Speaker 2: I said, I spin out that car company. 205 00:10:47,760 --> 00:10:48,240 Speaker 5: Who cares. 206 00:10:48,360 --> 00:10:50,679 Speaker 2: Let's focus on all the other stuff that he seems 207 00:10:50,679 --> 00:10:51,760 Speaker 2: to be all fired up about. 208 00:10:52,040 --> 00:10:54,000 Speaker 3: But Steve talked to us about tariffs. 209 00:10:54,040 --> 00:10:54,199 Speaker 5: Here. 210 00:10:54,920 --> 00:10:57,800 Speaker 2: Looks like one of the key aspects of the Japan deal, 211 00:10:58,840 --> 00:11:00,920 Speaker 2: as we know, is maybe the autos coming in from 212 00:11:01,000 --> 00:11:05,840 Speaker 2: Japan will have only a fifteen percent tariff on that. 213 00:11:06,000 --> 00:11:07,839 Speaker 2: What did the US automakers think about that? 214 00:11:09,000 --> 00:11:12,360 Speaker 7: Well, I think it's good news. You can see, you know, GM, 215 00:11:12,400 --> 00:11:14,520 Speaker 7: when they announced their earnings it was down I think 216 00:11:14,559 --> 00:11:17,560 Speaker 7: eight nine percent, and then it kind of recover a 217 00:11:17,600 --> 00:11:21,080 Speaker 7: lot of that yesterday on the back of the announcement 218 00:11:21,160 --> 00:11:24,600 Speaker 7: that US and Japan had come to terms on a 219 00:11:24,640 --> 00:11:28,880 Speaker 7: trade deal, and what it means is fifteen percent at 220 00:11:28,960 --> 00:11:33,320 Speaker 7: least fifteen percent tariff. And look, GM has a lot 221 00:11:33,360 --> 00:11:36,480 Speaker 7: of you know, some of the most popular vehicles coming 222 00:11:36,520 --> 00:11:39,200 Speaker 7: from Korea, and the hopes is that, you know, Korea 223 00:11:39,320 --> 00:11:42,520 Speaker 7: and US can can make the same deal. But look, 224 00:11:42,720 --> 00:11:45,000 Speaker 7: it's it's far from over. 225 00:11:45,559 --> 00:11:46,000 Speaker 9: Okay. 226 00:11:46,760 --> 00:11:49,679 Speaker 7: What Tesla talked about yesterday and how the tariffs are 227 00:11:49,679 --> 00:11:53,079 Speaker 7: going to impact their sales is not the impact not 228 00:11:53,200 --> 00:11:55,760 Speaker 7: just on them, it's for the whole US auto industry. 229 00:11:56,240 --> 00:12:01,880 Speaker 7: Don't forget right, next year the USMS, the US, Mexico 230 00:12:01,920 --> 00:12:05,720 Speaker 7: and Canada trade free trade Agreement comes up for renegotiation, 231 00:12:06,360 --> 00:12:09,640 Speaker 7: UH in twenty twenty six, and uh, you know, the 232 00:12:09,679 --> 00:12:15,560 Speaker 7: automakers here depend on that trade agreement significantly to to 233 00:12:15,559 --> 00:12:19,440 Speaker 7: to to lower costs. So I wouldn't be surprised if 234 00:12:19,800 --> 00:12:22,840 Speaker 7: Trump comes in and wants to kind of tear that 235 00:12:22,960 --> 00:12:26,960 Speaker 7: apart and UH renegratation, you renegotiate the whole thing. 236 00:12:27,480 --> 00:12:27,680 Speaker 5: UH. 237 00:12:27,760 --> 00:12:29,120 Speaker 9: That that that's there's. 238 00:12:28,960 --> 00:12:30,880 Speaker 7: A lot uncertainty around that, and we don't have a 239 00:12:30,960 --> 00:12:34,199 Speaker 7: lot of visibility. So so the whole tariff story is 240 00:12:34,240 --> 00:12:35,439 Speaker 7: not over yet. 241 00:12:35,880 --> 00:12:38,480 Speaker 6: So Stephen must go so voice some concerns on the 242 00:12:38,520 --> 00:12:41,240 Speaker 6: call about the size of his stake in the company, 243 00:12:41,840 --> 00:12:44,400 Speaker 6: suggesting it should be larger. I mean, how did investors 244 00:12:44,400 --> 00:12:45,120 Speaker 6: take that statement? 245 00:12:46,440 --> 00:12:49,080 Speaker 7: Well, you know, there's been a lot of back and 246 00:12:49,120 --> 00:12:54,040 Speaker 7: forth between uh Tesla and the courts on you know, 247 00:12:54,720 --> 00:13:00,560 Speaker 7: Elon must pay package. Essentially, he's he's not getting paid, 248 00:13:01,320 --> 00:13:04,480 Speaker 7: you know, for what he's doing for the company, you know, 249 00:13:04,679 --> 00:13:08,679 Speaker 7: as much as he deserves. So I think there's a 250 00:13:09,280 --> 00:13:12,480 Speaker 7: I mean, there's a point, there's a strong argument for 251 00:13:12,960 --> 00:13:13,839 Speaker 7: him getting paid. 252 00:13:14,200 --> 00:13:14,800 Speaker 9: But we'll see. 253 00:13:14,920 --> 00:13:18,600 Speaker 7: There's a shareholder meeting coming up and I think I 254 00:13:18,600 --> 00:13:22,559 Speaker 7: think the shareholders will revote on this issue, and uh, 255 00:13:23,000 --> 00:13:25,280 Speaker 7: you know, hopefully he gets he gets paid for his 256 00:13:25,400 --> 00:13:27,040 Speaker 7: contribution for the company. 257 00:13:27,679 --> 00:13:29,360 Speaker 3: All right, Steve, thanks so much. Appreciate that. 258 00:13:29,400 --> 00:13:32,640 Speaker 2: Steve Man Global Autos Industrials Research Channels for Bloomberg Intelligence 259 00:13:33,200 --> 00:13:34,840 Speaker 2: joining us from Princeton. 260 00:13:36,760 --> 00:13:40,480 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 261 00:13:40,559 --> 00:13:43,920 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 262 00:13:44,040 --> 00:13:47,120 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 263 00:13:47,160 --> 00:13:50,120 Speaker 1: get your podcasts, or watch us live on YouTube. 264 00:13:50,559 --> 00:13:52,840 Speaker 2: All right, I'm looking at some airline earnings here today 265 00:13:52,880 --> 00:13:55,120 Speaker 2: and stocks are not reacting well. I'm looking at America 266 00:13:55,160 --> 00:14:00,239 Speaker 2: Airlines that stock is trading down, love which is Southwest 267 00:14:00,920 --> 00:14:03,240 Speaker 2: that is also trading down. There definitely some concerns out 268 00:14:03,280 --> 00:14:05,800 Speaker 2: there about the consumer and flights and demand and all 269 00:14:05,800 --> 00:14:08,400 Speaker 2: that kind of stuff on the airline front. See Philip 270 00:14:08,440 --> 00:14:12,120 Speaker 2: joins his deputy team leader for Global Aviation sid What 271 00:14:12,120 --> 00:14:14,120 Speaker 2: are you seeing from American and south West? 272 00:14:14,200 --> 00:14:15,080 Speaker 3: Is their team out there? 273 00:14:15,600 --> 00:14:18,040 Speaker 10: The team seems to be that there isn't as much 274 00:14:18,080 --> 00:14:21,920 Speaker 10: bullishness about the recovery that United Airlines and Delta air 275 00:14:21,920 --> 00:14:25,480 Speaker 10: Lines pointed out last week, So they're sort of more 276 00:14:25,560 --> 00:14:28,960 Speaker 10: cautious about the outlook, and they're talking about how they're 277 00:14:29,040 --> 00:14:31,520 Speaker 10: still like they're still having to discount, they're still having 278 00:14:31,560 --> 00:14:35,120 Speaker 10: to sort of offer incentives, which is crazy in the 279 00:14:35,200 --> 00:14:38,440 Speaker 10: sort of the busy summer season. Summers typically when airlines 280 00:14:38,440 --> 00:14:40,880 Speaker 10: tend to make most of their money, they're very rarely, 281 00:14:40,960 --> 00:14:44,240 Speaker 10: if ever discounts on travel, and so it does so 282 00:14:44,400 --> 00:14:48,239 Speaker 10: seem to be pointing towards a sort of consumer recovery 283 00:14:49,080 --> 00:14:51,520 Speaker 10: still being in the holding pattern rather than sort of 284 00:14:51,600 --> 00:14:54,400 Speaker 10: out there and everyone sort of back to spending as much. 285 00:14:54,600 --> 00:14:57,320 Speaker 6: Can you talk about the difference with American being more 286 00:14:57,360 --> 00:14:58,880 Speaker 6: exposed to the domestic. 287 00:14:58,520 --> 00:15:02,080 Speaker 10: Market, So American typically has a lot of flights in 288 00:15:02,120 --> 00:15:04,080 Speaker 10: the US, I mean, they have much larger presence in 289 00:15:04,080 --> 00:15:07,920 Speaker 10: the US versus Delta and United, which have more international offerings. 290 00:15:08,200 --> 00:15:10,760 Speaker 10: And also, I mean we heard from American CEO saying 291 00:15:10,800 --> 00:15:14,360 Speaker 10: that business travel isn't yet backs as much as they 292 00:15:14,400 --> 00:15:17,240 Speaker 10: expected it to be. And that's in contrast to what 293 00:15:17,440 --> 00:15:20,200 Speaker 10: Ed Bastian of Delta talked about last week where he 294 00:15:20,240 --> 00:15:23,080 Speaker 10: said business travel is beginning to take off again. So 295 00:15:23,120 --> 00:15:26,280 Speaker 10: we're still we're seen contrasting images from the sort of 296 00:15:26,320 --> 00:15:29,400 Speaker 10: American and Southwest. I mean, Southwest is a leisure carrier, 297 00:15:29,840 --> 00:15:32,920 Speaker 10: and they're sort of in the midst of adding more fees. 298 00:15:32,960 --> 00:15:36,160 Speaker 10: They're adding more in terms of offering basic economy, they're 299 00:15:36,200 --> 00:15:40,120 Speaker 10: offering check they're starting discharge for check baggage, They've started 300 00:15:40,120 --> 00:15:42,760 Speaker 10: to sell seats, and so they're in a bit of 301 00:15:42,800 --> 00:15:45,920 Speaker 10: a different situation. But American Airlines, I mean, their bread 302 00:15:45,920 --> 00:15:49,280 Speaker 10: and butter is flying people around the Americas, and that 303 00:15:49,520 --> 00:15:51,680 Speaker 10: is sort of still a big question mark as to 304 00:15:51,800 --> 00:15:54,880 Speaker 10: where the recovery is at the moment and whether it'll 305 00:15:54,880 --> 00:15:58,760 Speaker 10: hold up, especially the green shoots that they've been talking about. 306 00:15:59,080 --> 00:16:03,000 Speaker 2: Southwest Airlines, doctor uh seeing some red here at down 307 00:16:03,000 --> 00:16:07,680 Speaker 2: eleven percent. Here symbol is luv Love for love Field, 308 00:16:07,680 --> 00:16:11,840 Speaker 2: which was their main airport when they started Southwest they 309 00:16:11,880 --> 00:16:14,920 Speaker 2: called out a billion dollars from terror fallout. 310 00:16:14,960 --> 00:16:16,760 Speaker 3: Where did that number come from? What's that represented? 311 00:16:16,800 --> 00:16:20,480 Speaker 10: So they offered a one point seven billion e bit 312 00:16:20,560 --> 00:16:22,080 Speaker 10: dug it at the start of the year. That's what 313 00:16:22,120 --> 00:16:25,200 Speaker 10: they expected to make in twenty twenty five. And now 314 00:16:25,240 --> 00:16:28,960 Speaker 10: they've sort of they reinstated a estimate for the year. 315 00:16:29,000 --> 00:16:31,280 Speaker 10: They expect between six hundred and eight hundred million in 316 00:16:31,400 --> 00:16:35,680 Speaker 10: EBIT and they're saying that the decline in that estimate 317 00:16:35,720 --> 00:16:37,320 Speaker 10: that they had from the start of the year to now, 318 00:16:37,560 --> 00:16:39,920 Speaker 10: that's the impact of the macro conditions. 319 00:16:40,400 --> 00:16:41,320 Speaker 3: And so because I. 320 00:16:41,240 --> 00:16:44,640 Speaker 2: Can I'm trying to think terraffs, I guess terrafune repair 321 00:16:44,800 --> 00:16:46,880 Speaker 2: parts or something like that, or is it just the 322 00:16:47,000 --> 00:16:49,720 Speaker 2: uncertainly created by teriffs they're describing that. 323 00:16:49,960 --> 00:16:53,400 Speaker 10: Exactly that they're talking about the macro environment and buying that. 324 00:16:53,440 --> 00:16:55,000 Speaker 9: Do you think, uh, they. 325 00:16:54,960 --> 00:16:56,760 Speaker 10: Are to something. I mean, there has been there has 326 00:16:56,800 --> 00:16:59,960 Speaker 10: been a slump in travel. I mean the immediately after 327 00:17:00,080 --> 00:17:03,000 Speaker 10: the sort of the tariffs who announced and the whole 328 00:17:03,120 --> 00:17:06,560 Speaker 10: shade wars and everything else, people did started start pulling 329 00:17:06,600 --> 00:17:10,160 Speaker 10: back on spending. People stopped buying holidays because they sort 330 00:17:10,200 --> 00:17:13,399 Speaker 10: of are more concerned about their economic certainty. And that 331 00:17:13,560 --> 00:17:15,560 Speaker 10: seems to be the STrenD that continuing at the moment, 332 00:17:15,600 --> 00:17:18,199 Speaker 10: where people are still not quite sure if they're going 333 00:17:18,240 --> 00:17:20,800 Speaker 10: to have the money that they need to spend on holidays. 334 00:17:21,119 --> 00:17:24,200 Speaker 10: And that's really where Southwest Allianes is sort of seeing 335 00:17:24,240 --> 00:17:27,480 Speaker 10: a big hole in its finances because they need people 336 00:17:27,480 --> 00:17:29,359 Speaker 10: to go on holiday in order to be able to 337 00:17:29,960 --> 00:17:30,840 Speaker 10: actually make money. 338 00:17:30,920 --> 00:17:31,959 Speaker 3: Yeah, no kidding. 339 00:17:32,800 --> 00:17:34,760 Speaker 6: So did they see I'm kind of going through the story. 340 00:17:34,760 --> 00:17:38,040 Speaker 6: I didn't see anything about them gaining passengers from all 341 00:17:38,080 --> 00:17:41,679 Speaker 6: those air traffic control issues over with United stub over 342 00:17:41,720 --> 00:17:43,879 Speaker 6: at Newark. Was there anything that they talked about. 343 00:17:44,119 --> 00:17:45,280 Speaker 9: They didn't talk about Newark. 344 00:17:45,320 --> 00:17:48,560 Speaker 10: And I mean, obviously United Airlines had a big impact 345 00:17:48,600 --> 00:17:52,320 Speaker 10: from the Newark fallout, but typically given the fact that 346 00:17:52,400 --> 00:17:56,280 Speaker 10: Newark's a big international hub for United Airlines and Southwest 347 00:17:56,280 --> 00:17:59,840 Speaker 10: Allianes typically flies within the US and within the Americas, 348 00:18:00,920 --> 00:18:03,760 Speaker 10: that business might have gone on to other carriers who 349 00:18:03,800 --> 00:18:06,560 Speaker 10: operate from Newark as well. New York Airports. 350 00:18:07,080 --> 00:18:09,040 Speaker 2: Yeah, I've been finding out of Newark my entire life. 351 00:18:09,480 --> 00:18:11,240 Speaker 2: And I'll tell you what. It was a dumblem. 352 00:18:12,000 --> 00:18:15,160 Speaker 3: But Terminal A that's nice. That renovation is awesome. 353 00:18:15,320 --> 00:18:16,640 Speaker 2: I mean, and if they can do to the other 354 00:18:16,840 --> 00:18:18,960 Speaker 2: terminals what they did to Terminal A, then we're then 355 00:18:18,960 --> 00:18:21,359 Speaker 2: we got something there. So I'll stick up for Newark 356 00:18:21,400 --> 00:18:25,119 Speaker 2: Airport at EWR anytime. More or less, it's been generally okay, 357 00:18:25,440 --> 00:18:27,440 Speaker 2: although they tend to when you land. You tended to 358 00:18:27,480 --> 00:18:29,920 Speaker 2: sit on the tarmac waiting for a gate. That really 359 00:18:30,800 --> 00:18:32,679 Speaker 2: bothers me now and I let everybody know about it, 360 00:18:33,280 --> 00:18:35,320 Speaker 2: all right, Sid, thanks so much for joining U, said Philip, 361 00:18:35,359 --> 00:18:39,600 Speaker 2: deputy team leader for a global abitation here at Bloomberg News. 362 00:18:39,760 --> 00:18:42,040 Speaker 2: Joining us live here in our Bloomberg Interact Approper Studio. 363 00:18:43,680 --> 00:18:47,359 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 364 00:18:47,440 --> 00:18:50,560 Speaker 1: weekdays at ten am Eastern on Apple Coarcklay and Android 365 00:18:50,560 --> 00:18:53,880 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 366 00:18:53,920 --> 00:18:57,640 Speaker 1: you get your podcasts, or watch us live on YouTube at. 367 00:18:57,640 --> 00:19:00,280 Speaker 2: Least Teo Paul Sweeney live here in our Bloomberg Active 368 00:19:00,280 --> 00:19:04,920 Speaker 2: Brokeer Studio. Stream live on YouTube as well. Alphabet. I 369 00:19:04,960 --> 00:19:07,200 Speaker 2: think that's Google. I can't remember. They report us some 370 00:19:07,240 --> 00:19:09,280 Speaker 2: numbers last night after close. I thought they were really good. 371 00:19:09,400 --> 00:19:11,960 Speaker 2: Stocks up a couple of percent. Some people are bummed 372 00:19:11,960 --> 00:19:14,199 Speaker 2: because they took up their CAPEX number a lot. I 373 00:19:14,320 --> 00:19:16,399 Speaker 2: view that as a positive. I don't know, because I 374 00:19:16,400 --> 00:19:18,480 Speaker 2: think they're spending money to make money. It's one of 375 00:19:18,520 --> 00:19:20,840 Speaker 2: those things, Mandy saying. Joints is here. He covers all 376 00:19:20,880 --> 00:19:24,000 Speaker 2: the technology stuff for Bloomberg Intelligence. Mandy hope should take 377 00:19:24,040 --> 00:19:26,320 Speaker 2: away from the Google results. 378 00:19:26,600 --> 00:19:29,600 Speaker 8: I mean the fact that they are able to grow 379 00:19:29,680 --> 00:19:33,400 Speaker 8: their search business double digit at that kind of run 380 00:19:33,520 --> 00:19:36,920 Speaker 8: rate two hundred ten billion dollar plus. Like, think of 381 00:19:37,080 --> 00:19:41,760 Speaker 8: how many incremental dollars they added just by virtue of 382 00:19:41,840 --> 00:19:45,439 Speaker 8: that eleven percent growth in the two hundred ten billion 383 00:19:45,520 --> 00:19:49,560 Speaker 8: dollar business. And that is where you know, the real 384 00:19:50,200 --> 00:19:53,520 Speaker 8: strength lies with a company like alphabet They are overlaying 385 00:19:53,560 --> 00:20:00,399 Speaker 8: Gemini across their family apps. AI overviews is actually driving 386 00:20:00,480 --> 00:20:05,360 Speaker 8: ten percent more queries and aioverviews is now used by 387 00:20:05,520 --> 00:20:08,720 Speaker 8: two billion monthly active users. So Google Search has five 388 00:20:08,760 --> 00:20:13,600 Speaker 8: billion monthly active users. Imagine aioverviews being used by two 389 00:20:13,640 --> 00:20:15,200 Speaker 8: billion monthly active users. 390 00:20:15,240 --> 00:20:17,680 Speaker 9: So they got the UI part right. 391 00:20:18,160 --> 00:20:21,280 Speaker 8: Gemini as a standalone app has got four hundred and 392 00:20:21,320 --> 00:20:25,440 Speaker 8: fifty million monthly active users. Imagine if everyone started paying 393 00:20:25,440 --> 00:20:28,840 Speaker 8: a twenty dollars subscription like chatchipt, this could become one 394 00:20:28,880 --> 00:20:32,920 Speaker 8: hundred billion dollar business. In addition to search and then 395 00:20:33,000 --> 00:20:34,960 Speaker 8: YouTube I'm not even talking about you know. 396 00:20:37,240 --> 00:20:39,919 Speaker 9: All the strengthen YouTube and way more. So this is 397 00:20:39,960 --> 00:20:40,760 Speaker 9: a powerhouse. 398 00:20:40,800 --> 00:20:43,240 Speaker 8: When it comes to four hundred billion dollar run rate, 399 00:20:43,520 --> 00:20:45,040 Speaker 8: they will be at the end of the year. 400 00:20:45,480 --> 00:20:47,320 Speaker 6: So can you explain something to me, because when the 401 00:20:47,359 --> 00:20:50,000 Speaker 6: shares dropped because they said capex was a little bit more, 402 00:20:50,080 --> 00:20:53,040 Speaker 6: well ten billion dollars more than expected a little bit, 403 00:20:53,920 --> 00:20:58,240 Speaker 6: how is that different for an alphabet versus if metaphor 404 00:20:58,320 --> 00:20:58,720 Speaker 6: to say that? 405 00:20:58,840 --> 00:21:00,360 Speaker 9: So that's that's great. 406 00:21:00,400 --> 00:21:03,960 Speaker 8: So look, let's frame the capex eighty five billion dollars 407 00:21:04,080 --> 00:21:07,199 Speaker 8: at potentially a four hundred billion dollar revenue run rate 408 00:21:07,280 --> 00:21:09,240 Speaker 8: by the end of the year. That's like a twenty 409 00:21:09,240 --> 00:21:13,399 Speaker 8: five percent CAPEX intensity. Meta on the other hand, is 410 00:21:13,480 --> 00:21:17,000 Speaker 8: already at a forty percent CAPEX intensity because their CAPEX 411 00:21:17,000 --> 00:21:19,240 Speaker 8: will be seventy billion at a hundred of. 412 00:21:19,200 --> 00:21:20,439 Speaker 9: Close to two hundred billion. 413 00:21:20,920 --> 00:21:24,480 Speaker 8: So that just goes to show Alphabet is still far 414 00:21:24,640 --> 00:21:26,639 Speaker 8: lower than their peer group when it comes to the 415 00:21:26,680 --> 00:21:30,119 Speaker 8: capex intensity. I mean, that's just the scale of the 416 00:21:30,160 --> 00:21:33,800 Speaker 8: business that they are operating. And look, I do think 417 00:21:33,880 --> 00:21:37,959 Speaker 8: the ROI on their capex is higher because Gemini's cost 418 00:21:38,359 --> 00:21:41,679 Speaker 8: is much lower than all the other large ANGLID models, 419 00:21:41,680 --> 00:21:47,280 Speaker 8: including Microsoft, including Meta. They do inferencing at a lower cost, 420 00:21:47,640 --> 00:21:50,600 Speaker 8: and that's the advantage of having your own chip, having 421 00:21:50,640 --> 00:21:53,920 Speaker 8: your own large ANGLID model that Microsoft or Meta don't 422 00:21:53,920 --> 00:21:57,440 Speaker 8: have because they rely on in video chips, whereas Google 423 00:21:57,880 --> 00:22:01,159 Speaker 8: does most of their inferencing from the TPU chip. So 424 00:22:01,600 --> 00:22:05,080 Speaker 8: I think that just vertical integration they have Alphabet has 425 00:22:05,320 --> 00:22:07,840 Speaker 8: gives them such a big cost advantage when it comes 426 00:22:07,880 --> 00:22:09,480 Speaker 8: to running the AI infrastructure. 427 00:22:10,280 --> 00:22:13,960 Speaker 2: Where's the company on the various regulatory issues outstanding? What 428 00:22:14,000 --> 00:22:15,479 Speaker 2: are the one or two or three ones that we've 429 00:22:15,480 --> 00:22:18,640 Speaker 2: really got to focus on in what's the market telling us? 430 00:22:18,680 --> 00:22:21,080 Speaker 9: So that's the biggest risk with Alphabet. 431 00:22:21,160 --> 00:22:23,879 Speaker 8: That has been the biggest drag on their multiple and 432 00:22:23,960 --> 00:22:27,720 Speaker 8: it remains because we have a catalyst next month where 433 00:22:27,920 --> 00:22:30,399 Speaker 8: Judge Meta is going to make a decision on the 434 00:22:30,480 --> 00:22:35,080 Speaker 8: remedies and you know, especially that Chrome split, that's still 435 00:22:35,080 --> 00:22:38,040 Speaker 8: an overhang. Now the base case is there won't be 436 00:22:38,080 --> 00:22:42,000 Speaker 8: any Chrome divestiture, but we still need to learn about 437 00:22:42,040 --> 00:22:44,800 Speaker 8: what are the remedies that may come about in terms 438 00:22:44,840 --> 00:22:47,280 Speaker 8: of you know, proposed by the judge, And that is 439 00:22:47,320 --> 00:22:50,359 Speaker 8: where if they're asked to you know, share search data 440 00:22:50,920 --> 00:22:53,480 Speaker 8: or some other type of remedy, that's going to hurt 441 00:22:53,520 --> 00:22:55,040 Speaker 8: their position. 442 00:22:55,400 --> 00:22:56,960 Speaker 9: I think that is the big overweight. 443 00:22:57,040 --> 00:22:59,160 Speaker 3: This one could be this one. 444 00:22:59,160 --> 00:23:02,240 Speaker 2: If you have a firm view on that, you buy 445 00:23:02,280 --> 00:23:04,639 Speaker 2: the stock here and there there's a ton in this thing. 446 00:23:04,680 --> 00:23:06,640 Speaker 2: Given when I just saw last night on the Earnings, 447 00:23:06,720 --> 00:23:08,679 Speaker 2: Are people doing that? Are people making bets here? 448 00:23:08,840 --> 00:23:09,000 Speaker 8: Think? 449 00:23:09,000 --> 00:23:10,480 Speaker 3: I bit you they have to be. 450 00:23:10,880 --> 00:23:14,000 Speaker 9: I mean, the narrative is still no net so negative. 451 00:23:14,080 --> 00:23:17,960 Speaker 8: Everyone is fixated on oh Chat, ChiPT my Verse, Bobby 452 00:23:18,040 --> 00:23:19,840 Speaker 8: Action Rod on billions. 453 00:23:20,000 --> 00:23:22,639 Speaker 3: Would somehow figure out where this judge is going to rule, 454 00:23:23,119 --> 00:23:24,879 Speaker 3: make a bet one way or the other. You know, 455 00:23:24,920 --> 00:23:26,560 Speaker 3: there's the Bobby Action Rods of the world out. 456 00:23:26,680 --> 00:23:27,479 Speaker 9: I agree. 457 00:23:27,520 --> 00:23:30,560 Speaker 8: I think if you can figure out decisively what the 458 00:23:30,680 --> 00:23:33,800 Speaker 8: judge's verdict is going to be the multiple wise, you 459 00:23:33,800 --> 00:23:38,120 Speaker 8: could see easily a twenty five to thirty percent multiple expansion. Well, 460 00:23:38,320 --> 00:23:41,560 Speaker 8: and numbers will go up for sure after print last night, 461 00:23:41,760 --> 00:23:44,600 Speaker 8: but multiple expansion is like twenty five to thirty percent 462 00:23:44,760 --> 00:23:47,640 Speaker 8: just on and when is that ruling that's coming up 463 00:23:47,720 --> 00:23:49,640 Speaker 8: in August September time frame. 464 00:23:49,720 --> 00:23:51,920 Speaker 6: Yeah, to keep up with these things, I do it. 465 00:23:52,000 --> 00:23:52,320 Speaker 5: That's what. 466 00:23:54,400 --> 00:23:57,480 Speaker 2: Maggieach got like a huge team, global team behind him. 467 00:23:57,480 --> 00:23:59,120 Speaker 2: I mean, all he does is come on radio TV 468 00:23:59,440 --> 00:24:01,639 Speaker 2: and they work. He's got everything. 469 00:24:01,680 --> 00:24:02,359 Speaker 9: He's got everything. 470 00:24:02,840 --> 00:24:06,480 Speaker 6: So you mentioned YouTube before, Google Video site. How is 471 00:24:06,520 --> 00:24:08,679 Speaker 6: its advertising still going? It's still going strong. 472 00:24:09,320 --> 00:24:13,600 Speaker 8: So look, YouTube subscriptions is what it's really doing well 473 00:24:13,680 --> 00:24:18,200 Speaker 8: right now. So YouTube subscription growth is north of twenty percent. Imagine, 474 00:24:18,240 --> 00:24:23,120 Speaker 8: you know, Netflix growing sixteen seventeen percent, YouTube subscriptions actually 475 00:24:23,240 --> 00:24:26,800 Speaker 8: surpassing Netflix's growth. And then you layer ADS on top 476 00:24:26,840 --> 00:24:29,240 Speaker 8: of that, which grew at a very healthy thirteen percent. 477 00:24:29,560 --> 00:24:33,239 Speaker 8: So ads is a forty billion dollar business. Subscriptions is 478 00:24:33,320 --> 00:24:37,159 Speaker 8: now close to you know, twenty billion dollars, and that 479 00:24:37,359 --> 00:24:41,440 Speaker 8: is where you're seeing, you know, combined cloud plus YouTube 480 00:24:42,520 --> 00:24:43,280 Speaker 8: arr is. 481 00:24:43,280 --> 00:24:45,080 Speaker 9: Close to one hundred and fifteen billion. 482 00:24:45,440 --> 00:24:49,000 Speaker 8: So imagine when just these two segments growing at north 483 00:24:49,040 --> 00:24:52,280 Speaker 8: of twenty percent. I mean, it's it's just a phenomenal 484 00:24:52,440 --> 00:24:55,439 Speaker 8: business these to both cloud and YouTube, and on a 485 00:24:55,480 --> 00:24:59,600 Speaker 8: standalone basis, there is so much runway for growing these 486 00:24:59,600 --> 00:25:00,720 Speaker 8: two segments. 487 00:25:00,760 --> 00:25:02,280 Speaker 2: And the one thing I will like, one of the 488 00:25:02,359 --> 00:25:05,719 Speaker 2: initial use cases that made sense to me was advertising 489 00:25:06,000 --> 00:25:09,440 Speaker 2: for AI. Use case AI just making you could use 490 00:25:09,480 --> 00:25:12,959 Speaker 2: AI to really make an ad that much more targetable 491 00:25:13,440 --> 00:25:17,119 Speaker 2: and therefore it's much more valuable to the advertiser. And 492 00:25:17,160 --> 00:25:21,360 Speaker 2: that's what we're seeing from Meta, from Google, from you know, Amazon, 493 00:25:21,680 --> 00:25:23,359 Speaker 2: anybody who's selling digital advertising. 494 00:25:24,040 --> 00:25:25,440 Speaker 3: We're seeing in the numbers. 495 00:25:25,359 --> 00:25:26,880 Speaker 9: Yeah, and at pricing. 496 00:25:26,960 --> 00:25:29,399 Speaker 8: I mean again, it came out at eight percent growth, 497 00:25:29,720 --> 00:25:33,120 Speaker 8: high single digit growth on at pricing, especially when everyone 498 00:25:33,200 --> 00:25:36,200 Speaker 8: was concerned about Chinese advertisers pulling back in the wake 499 00:25:36,240 --> 00:25:39,840 Speaker 8: of tariffs. Eight percent at pricing growth is phenomenal And 500 00:25:39,880 --> 00:25:42,439 Speaker 8: that just goes to show these companies know how to 501 00:25:42,560 --> 00:25:45,560 Speaker 8: target the ads the right way, and AI is augmenting that. 502 00:25:45,880 --> 00:25:48,120 Speaker 6: And I always forget that Weai Moo is a part 503 00:25:49,000 --> 00:25:51,400 Speaker 6: of al that too. They've got their hand in everything. 504 00:25:51,880 --> 00:25:53,480 Speaker 6: How have vaporen new because I know they're talking about 505 00:25:53,480 --> 00:25:55,520 Speaker 6: different partnerships with different ride sharing apps. 506 00:25:55,640 --> 00:25:59,720 Speaker 8: Yeah, so look, everyone talked about Capex increase. To me, 507 00:26:00,160 --> 00:26:03,560 Speaker 8: the kapex dollars don't just flow to cloud, but also 508 00:26:03,720 --> 00:26:07,080 Speaker 8: they help Weimo expand because you have to remember with 509 00:26:07,160 --> 00:26:12,280 Speaker 8: alphabet everything is powered by that shared infrastructure. That is 510 00:26:12,320 --> 00:26:17,159 Speaker 8: what's powering search, that's what's powering cloud, YouTube and now Weimo. 511 00:26:17,800 --> 00:26:20,480 Speaker 8: And so with Weveimo, they obviously need more fleet. They 512 00:26:20,480 --> 00:26:22,840 Speaker 8: have a fleet of fifteen hundred right now, so they 513 00:26:23,480 --> 00:26:26,960 Speaker 8: want to expand to more cities. But the more Capex 514 00:26:27,040 --> 00:26:29,600 Speaker 8: you spend right now, it's a land rep and they 515 00:26:29,680 --> 00:26:32,760 Speaker 8: will they have the best technology when it comes to robotaxis, 516 00:26:32,760 --> 00:26:34,639 Speaker 8: so CAPEX makes a lot of sense. 517 00:26:34,680 --> 00:26:36,919 Speaker 2: All right, men, Deep, thank you so much for joinings. 518 00:26:36,920 --> 00:26:39,000 Speaker 2: Appreciate that as always, Mandeep saying he's a senior tech 519 00:26:39,000 --> 00:26:41,320 Speaker 2: industry anal from Bloomberg Intelligence joining us here in our 520 00:26:41,480 --> 00:26:46,399 Speaker 2: Bloomberg Interactive Brokers studio. People just got a team behind him. 521 00:26:46,440 --> 00:26:48,760 Speaker 2: I mean, we have tech analysts all over the world 522 00:26:49,040 --> 00:26:51,360 Speaker 2: covering this thing because it is a global industry. So 523 00:26:51,440 --> 00:26:53,560 Speaker 2: that's Mendeb's just a pretty face we put up here. 524 00:26:53,960 --> 00:26:58,639 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 525 00:26:58,840 --> 00:27:02,320 Speaker 1: and anywhere else you get your podcasts. Listen live each 526 00:27:02,320 --> 00:27:06,119 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 527 00:27:06,200 --> 00:27:09,720 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 528 00:27:10,160 --> 00:27:13,080 Speaker 1: You can also watch us live every weekday on YouTube 529 00:27:13,480 --> 00:27:15,720 Speaker 1: and always on the Bloomberg terminal.