WEBVTT - Tech Earnings & Job Cuts

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Brian Curtis and I'm Doug Prisner. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 1>US officials have agreed on a plan to retaliate against

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<v Speaker 1>an earlier militant attack in Jordan. At Baxter has that

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<v Speaker 1>story more from San Francisco ed.

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<v Speaker 3>Yeah, that's right, Brion and Brian, and President Biden says

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<v Speaker 3>he has agreed to the plan.

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<v Speaker 2>The whole response women responsible in the sense of the.

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<v Speaker 3>Supplying the weapons to the people who given'.

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<v Speaker 2>I don't think we need a wider war in the

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<v Speaker 2>Middle East. That's not what I'm looking for.

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<v Speaker 3>And former NATO Supreme Commander James Trevitia says that Biden

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<v Speaker 3>administration's approach to Iran has not been working.

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<v Speaker 4>We've been trying to curtain this by pinprick attacks, by

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<v Speaker 4>tit for tad small beer. At the other end of

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<v Speaker 4>that spectrum is whistling jets overhead Teyran. I don't think

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<v Speaker 4>we're there yet. We need to be in the middle.

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<v Speaker 4>That Goldilocks place on.

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<v Speaker 3>The White House says it could be what they're calling

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<v Speaker 3>tiered attacks, not all. At the same time, Iran's Foreign

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<v Speaker 3>ministry is dismissing the US accusations that it was behind

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<v Speaker 3>the Jordan drone attack. It's asking for diplomacy to try

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<v Speaker 3>and reach understandings. The Israeli military says it's engaged in

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<v Speaker 3>his fiercest fighting since yet since Jimas, but it's indicating

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<v Speaker 3>that the fight is far from over. Bloomberg's Israel Beer

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<v Speaker 3>chief Ethan Bronner in Tel Aviv says Israel says there's

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<v Speaker 3>much more work needed before it's all done.

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<v Speaker 5>There are five Hamas brigades. Two of them have been

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<v Speaker 5>kind of taken down in the North by Israel, one

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<v Speaker 5>in Hanyunis is in the process of that. But there

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<v Speaker 5>are two.

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<v Speaker 3>More, yeah, he says. In the briefing, at least through

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<v Speaker 3>the end of the year. They say US and Chinese

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<v Speaker 3>officials have held their first working group to set plans

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<v Speaker 3>to counter narcotics, particularly fentanyl now. NSC official John Kirby

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<v Speaker 3>says China's made promises.

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<v Speaker 4>He committed to cooperate on increased LAFEW enforcement coordination to

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<v Speaker 4>tackle the distribution an export of precursor chemicals for the

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<v Speaker 4>oak wheelings that are taking so.

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<v Speaker 3>Many lives, Specifically to fight the distribution of chemicals to

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<v Speaker 3>make opioids like fentanyl and House Speaker Mike Johnson again

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<v Speaker 3>urging President Biden to take executive action to resolve the

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<v Speaker 3>border crisis. He says he's spoken with Donald Trump.

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<v Speaker 6>I have talked to form President Trump about this issue

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<v Speaker 6>at length, and he understands that he understands that we

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<v Speaker 6>have a responsibility to do here the president, of course,

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<v Speaker 6>President Trump wants to secure the country.

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<v Speaker 3>He says congressional bill does not due enough. New York

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<v Speaker 3>City Council over riding Mayor Eric Adams veto of a

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<v Speaker 3>controversial bill that will require police officers to document their

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<v Speaker 3>low level encounters with civilians. It will require officers requord

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<v Speaker 3>the race, ethnicity, gender, age of anyone they talk to,

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<v Speaker 3>along with a reason for the encounter and the basis

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<v Speaker 3>for stopping the person. The vote forty two to nine.

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<v Speaker 3>Hong Kong has officially decided to pass its own security ledgeisation.

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<v Speaker 3>This in addition to the laws handed down from Beijing.

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<v Speaker 3>The wording says foreign agents and advocates of Hong Kong

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<v Speaker 3>independence are still lurking in the city as well. It

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<v Speaker 3>has provisions a warning of external interference, citing similar laws

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<v Speaker 3>in the UK and Canada as reference points. This comes

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<v Speaker 3>as Hong Kong tries to ramp up efforts to reopen

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<v Speaker 3>as an international financial leader. Global News twenty four hours

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<v Speaker 3>a day and whenever you want it with Bloomberg Nziele

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<v Speaker 3>in San Francisco. I'm Ed Baxter and this is Bloomberg.

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<v Speaker 3>All right, back to Hong Kong, Brian.

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<v Speaker 1>Thanks very much. Six and a half minutes past the hour. Now,

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<v Speaker 1>let's take a look at some of the top business

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<v Speaker 1>stories of the hour. Well, some of Wall Street's top

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<v Speaker 1>performing companies reported earnings today, Microsoft topping sales estimates, posting

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<v Speaker 1>revenue growth up eighteen percent. That growth was driven by

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<v Speaker 1>interest in new artificial intelligence products. This in turn drove

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<v Speaker 1>renewed spending on cloud computing. Investors have bid up the

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<v Speaker 1>shares in recent months on a bet that Microsoft will

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<v Speaker 1>turn into an artificial intelligence powerhouse by partnering with startup

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<v Speaker 1>open Ai. Now, the shares initially traded sharply lower, but

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<v Speaker 1>they finished up the after hour session less than a

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<v Speaker 1>half a percent lower.

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<v Speaker 4>So.

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<v Speaker 2>Alphabet, on the other hand, reported revenue from its core

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<v Speaker 2>search ad business a bit below estimates for the fourth quarter.

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<v Speaker 2>Now that may overshadow an otherwise strong end of the

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<v Speaker 2>year for Alphabet. We got reaction earlier from Bloomberg's a

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<v Speaker 2>Man Deep Things intelligence tech analyst.

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<v Speaker 7>Search had a slight miss when you look at the

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<v Speaker 7>top line number, but it was sort of expected given

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<v Speaker 7>you know, everyone was talking about how the competition from

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<v Speaker 7>chat GPT will have an impact on the volume, and

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<v Speaker 7>I feel on the cost side, there are puts in takes.

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<v Speaker 7>Clearly they have brought down the cost through the layoffs,

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<v Speaker 7>but when you look at the cloud numbers that have

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<v Speaker 7>actually done better than expected.

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<v Speaker 2>Man Deep sing there Bloombergatel and senior tech analysts. Now,

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<v Speaker 2>these disappointing results from Alphabet come at a time of

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<v Speaker 2>broader uncertainty, especially where the Google Search engine is concerned.

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<v Speaker 2>Search is now the subject of a major anti trust case.

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<v Speaker 2>Brian Well.

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<v Speaker 1>Chip maker Advanced micro Devices also gave a week revenue

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<v Speaker 1>forecast after the bell. The forecast suggests that consumers are

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<v Speaker 1>holding off on purchases in AMDs, core markets, PCs servers,

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<v Speaker 1>game consoles, and programmable processors, and we saw the stock

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<v Speaker 1>trade down about six percent in late trading. A couple

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<v Speaker 1>of other quick stories. Ups is delivering some pink slips

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<v Speaker 1>to as many as twelve thousand of its workers. PayPal

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<v Speaker 1>reducing its workforce by about nine percent, and Nasdaq announcing

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<v Speaker 1>it plans to cut hundreds of jobs as it integrates

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<v Speaker 1>software provider Adenza.

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<v Speaker 2>All right, let's take a closer look now at what

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<v Speaker 2>we learned after the bell. Jackie Devallis, Bloomberg News Tech reporter. Jackie,

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<v Speaker 2>thanks for being with us. First, Microsoft, what do you

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<v Speaker 2>think is the most most important takeaway?

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<v Speaker 8>Its Azure cloud business is still strong and growing. Its

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<v Speaker 8>growth rate was thirty percent, that beat Wall Street's expectations

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<v Speaker 8>of twenty eight percent, and it actually saw about a

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<v Speaker 8>six percentage point boost from AI services, which was key

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<v Speaker 8>for investors that were looking for some evidence that it's

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<v Speaker 8>AI bets and investments in startup like open Ai are

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<v Speaker 8>paying off. Some other bright spots in the report included

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<v Speaker 8>its Xbox revenue, which was up sixty one percent. As

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<v Speaker 8>you remember, that Activision deal went through in October that

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<v Speaker 8>contributed significantly to that to those sales, and overall, Satya

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<v Speaker 8>Nadella and CFO Amy Wood were very adamant on the

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<v Speaker 8>conference call that they're moving from just talking about AI

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<v Speaker 8>to actually applying AI in their tools, and they're seeing

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<v Speaker 8>some of that bear fruit. But as you saw some

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<v Speaker 8>of those even some of those bright spots in the

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<v Speaker 8>report were enough to satisfy and which we're looking for,

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<v Speaker 8>you know, a little bit more, especially when you have

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<v Speaker 8>other companies like Nvidia showing these like crazy numbers. Microsoft

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<v Speaker 8>analysts say, is going to take a little bit more

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<v Speaker 8>time to see that materialize.

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<v Speaker 1>Yeah, that's the thing. And expectations were very high, and

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<v Speaker 1>the valuations are quite high, and both companies Microsoft and

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<v Speaker 1>Alphabet actually had very solid numbers. Stocks traded down. Let's

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<v Speaker 1>focus a little bit on Alphabet for the moment. We

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<v Speaker 1>highlighted that the search business was disappointing. Well, it came

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<v Speaker 1>in at forty eight billion the estimate forty eight point

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<v Speaker 1>one five billion, so not really much of a miss.

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<v Speaker 1>Shares traded down six percent. But I wonder whether investors

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<v Speaker 1>are worried about search at Google being supplanted by AI.

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<v Speaker 1>That could be one thing, or is it perhaps the

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<v Speaker 1>anti trust issues that are looming.

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<v Speaker 8>You know, search has always been the reliable financial engine

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<v Speaker 8>for Google. To see even a slight miss is worrisome,

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<v Speaker 8>especially when you have a player like Microsoft that has

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<v Speaker 8>made it clear they want to be a bigger player

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<v Speaker 8>in search. Now Bing is nowhere near the ninety plus

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<v Speaker 8>percent in market share that Google still has. But even

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<v Speaker 8>just to see a little bit of weakness showing up

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<v Speaker 8>in those sales figures is spooking investors AI. As you know,

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<v Speaker 8>they've been a little bit slower to integrate features into

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<v Speaker 8>their search engine because they don't want to kind of

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<v Speaker 8>really like, they don't want to damage the reputation and

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<v Speaker 8>kind of that brand trust that they've gotten from consumers.

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<v Speaker 8>So until they really start to show that they're in

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<v Speaker 8>this AI game within search alongside Microsoft, those sales are

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<v Speaker 8>going to be a little bit more sensitive to investor sentiment.

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<v Speaker 2>So to that point, where is Alphabet when it comes

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<v Speaker 2>to investing putting more capital to work in artificial intelligence?

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<v Speaker 8>The place you can see it in action is through

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<v Speaker 8>one of its most powerful large language models that it

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<v Speaker 8>released in December Gemini. The company made it clear that

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<v Speaker 8>this is something they want to incorporate in some of

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<v Speaker 8>those experiments it's running for its search business. It's not

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<v Speaker 8>widely available yet, but they know that Gemini is going

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<v Speaker 8>to play a very big part in not just search,

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<v Speaker 8>but also in Barred that Chat bought that competes with

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<v Speaker 8>Chat GPT. You're also starting to see more expectations being

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<v Speaker 8>put on YouTube revenues. That is one of its most

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<v Speaker 8>prized assets. It really competes with kind of the other

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<v Speaker 8>social media giants for some of that ad spend. And again,

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<v Speaker 8>it's really high margin revenue that at a time when

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<v Speaker 8>Google is investing so much money, it really needs that

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<v Speaker 8>high margin cash.

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<v Speaker 1>And what was quite positive for Google was its cloud

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<v Speaker 1>sales operating profit there eight hundred and sixty four million.

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<v Speaker 1>That was more than double the estimate of four hundred

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<v Speaker 1>and twenty seven million. And while Google trails Microsoft and Amazon,

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<v Speaker 1>they are making some progress. And you would think that

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<v Speaker 1>that that's an area that I mean, that's another big

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<v Speaker 1>product for Google that it can work forward on, you know,

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<v Speaker 1>going forward exactly.

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<v Speaker 8>And I'm glad you brought it up because they don't

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<v Speaker 8>get a whole ton of credit for getting, you know,

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<v Speaker 8>incorporating AI into the business. But you're absolutely right. Cloud

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<v Speaker 8>is one of the areas in which you can start

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<v Speaker 8>to see some of that actually bear fruit. AI startups

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<v Speaker 8>are turning to players like Google to be their provider

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<v Speaker 8>as opposed to going to some of the cloud giants,

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<v Speaker 8>so they're seeing some of that AI wave actually pan

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<v Speaker 8>out in that cloud business. But it's still lagging. I mean,

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<v Speaker 8>it's going to take much more for that to see

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<v Speaker 8>kind of the bigger contributions that investors are expecting. It's

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<v Speaker 8>supposed to be kind of the main financial driver for

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<v Speaker 8>few for growth search as it sees more competition for

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<v Speaker 8>Microsoft isn't going to be this engine forever, and so

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<v Speaker 8>they need to see more coming from Cloud to feel

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<v Speaker 8>a little bit more confident that Google kind of has,

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<v Speaker 8>you know, it's banking on the right thing for future revenue.

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<v Speaker 2>You mentioned YouTube a moment ago, Jackie, and I'm curious

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<v Speaker 2>to wonder about how that unit has been performing. We

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<v Speaker 2>talk a lot on this show about TikTok because of

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<v Speaker 2>obviously the ByteDance connection in China. How is YouTube doing?

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<v Speaker 8>You know, they exceeded expectations for revenue. They brought in

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<v Speaker 8>about nine point two billion this quarter, and it was

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<v Speaker 8>really in line with investor expectations, which is kind of

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<v Speaker 8>a win given it's somewhat have been a little bit

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<v Speaker 8>of a weaker spot in past quarters, and that's kind

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<v Speaker 8>of been social media broadly. You saw a lot of

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<v Speaker 8>that ad spend come down from the pandemic highs, and

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<v Speaker 8>it's also seeing a lot of challenge from these short

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<v Speaker 8>form video players like TikTok, but also Meta, who's also

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<v Speaker 8>been trying to develop their own reals product, and YouTube

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<v Speaker 8>has been trying to find their footing. Thankfully, AdSpend was

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<v Speaker 8>pretty healthy this time around and they were able to

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<v Speaker 8>capture some of that.

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<v Speaker 1>Jackie, let's go back to Microsoft, because there's this relationship

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<v Speaker 1>with open ai that is very much under the spotlight.

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<v Speaker 1>I mean, let's face it, for both companies, Alphabet and

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<v Speaker 1>Microsoft AI hopes, so it's really driving a lot of

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<v Speaker 1>investor attention. How can we characterize the partnership with open

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<v Speaker 1>ai for Microsoft?

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<v Speaker 8>At the moment, it's an integral part of Microsoft's future.

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<v Speaker 8>The company has been very forthcoming with the fact that

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<v Speaker 8>this technology that it's licensing exclusively from open ai is

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<v Speaker 8>responsible for the advances that it's made, and it's a

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<v Speaker 8>productivity suite Office three sixty five, that co pilot product

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<v Speaker 8>that is available to enterprises but also to small businesses

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<v Speaker 8>to consumers. That's supposed to be kind of the next

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<v Speaker 8>chapter for Microsoft. Now, the company doesn't hold a voting seat,

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<v Speaker 8>it's only an observer on the board. But that's sort

0:13:22.640 --> 0:13:25.559
<v Speaker 8>of a new development that came out of that Ouster

0:13:25.800 --> 0:13:29.120
<v Speaker 8>than the rehiring of Sam Altman, that drama from November,

0:13:29.600 --> 0:13:34.080
<v Speaker 8>so it certainly has an influential relationship and kind of

0:13:34.160 --> 0:13:38.240
<v Speaker 8>say at open Ai. But of course it's treading a

0:13:38.360 --> 0:13:42.600
<v Speaker 8>very fine line because it is under the microscope of

0:13:42.760 --> 0:13:46.480
<v Speaker 8>various regulators in the UK, in the European Union, and

0:13:46.520 --> 0:13:48.920
<v Speaker 8>of course most recently with the FTC here in the US.

0:13:49.160 --> 0:13:51.640
<v Speaker 2>So before we let you go, Jackie, you mentioned the

0:13:51.679 --> 0:13:54.400
<v Speaker 2>regulatory aspect of both of these stories. So you've got

0:13:54.440 --> 0:13:57.840
<v Speaker 2>the AI story on Microsoft and the search story where

0:13:57.840 --> 0:14:01.640
<v Speaker 2>alphabet is concerned. What type of year is twenty twenty

0:14:01.640 --> 0:14:05.000
<v Speaker 2>four going to be for these companies When regulators or

0:14:05.040 --> 0:14:06.920
<v Speaker 2>where the regulatory story is concerned.

0:14:08.000 --> 0:14:12.040
<v Speaker 8>For Microsoft, an outcome is expected to kind of yield

0:14:12.280 --> 0:14:18.760
<v Speaker 8>some kind of resolution, probably sooner than Google because these

0:14:19.000 --> 0:14:22.400
<v Speaker 8>inquiries actually started at the end of last year. They

0:14:22.400 --> 0:14:25.840
<v Speaker 8>seem to be wanting to move a bit quicker. That

0:14:25.960 --> 0:14:29.920
<v Speaker 8>antitrust trial, as we've seen like has taken so long,

0:14:30.040 --> 0:14:33.000
<v Speaker 8>and I think for Google the question will be how

0:14:33.040 --> 0:14:37.160
<v Speaker 8>do you start to untangle this? But for Microsoft, you know,

0:14:37.240 --> 0:14:42.240
<v Speaker 8>those short term impacts will be pretty hefty because their

0:14:42.280 --> 0:14:45.800
<v Speaker 8>relationship and their products are so dependent on Opening Eyes Technology.

0:14:48.480 --> 0:14:51.320
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