Speaker 1: Good morning.
Speaker 2: I'm Brian Curtis and I'm Doug Prisner. Here are the
Speaker 2: stories we're following today.
Speaker 1: US officials have agreed on a plan to retaliate against
Speaker 1: an earlier militant attack in Jordan. At Baxter has that
Speaker 1: story more from San Francisco ed.
Speaker 3: Yeah, that's right, Brion and Brian, and President Biden says
Speaker 3: he has agreed to the plan.
Speaker 2: The whole response women responsible in the sense of the.
Speaker 3: Supplying the weapons to the people who given'.
Speaker 2: I don't think we need a wider war in the
Speaker 2: Middle East. That's not what I'm looking for.
Speaker 3: And former NATO Supreme Commander James Trevitia says that Biden
Speaker 3: administration's approach to Iran has not been working.
Speaker 4: We've been trying to curtain this by pinprick attacks, by
Speaker 4: tit for tad small beer. At the other end of
Speaker 4: that spectrum is whistling jets overhead Teyran. I don't think
Speaker 4: we're there yet. We need to be in the middle.
Speaker 4: That Goldilocks place on.
Speaker 3: The White House says it could be what they're calling
Speaker 3: tiered attacks, not all. At the same time, Iran's Foreign
Speaker 3: ministry is dismissing the US accusations that it was behind
Speaker 3: the Jordan drone attack. It's asking for diplomacy to try
Speaker 3: and reach understandings. The Israeli military says it's engaged in
Speaker 3: his fiercest fighting since yet since Jimas, but it's indicating
Speaker 3: that the fight is far from over. Bloomberg's Israel Beer
Speaker 3: chief Ethan Bronner in Tel Aviv says Israel says there's
Speaker 3: much more work needed before it's all done.
Speaker 5: There are five Hamas brigades. Two of them have been
Speaker 5: kind of taken down in the North by Israel, one
Speaker 5: in Hanyunis is in the process of that. But there
Speaker 5: are two.
Speaker 3: More, yeah, he says. In the briefing, at least through
Speaker 3: the end of the year. They say US and Chinese
Speaker 3: officials have held their first working group to set plans
Speaker 3: to counter narcotics, particularly fentanyl now. NSC official John Kirby
Speaker 3: says China's made promises.
Speaker 4: He committed to cooperate on increased LAFEW enforcement coordination to
Speaker 4: tackle the distribution an export of precursor chemicals for the
Speaker 4: oak wheelings that are taking so.
Speaker 3: Many lives, Specifically to fight the distribution of chemicals to
Speaker 3: make opioids like fentanyl and House Speaker Mike Johnson again
Speaker 3: urging President Biden to take executive action to resolve the
Speaker 3: border crisis. He says he's spoken with Donald Trump.
Speaker 6: I have talked to form President Trump about this issue
Speaker 6: at length, and he understands that he understands that we
Speaker 6: have a responsibility to do here the president, of course,
Speaker 6: President Trump wants to secure the country.
Speaker 3: He says congressional bill does not due enough. New York
Speaker 3: City Council over riding Mayor Eric Adams veto of a
Speaker 3: controversial bill that will require police officers to document their
Speaker 3: low level encounters with civilians. It will require officers requord
Speaker 3: the race, ethnicity, gender, age of anyone they talk to,
Speaker 3: along with a reason for the encounter and the basis
Speaker 3: for stopping the person. The vote forty two to nine.
Speaker 3: Hong Kong has officially decided to pass its own security ledgeisation.
Speaker 3: This in addition to the laws handed down from Beijing.
Speaker 3: The wording says foreign agents and advocates of Hong Kong
Speaker 3: independence are still lurking in the city as well. It
Speaker 3: has provisions a warning of external interference, citing similar laws
Speaker 3: in the UK and Canada as reference points. This comes
Speaker 3: as Hong Kong tries to ramp up efforts to reopen
Speaker 3: as an international financial leader. Global News twenty four hours
Speaker 3: a day and whenever you want it with Bloomberg Nziele
Speaker 3: in San Francisco. I'm Ed Baxter and this is Bloomberg.
Speaker 3: All right, back to Hong Kong, Brian.
Speaker 1: Thanks very much. Six and a half minutes past the hour. Now,
Speaker 1: let's take a look at some of the top business
Speaker 1: stories of the hour. Well, some of Wall Street's top
Speaker 1: performing companies reported earnings today, Microsoft topping sales estimates, posting
Speaker 1: revenue growth up eighteen percent. That growth was driven by
Speaker 1: interest in new artificial intelligence products. This in turn drove
Speaker 1: renewed spending on cloud computing. Investors have bid up the
Speaker 1: shares in recent months on a bet that Microsoft will
Speaker 1: turn into an artificial intelligence powerhouse by partnering with startup
Speaker 1: open Ai. Now, the shares initially traded sharply lower, but
Speaker 1: they finished up the after hour session less than a
Speaker 1: half a percent lower.
Speaker 4: So.
Speaker 2: Alphabet, on the other hand, reported revenue from its core
Speaker 2: search ad business a bit below estimates for the fourth quarter.
Speaker 2: Now that may overshadow an otherwise strong end of the
Speaker 2: year for Alphabet. We got reaction earlier from Bloomberg's a
Speaker 2: Man Deep Things intelligence tech analyst.
Speaker 7: Search had a slight miss when you look at the
Speaker 7: top line number, but it was sort of expected given
Speaker 7: you know, everyone was talking about how the competition from
Speaker 7: chat GPT will have an impact on the volume, and
Speaker 7: I feel on the cost side, there are puts in takes.
Speaker 7: Clearly they have brought down the cost through the layoffs,
Speaker 7: but when you look at the cloud numbers that have
Speaker 7: actually done better than expected.
Speaker 2: Man Deep sing there Bloombergatel and senior tech analysts. Now,
Speaker 2: these disappointing results from Alphabet come at a time of
Speaker 2: broader uncertainty, especially where the Google Search engine is concerned.
Speaker 2: Search is now the subject of a major anti trust case.
Speaker 2: Brian Well.
Speaker 1: Chip maker Advanced micro Devices also gave a week revenue
Speaker 1: forecast after the bell. The forecast suggests that consumers are
Speaker 1: holding off on purchases in AMDs, core markets, PCs servers,
Speaker 1: game consoles, and programmable processors, and we saw the stock
Speaker 1: trade down about six percent in late trading. A couple
Speaker 1: of other quick stories. Ups is delivering some pink slips
Speaker 1: to as many as twelve thousand of its workers. PayPal
Speaker 1: reducing its workforce by about nine percent, and Nasdaq announcing
Speaker 1: it plans to cut hundreds of jobs as it integrates
Speaker 1: software provider Adenza.
Speaker 2: All right, let's take a closer look now at what
Speaker 2: we learned after the bell. Jackie Devallis, Bloomberg News Tech reporter. Jackie,
Speaker 2: thanks for being with us. First, Microsoft, what do you
Speaker 2: think is the most most important takeaway?
Speaker 8: Its Azure cloud business is still strong and growing. Its
Speaker 8: growth rate was thirty percent, that beat Wall Street's expectations
Speaker 8: of twenty eight percent, and it actually saw about a
Speaker 8: six percentage point boost from AI services, which was key
Speaker 8: for investors that were looking for some evidence that it's
Speaker 8: AI bets and investments in startup like open Ai are
Speaker 8: paying off. Some other bright spots in the report included
Speaker 8: its Xbox revenue, which was up sixty one percent. As
Speaker 8: you remember, that Activision deal went through in October that
Speaker 8: contributed significantly to that to those sales, and overall, Satya
Speaker 8: Nadella and CFO Amy Wood were very adamant on the
Speaker 8: conference call that they're moving from just talking about AI
Speaker 8: to actually applying AI in their tools, and they're seeing
Speaker 8: some of that bear fruit. But as you saw some
Speaker 8: of those even some of those bright spots in the
Speaker 8: report were enough to satisfy and which we're looking for,
Speaker 8: you know, a little bit more, especially when you have
Speaker 8: other companies like Nvidia showing these like crazy numbers. Microsoft
Speaker 8: analysts say, is going to take a little bit more
Speaker 8: time to see that materialize.
Speaker 1: Yeah, that's the thing. And expectations were very high, and
Speaker 1: the valuations are quite high, and both companies Microsoft and
Speaker 1: Alphabet actually had very solid numbers. Stocks traded down. Let's
Speaker 1: focus a little bit on Alphabet for the moment. We
Speaker 1: highlighted that the search business was disappointing. Well, it came
Speaker 1: in at forty eight billion the estimate forty eight point
Speaker 1: one five billion, so not really much of a miss.
Speaker 1: Shares traded down six percent. But I wonder whether investors
Speaker 1: are worried about search at Google being supplanted by AI.
Speaker 1: That could be one thing, or is it perhaps the
Speaker 1: anti trust issues that are looming.
Speaker 8: You know, search has always been the reliable financial engine
Speaker 8: for Google. To see even a slight miss is worrisome,
Speaker 8: especially when you have a player like Microsoft that has
Speaker 8: made it clear they want to be a bigger player
Speaker 8: in search. Now Bing is nowhere near the ninety plus
Speaker 8: percent in market share that Google still has. But even
Speaker 8: just to see a little bit of weakness showing up
Speaker 8: in those sales figures is spooking investors AI. As you know,
Speaker 8: they've been a little bit slower to integrate features into
Speaker 8: their search engine because they don't want to kind of
Speaker 8: really like, they don't want to damage the reputation and
Speaker 8: kind of that brand trust that they've gotten from consumers.
Speaker 8: So until they really start to show that they're in
Speaker 8: this AI game within search alongside Microsoft, those sales are
Speaker 8: going to be a little bit more sensitive to investor sentiment.
Speaker 2: So to that point, where is Alphabet when it comes
Speaker 2: to investing putting more capital to work in artificial intelligence?
Speaker 8: The place you can see it in action is through
Speaker 8: one of its most powerful large language models that it
Speaker 8: released in December Gemini. The company made it clear that
Speaker 8: this is something they want to incorporate in some of
Speaker 8: those experiments it's running for its search business. It's not
Speaker 8: widely available yet, but they know that Gemini is going
Speaker 8: to play a very big part in not just search,
Speaker 8: but also in Barred that Chat bought that competes with
Speaker 8: Chat GPT. You're also starting to see more expectations being
Speaker 8: put on YouTube revenues. That is one of its most
Speaker 8: prized assets. It really competes with kind of the other
Speaker 8: social media giants for some of that ad spend. And again,
Speaker 8: it's really high margin revenue that at a time when
Speaker 8: Google is investing so much money, it really needs that
Speaker 8: high margin cash.
Speaker 1: And what was quite positive for Google was its cloud
Speaker 1: sales operating profit there eight hundred and sixty four million.
Speaker 1: That was more than double the estimate of four hundred
Speaker 1: and twenty seven million. And while Google trails Microsoft and Amazon,
Speaker 1: they are making some progress. And you would think that
Speaker 1: that that's an area that I mean, that's another big
Speaker 1: product for Google that it can work forward on, you know,
Speaker 1: going forward exactly.
Speaker 8: And I'm glad you brought it up because they don't
Speaker 8: get a whole ton of credit for getting, you know,
Speaker 8: incorporating AI into the business. But you're absolutely right. Cloud
Speaker 8: is one of the areas in which you can start
Speaker 8: to see some of that actually bear fruit. AI startups
Speaker 8: are turning to players like Google to be their provider
Speaker 8: as opposed to going to some of the cloud giants,
Speaker 8: so they're seeing some of that AI wave actually pan
Speaker 8: out in that cloud business. But it's still lagging. I mean,
Speaker 8: it's going to take much more for that to see
Speaker 8: kind of the bigger contributions that investors are expecting. It's
Speaker 8: supposed to be kind of the main financial driver for
Speaker 8: few for growth search as it sees more competition for
Speaker 8: Microsoft isn't going to be this engine forever, and so
Speaker 8: they need to see more coming from Cloud to feel
Speaker 8: a little bit more confident that Google kind of has,
Speaker 8: you know, it's banking on the right thing for future revenue.
Speaker 2: You mentioned YouTube a moment ago, Jackie, and I'm curious
Speaker 2: to wonder about how that unit has been performing. We
Speaker 2: talk a lot on this show about TikTok because of
Speaker 2: obviously the ByteDance connection in China. How is YouTube doing?
Speaker 8: You know, they exceeded expectations for revenue. They brought in
Speaker 8: about nine point two billion this quarter, and it was
Speaker 8: really in line with investor expectations, which is kind of
Speaker 8: a win given it's somewhat have been a little bit
Speaker 8: of a weaker spot in past quarters, and that's kind
Speaker 8: of been social media broadly. You saw a lot of
Speaker 8: that ad spend come down from the pandemic highs, and
Speaker 8: it's also seeing a lot of challenge from these short
Speaker 8: form video players like TikTok, but also Meta, who's also
Speaker 8: been trying to develop their own reals product, and YouTube
Speaker 8: has been trying to find their footing. Thankfully, AdSpend was
Speaker 8: pretty healthy this time around and they were able to
Speaker 8: capture some of that.
Speaker 1: Jackie, let's go back to Microsoft, because there's this relationship
Speaker 1: with open ai that is very much under the spotlight.
Speaker 1: I mean, let's face it, for both companies, Alphabet and
Speaker 1: Microsoft AI hopes, so it's really driving a lot of
Speaker 1: investor attention. How can we characterize the partnership with open
Speaker 1: ai for Microsoft?
Speaker 8: At the moment, it's an integral part of Microsoft's future.
Speaker 8: The company has been very forthcoming with the fact that
Speaker 8: this technology that it's licensing exclusively from open ai is
Speaker 8: responsible for the advances that it's made, and it's a
Speaker 8: productivity suite Office three sixty five, that co pilot product
Speaker 8: that is available to enterprises but also to small businesses
Speaker 8: to consumers. That's supposed to be kind of the next
Speaker 8: chapter for Microsoft. Now, the company doesn't hold a voting seat,
Speaker 8: it's only an observer on the board. But that's sort
Speaker 8: of a new development that came out of that Ouster
Speaker 8: than the rehiring of Sam Altman, that drama from November,
Speaker 8: so it certainly has an influential relationship and kind of
Speaker 8: say at open Ai. But of course it's treading a
Speaker 8: very fine line because it is under the microscope of
Speaker 8: various regulators in the UK, in the European Union, and
Speaker 8: of course most recently with the FTC here in the US.
Speaker 2: So before we let you go, Jackie, you mentioned the
Speaker 2: regulatory aspect of both of these stories. So you've got
Speaker 2: the AI story on Microsoft and the search story where
Speaker 2: alphabet is concerned. What type of year is twenty twenty
Speaker 2: four going to be for these companies When regulators or
Speaker 2: where the regulatory story is concerned.
Speaker 8: For Microsoft, an outcome is expected to kind of yield
Speaker 8: some kind of resolution, probably sooner than Google because these
Speaker 8: inquiries actually started at the end of last year. They
Speaker 8: seem to be wanting to move a bit quicker. That
Speaker 8: antitrust trial, as we've seen like has taken so long,
Speaker 8: and I think for Google the question will be how
Speaker 8: do you start to untangle this? But for Microsoft, you know,
Speaker 8: those short term impacts will be pretty hefty because their
Speaker 8: relationship and their products are so dependent on Opening Eyes Technology.
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