WEBVTT - Week Ahead: Microsoft, Alphabet & Meta Headline Big Tech Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>The Stock Movers report, your roundup of companies making moves

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<v Speaker 2>in the stock market, harnessing the power of Bloomberg Data.

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<v Speaker 1>Let's take a look now, add some stocks to watch

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<v Speaker 1>in the week ahead. I'm Nathan Hager, joined by Bloomberg

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<v Speaker 1>Intelligence Global Head of Tech Research, Man Deep saying, because

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<v Speaker 1>it really is all about tech this week, I think

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<v Speaker 1>we're hearing from what five of the mag seven when

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<v Speaker 1>it comes to earnings, and a lot of them are

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<v Speaker 1>just this Wednesday, right, Man Deep.

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<v Speaker 3>They are. And look, I think what Tesla has shown

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<v Speaker 3>us is, you know, capex increases are still a big

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<v Speaker 3>focus in terms of what these companies are doing around

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<v Speaker 3>the AI infrastructure build out, and so that's a common

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<v Speaker 3>thread across all of them. Yeah.

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<v Speaker 1>Absolutely, Well let's start off with one of the biggest names.

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<v Speaker 1>Micro Soft is one of them that's reporting on Wednesday.

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<v Speaker 1>We just heard this past week that they're offering voluntary

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<v Speaker 1>buyouts to a bunch of their workforce. What does that

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<v Speaker 1>tell you about what we could get when it comes

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<v Speaker 1>to the earnings.

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<v Speaker 3>Look, I think with Microsoft, clearly the stock has been

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<v Speaker 3>under pressure because of their open AI partnership and you

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<v Speaker 3>know just the way it's evolving. And when it comes

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<v Speaker 3>to the top line growth, I think what investors are

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<v Speaker 3>waiting for is what kind of lift they are going

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<v Speaker 3>to see in their Azure segment from all these AI workloads.

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<v Speaker 3>I mean last quarter Google had that ten percentage point

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<v Speaker 3>gap where Google grew forty eight percent and Microsoft's was

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<v Speaker 3>thirty eight percent growth. So Microsoft really needs that lift

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<v Speaker 3>in that Azure growth line and that's where I think

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<v Speaker 3>investors will be comparing them against the likes of Amazons

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<v Speaker 3>and Google Cloud, and to me, that's what they need

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<v Speaker 3>to show that they can deliver on that Azure growth numbers.

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<v Speaker 1>Are you expecting that we're going to hear much more

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<v Speaker 1>from Microsoft about their CAPEX plans after what we heard

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<v Speaker 1>from Tesla. I mean, they were a big part of

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<v Speaker 1>that six hundred and fifty billion dollar number we heard

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<v Speaker 1>from the hyperscalers just a few months ago.

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<v Speaker 3>Yeah, I wouldn't be surprised if that number is revised upward.

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<v Speaker 3>Now it won't be a big revision, but clearly, as

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<v Speaker 3>things stand, everyone seems to be compute constrained. That's what

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<v Speaker 3>we have heard from Anthropic and these leading labs and Microsoft.

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<v Speaker 3>If they are able to show that sequential acceleration and

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<v Speaker 3>Azure growth, that could be the justification to raise their capex,

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<v Speaker 3>but otherwise I think the stock may react negatively if

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<v Speaker 3>they end up raising their capex.

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<v Speaker 1>Also Wednesday, we're going to hear from Google parent Alphabet.

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<v Speaker 1>They're a big part of this KAPEC story as well,

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<v Speaker 1>and they just came out with a new generation TPU chip.

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<v Speaker 1>Where is Google Cloud in the AI race?

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<v Speaker 3>Mandy, Yeah, Google Cloud clearly has seen an acceleration, and

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<v Speaker 3>so I expect, you know, this quarter to be the

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<v Speaker 3>growth and Google Cloud to be closer to fifty percent.

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<v Speaker 3>And look, they've just launched two new chips TPUs, one

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<v Speaker 3>for training, the other one for inferencing, and they signed

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<v Speaker 3>that big deal three point five gigaboard deal with Anthropic

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<v Speaker 3>and Broadcom. So from that perspective, there is a lot

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<v Speaker 3>of momentum they have with their chips and cloud, and

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<v Speaker 3>their margins in the cloud business also seem to be expanding.

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<v Speaker 3>The only thing which I'm not sure about is their

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<v Speaker 3>search business, because there are puts and takes. I mean,

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<v Speaker 3>clearly there is some search volume pressure because these chat pots,

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<v Speaker 3>whether it's Open AI or Tropic Cloud they are taking

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<v Speaker 3>some volume of search queries away from Google. At the

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<v Speaker 3>same time, they don't really have an AD's kind of

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<v Speaker 3>surface to their queries. So from that perspective, Google should

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<v Speaker 3>be insulated. But I would be curious to see how

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<v Speaker 3>they end up doing in their core search business in

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<v Speaker 3>terms of the top line growth.

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<v Speaker 1>And I keep seeing Google Gemini try to sneak into

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<v Speaker 1>my search results as well. Where do they factor in

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<v Speaker 1>when it comes to some of the other chatbots.

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<v Speaker 3>Yeah, so Gemini will not show you any ads. It's

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<v Speaker 3>purely subscription driven. Although Gemini is what's powering their AI

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<v Speaker 3>overviews and that's where Google could show a lot more

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<v Speaker 3>engagement with their searches and so in turn that could

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<v Speaker 3>translate into better ADS growth. But clearly Gemini is the

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<v Speaker 3>model that's powering all of their llms across the family

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<v Speaker 3>of apps, whether it's YouTube or or any other surface

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<v Speaker 3>they have. So from that perspective, you know, Gemini standalone

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<v Speaker 3>contribution may not be that much, but clearly it's influencing

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<v Speaker 3>all the family of apps that Google has.

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<v Speaker 1>And also Wednesday we get earnings from meta platforms they're

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<v Speaker 1>guiding for what thirty percent revenue growth? Is that right?

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<v Speaker 3>It's phenomenal that upward revisions we have seen on Meta,

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<v Speaker 3>partly because they have used their compute capacity for their

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<v Speaker 3>ad recommendation systems. So the expectation is that ad pricing

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<v Speaker 3>will probably be very strong for someone like Meta, which

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<v Speaker 3>is able to target the ads much better than anyone

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<v Speaker 3>else in that digital ad ecosystem, and that's what's driving

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<v Speaker 3>the expectation for thirty percent growth. But look, they've raised

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<v Speaker 3>their capex, they've talked about how they're releasing a new

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<v Speaker 3>model and that will help improve the ad targeting and

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<v Speaker 3>engagement further. So high expectations, but they seem to be

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<v Speaker 3>doing quite well in terms of that top line growth

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<v Speaker 3>in digital ads compared to everyone else.

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<v Speaker 1>And where do they stack up? Do you think when

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<v Speaker 1>it comes to the digital ad environment compared to a

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<v Speaker 1>player like Google.

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<v Speaker 3>I mean Google's ad sales, the core search ad sales

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<v Speaker 3>will grow fifteen percent, or that's the expectations. Meta is

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<v Speaker 3>expected to grow almost two times that thirty percent. So

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<v Speaker 3>clearly the social ads seem to be working. And the

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<v Speaker 3>rational for that is, you know, there isn't much LLM

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<v Speaker 3>competition when it comes to social media. In fact, open

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<v Speaker 3>ai has shut down as Sora apps. So when you

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<v Speaker 3>think about you know, AI generated content around social media,

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<v Speaker 3>there isn't much to talk about, whereas in search there

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<v Speaker 3>is a lot more competition from lms, and that's why

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<v Speaker 3>the top line growth expectations for Google Search are much

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<v Speaker 3>lower than a meta, which is expected to grow thirty

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<v Speaker 3>percent top line.

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