WEBVTT - Alphabet Plans Record Spending in Race to Win AI Customers 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am. 0:00:14.600 --> 0:00:17.239 He's done on Apple, Cocklay and Android Auto with the 0:00:17.280 --> 0:00:21.040 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.520 or watch us live on YouTube. 0:00:24.040 --> 0:00:26.279 Let's go back to big tech, because we can't stay 0:00:26.280 --> 0:00:29.160 away from them for too long. We have one more 0:00:29.160 --> 0:00:32.120 mags have a name reporting today. Amazon will be reporting. 0:00:32.320 --> 0:00:34.959 Alphabet reported yesterday. And I want to go back to 0:00:35.000 --> 0:00:38.360 that CAPEX number which just blew people's minds. One hundred 0:00:38.400 --> 0:00:40.960 and eighty five billion dollars all full of your capex, 0:00:41.720 --> 0:00:44.320 much much higher than what was anticipated. Man Deep Singh 0:00:44.760 --> 0:00:47.040 is our go to guy for all things tech. He's 0:00:47.040 --> 0:00:49.600 our global tech research head here at Bloomberg Intelligence and 0:00:49.680 --> 0:00:50.360 joins us now. 0:00:50.640 --> 0:00:53.040 One trader called it alphabets mic drop. 0:00:53.200 --> 0:00:57.560 Capex highlights the have versus havenots and AI capabilities, commitments 0:00:57.680 --> 0:01:01.880 and balance sheet. Once upon a time, spending on you know, 0:01:02.120 --> 0:01:05.880 your future growth was a good thing. But now any 0:01:05.959 --> 0:01:09.200 kind of CAPEX commitment bigger than what people anticipated as 0:01:09.200 --> 0:01:09.960 seen as negative. 0:01:10.440 --> 0:01:13.319 Well, I think in this case the market is thinking 0:01:13.680 --> 0:01:17.479 what comes next. So for twenty twenty six. Yeah, they've 0:01:17.480 --> 0:01:20.960 guided two hundred and eighty five billion dollars. I mean, 0:01:21.200 --> 0:01:24.479 chances are the growth rates are going to decelerate from 0:01:24.480 --> 0:01:27.360 this point on. So twenty twenty six will be the 0:01:27.440 --> 0:01:30.760 peak capex for a lot of these companies, Especially in 0:01:30.880 --> 0:01:33.640 terms of growth rates. You're not going to see you know, 0:01:33.680 --> 0:01:36.679 fifty sixty percent growth in capex going forward. 0:01:36.640 --> 0:01:37.520 From these numbers. 0:01:37.520 --> 0:01:39.679 So that's a given, and that's why you know the 0:01:39.720 --> 0:01:43.240 market will be anticipatory in that sense in terms of 0:01:43.280 --> 0:01:45.760 how that capex growth is going to pan out from 0:01:45.760 --> 0:01:48.560 this point on, because you know, for some of the 0:01:48.760 --> 0:01:54.480 chip makers, their growth is directly correlated to capex growth 0:01:54.520 --> 0:01:56.960 of the hyperscaler So yes, this year is going to 0:01:57.040 --> 0:02:00.800 look phenomenal, but as you look past this year, you 0:02:00.880 --> 0:02:05.280 will see deceleration. The point about I think Alphabet is 0:02:05.320 --> 0:02:08.000 really how is it reflected in their numbers? And to 0:02:08.080 --> 0:02:11.840 my mind, they've already seen a two hundred basis point 0:02:12.000 --> 0:02:15.800 growth in their overall top line. So they were growing, 0:02:15.840 --> 0:02:18.160 you know, fourteen to sixteen percent. Now they are growing 0:02:18.200 --> 0:02:21.400 eighteen percent. And so for a business with four hundred 0:02:21.480 --> 0:02:25.000 billion dollars in run rate, two hundred basis points is 0:02:25.080 --> 0:02:28.520 like almost that's Romney eight billion, you know, So that's 0:02:28.680 --> 0:02:31.680 the ROI on all this capex. Is that eight to 0:02:31.800 --> 0:02:34.640 ten billion dollar left in top line that they're seeing 0:02:34.680 --> 0:02:38.680 across search and cloud and cloud numbers were just monster 0:02:38.800 --> 0:02:41.480 when it comes to what they had did last nine Yeah. 0:02:41.360 --> 0:02:43.560 So is this AI spending? 0:02:44.400 --> 0:02:48.200 Is it one time in nature or does this suggest 0:02:48.760 --> 0:02:52.400 a higher level of ongoing capex question? 0:02:53.000 --> 0:02:56.600 Yeah, I mean, look, we know the public cloud businesses 0:02:57.080 --> 0:03:02.480 were a data center of heavy in the sense you 0:03:02.639 --> 0:03:06.120 had to replace your server gear every five years. So 0:03:06.240 --> 0:03:11.400 there is a depreciation aspect to AI as well. And 0:03:11.600 --> 0:03:15.480 the fact that Alphabet has built this enterprise business which 0:03:15.520 --> 0:03:17.760 is almost a seventy billion dollar rund rate out of 0:03:17.800 --> 0:03:22.760 there four hundred billion. Now it's phenomenal because that cloud 0:03:22.800 --> 0:03:25.880 business is going to accelerate. So what we saw last 0:03:25.960 --> 0:03:29.120 night forty eight percent. I won't be surprised if they 0:03:29.280 --> 0:03:33.760 grow cloud over fifty percent for the next four quarters, 0:03:34.080 --> 0:03:37.520 simply because a lot of that data center capacity that 0:03:37.560 --> 0:03:40.880 they've been building will come online. They'll be renting a 0:03:40.920 --> 0:03:44.360 lot of that, and they're very well taking share at 0:03:44.360 --> 0:03:46.800 this point. Given the numbers we have seen so far 0:03:46.880 --> 0:03:51.600 between Azure and Google Cloud. Google Cloud grew ten percent 0:03:51.720 --> 0:03:55.280 more than Azure, and it probably grew more than twenty percent. 0:03:55.320 --> 0:03:58.280 I mean, even if Amazon has a great quarter tonight, 0:03:58.680 --> 0:04:01.120 they probably won't print more more than twenty five percent. 0:04:01.240 --> 0:04:04.320 So there you go. You probably are seeing Shure shift 0:04:04.400 --> 0:04:05.600 and it sounds like a. 0:04:05.520 --> 0:04:08.120 Behind a weakness called I mean, clearly, Alphabet is the 0:04:08.200 --> 0:04:10.880 big winner among the mag seven names when it comes 0:04:10.920 --> 0:04:14.040 to AI, up sixty five percent over the past twelve months, 0:04:14.640 --> 0:04:16.320 much better than Microsoft. 0:04:15.960 --> 0:04:17.120 Which is down in that period. 0:04:17.440 --> 0:04:20.560 So did this set of results justify that kind of 0:04:20.600 --> 0:04:21.120 price action? 0:04:21.800 --> 0:04:25.039 Yes, the market did anticipate that. And look, there was 0:04:25.120 --> 0:04:29.080 a lot of bearishness around what chat ChiPT could do 0:04:29.240 --> 0:04:33.520 to Alphabet's core search business. I mean, search grew seventeen 0:04:33.560 --> 0:04:38.279 percent talking about ROI on spend. It's reflected not only 0:04:38.360 --> 0:04:42.200 in cloud but also in core search, where the number 0:04:42.200 --> 0:04:45.360 of clicks grew six percent. Who would have thought, you know, 0:04:45.720 --> 0:04:50.479 Alphabet clicks going up when chatchipt has nine hundred million 0:04:50.520 --> 0:04:54.000 monthly actives. I would have imagined pricing would hold steady 0:04:54.040 --> 0:04:57.800 for Alphabet, but not clicks growth. How are the impressions 0:04:57.800 --> 0:05:03.120 and clicks growing? It's unfathomable, you know, in Alphabet's case, 0:05:03.160 --> 0:05:05.880 and partly it has to do with the success of Gemini. 0:05:06.279 --> 0:05:10.960 That's seven hundred and fifty million standalone app users. Those 0:05:11.120 --> 0:05:14.840 are people who are going directly to Gemini beyond. 0:05:14.720 --> 0:05:16.839 Just using how I use it, which is when I 0:05:16.880 --> 0:05:18.840 go to Google. Yeah, first thing that comes up is 0:05:18.920 --> 0:05:20.440 often Gemini. That's my answer. 0:05:20.480 --> 0:05:22.560 I'm done. Yeah, But there's people separately go to a 0:05:22.600 --> 0:05:23.560 Gemini app. 0:05:23.560 --> 0:05:25.880 And they are engaging for a lot longer that So 0:05:25.920 --> 0:05:29.000 it's under which is people monetizing that they're I mean, 0:05:29.040 --> 0:05:32.280 they're monetizing using subscriptions, and what they're saying is we 0:05:32.400 --> 0:05:36.320 will not roll out ads anytime soon. Let Opening Eye 0:05:36.320 --> 0:05:39.240 do it because that's going to interfere with the experience 0:05:39.279 --> 0:05:42.280 that people have. So we'll monetize with subscriptions, and they're 0:05:42.360 --> 0:05:44.960 bundling subscription Stay with us. 0:05:45.120 --> 0:05:47.480 More from Bloomberg Intelligence coming up after this. 0:05:51.320 --> 0:05:55.039 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:55.120 --> 0:05:58.160 weekdays at ten am Eastern on Apple, Corplay and Android 0:05:58.200 --> 0:06:01.520 Auto with the Bloomberg Business App. Listen on demand wherever 0:06:01.560 --> 0:06:05.120 you get your podcasts, or watch us live on YouTube. 0:06:05.520 --> 0:06:08.919 I've been looking at the Philadelphia Semiconductor Index, which tracks 0:06:09.000 --> 0:06:11.479 chip companies, and it's had a brutal couple of days. 0:06:11.480 --> 0:06:15.120 It's rebounded today off a one month low. But you 0:06:15.200 --> 0:06:18.960 look inside the index and Qualcomm is the biggest loser 0:06:19.160 --> 0:06:22.040 in that group, down more than seven percent at the moment. 0:06:22.080 --> 0:06:26.320 Kunjohn Sabani is our senior analyst on semiconductors, and Kunjohn, 0:06:26.440 --> 0:06:30.600 when you look at Qualcom's results, Qualcomm is primarily making 0:06:30.880 --> 0:06:34.760 chips for smartphones and this forecast that it gave is 0:06:34.800 --> 0:06:36.560 not so great. What does that tell us? Is that 0:06:36.600 --> 0:06:39.240 more a case of, you know, supply chain issues or 0:06:39.480 --> 0:06:41.680 is there just not so much demand for new smartphones? 0:06:43.040 --> 0:06:45.880 No, it's nothing to do with demand. There's two factors here. 0:06:45.960 --> 0:06:49.360 One for Qualcomm, this year was a unique year where 0:06:49.400 --> 0:06:53.000 most of their Android handset makers, so think of Samsung, 0:06:53.080 --> 0:06:57.120 think of Jaumi, Opo, Vivo, launched their phones earlier than 0:06:57.160 --> 0:06:59.840 they used to. So remember the handsut businesses are very 0:07:00.040 --> 0:07:02.400 seasonal business, so you have up quarters when the phone 0:07:02.440 --> 0:07:05.360 chart launched and really down quarters. So in the nutshell, 0:07:05.440 --> 0:07:08.200 a lot of that revenue was sort of pulled ahead 0:07:08.240 --> 0:07:10.600 of time. That's why what you saw is they beat 0:07:10.680 --> 0:07:13.760 so strongly in the current quarter. So the flip part 0:07:13.760 --> 0:07:15.960 of that is the next quarter, which is a tropt quarter, 0:07:16.000 --> 0:07:18.040 is going to be even a word straff on top 0:07:18.080 --> 0:07:20.640 of that. What's happening is as we are all aware 0:07:20.640 --> 0:07:23.520 of the memory crunch happening because of HBM memory and 0:07:23.600 --> 0:07:27.040 data centers and the rising memory costs, that's freaking out 0:07:27.160 --> 0:07:32.240 the Chinese OEMs, which Qualcomm is now really disproposately exposed 0:07:32.280 --> 0:07:34.520 to compared to all other hands at SEMIS. So the 0:07:34.560 --> 0:07:38.040 guys like Apple and Samsung are probably doing fine. They 0:07:38.080 --> 0:07:41.120 have their ability to get access to memory and procure 0:07:41.160 --> 0:07:43.560 memory ahead of time, but the smaller players are not 0:07:43.600 --> 0:07:46.360 as sophisticated. So those players are freaking out and they 0:07:46.480 --> 0:07:49.440 basically have decided, we're going to stop ordering a lot 0:07:49.480 --> 0:07:51.240 more chips and we're going to clear out what we 0:07:51.320 --> 0:07:53.640 have in our inventory. And that's why what we're seeing 0:07:53.680 --> 0:07:56.440 is basically the memory impacting Qualcom's guidance. 0:07:56.600 --> 0:07:59.280 All right, So we step back from some of the 0:07:59.360 --> 0:08:01.880 chip makers and they're earning something at am D and 0:08:01.880 --> 0:08:06.280 that's soft again today Qualcom here, what are some of 0:08:05.760 --> 0:08:09.600 the takeaways from an interships perspective are you chatting about 0:08:09.600 --> 0:08:10.160 with clients? 0:08:11.640 --> 0:08:13.320 Yeah, so you mean you know, the sort of the 0:08:13.360 --> 0:08:16.680 software meltdown is trying to the fever is spreading in 0:08:16.720 --> 0:08:19.120 a little bit into semis. I would not say as 0:08:19.200 --> 0:08:22.720 broad strokes this earning season. What we're seeing is if 0:08:22.760 --> 0:08:25.200 companies didn't come out and blow the quarter out of 0:08:25.240 --> 0:08:28.280 the quarter, of the results and for their outlook, they're 0:08:28.280 --> 0:08:31.600 basically getting punished. A lot of that has to also remember, 0:08:31.800 --> 0:08:34.079 taking to context, a lot of these companies in the 0:08:34.160 --> 0:08:37.480 last six to seven months have seen significant rallies because 0:08:37.679 --> 0:08:40.600 a lot of good expectations, especially for the AI names 0:08:40.600 --> 0:08:43.160 like AMD being priced in. So the market is now 0:08:43.160 --> 0:08:45.760 in the mood where if you're not showing me real excitement, 0:08:46.880 --> 0:08:49.160 you're sort of being ready for a little bit of 0:08:49.160 --> 0:08:50.360 a pullback, right. 0:08:50.440 --> 0:08:53.600 They call it a show me kind of market environment. 0:08:53.920 --> 0:08:57.680 So our colleagues will be speaking with the CEO of Qualcom, 0:08:57.840 --> 0:09:01.080 Christiano Aman, how would you grate his performance so far? 0:09:01.240 --> 0:09:05.319 Con John, Well, look, he's doing everything right. It's just 0:09:05.400 --> 0:09:08.160 the company is in a tough spot. Investors have been 0:09:08.200 --> 0:09:12.040 wanting them to diversify away from handsets for many years now, 0:09:12.440 --> 0:09:15.200 and since he's been the CEO, that's what his primary 0:09:15.240 --> 0:09:18.400 objective has been. They're making good stries on the auto 0:09:18.440 --> 0:09:21.400 and IoT. In fact, both of those segments had much 0:09:21.440 --> 0:09:23.560 better than expected results and outlook. 0:09:23.840 --> 0:09:25.080 But when you still think. 0:09:24.960 --> 0:09:27.600 About the company now, even three four years down the road, 0:09:27.840 --> 0:09:33.120 it's still majority significantly a handset revenue company. So until 0:09:33.360 --> 0:09:35.960 the revenue exposure of hand sets doesn't get to at 0:09:36.040 --> 0:09:38.600 least fifty percent or lower, I think that sort of 0:09:39.120 --> 0:09:42.320 had been on the company. Impact from handsets is going 0:09:42.320 --> 0:09:44.600 to continue, and I think Ristiana just has to keep 0:09:44.600 --> 0:09:46.360 doing what he's doing and write this out. 0:09:47.160 --> 0:09:50.320 So John, I know most of or much of the 0:09:50.520 --> 0:09:53.240 selling in the tech spaces, in the software space, not 0:09:53.320 --> 0:09:56.280 in your chip sector. But when you talk to investors, 0:09:56.400 --> 0:09:59.360 we talk to clients, what's their mood over the last 0:09:59.400 --> 0:10:02.720 week or so, Like they're just kind of selling in 0:10:02.720 --> 0:10:05.240 a panic, selling because hey, I've got it such a 0:10:05.240 --> 0:10:08.360 big gain, I've taken something off the table. My fundamental 0:10:08.440 --> 0:10:10.319 view of AI is change. What's the tone. 0:10:11.600 --> 0:10:13.600 I don't think the fundamental view has changed. I think 0:10:13.600 --> 0:10:15.800 a couple of things. Once you said, if whatever is 0:10:15.840 --> 0:10:19.559 happening in the other sectors will impact this sector as well, right, 0:10:19.559 --> 0:10:23.160 because there is some definitely that risk of profit taking. Also, 0:10:23.200 --> 0:10:26.320 remember getting into this year a lot of investors in 0:10:26.360 --> 0:10:29.800 my sector are trying to reposition their books, right, they're revaluating. 0:10:30.000 --> 0:10:30.640 Last year in. 0:10:30.600 --> 0:10:33.280 Semis was like, look, everything was doing great. AI is 0:10:33.320 --> 0:10:35.880 helping everyone. I think now it's becoming a more of 0:10:35.920 --> 0:10:38.240 a stock pickers market in the sector, where people are 0:10:38.280 --> 0:10:41.679 really focusing deep and thinking which guys are going to 0:10:41.679 --> 0:10:44.560 be the real winners and let's focus on them, but 0:10:44.760 --> 0:10:47.040 let's get off or at least take some profit off 0:10:47.040 --> 0:10:49.560 the other folks which don't seem to be the top 0:10:49.679 --> 0:10:52.000 number and one and two in the areas that they're playing. 0:10:52.720 --> 0:10:56.400 You mentioned earlier how Christian among the CEO, is trying 0:10:56.400 --> 0:10:59.880 to diversify Qualcom to not rely so much on smart 0:11:00.240 --> 0:11:03.520 makers as its main line of business as it tries 0:11:03.600 --> 0:11:06.640 to get into the AI data center business. And you 0:11:07.160 --> 0:11:10.240 make chips that would compete with Nvidia, what kind of 0:11:10.480 --> 0:11:13.840 capex do you anticipate Quacom will have to commit to. 0:11:15.520 --> 0:11:18.480 Yeah, so Quacam predominantly is a fabulous semi company, so 0:11:18.640 --> 0:11:22.000 they don't have or would not have a significant capex 0:11:22.080 --> 0:11:24.960 like you hear from other AI hyperscalers. They would have 0:11:25.000 --> 0:11:27.960 to commit to significant opex, which is R and D dollars. 0:11:28.000 --> 0:11:30.240 If They are going into a new line of business 0:11:30.240 --> 0:11:33.079 where they need to develop newer chips, newer programs. They 0:11:33.120 --> 0:11:36.079 have acquired a company recently to do this, so they 0:11:36.120 --> 0:11:38.720 have spent some capital there and I think they will 0:11:38.760 --> 0:11:40.880 have to really boost of their R and D, which 0:11:40.880 --> 0:11:43.160 is their opecs spending to compete with the likes of 0:11:43.200 --> 0:11:43.680 in media. 0:11:44.679 --> 0:11:47.839 Stay with us. More from Bloomberg Intelligence coming up after this. 0:11:51.720 --> 0:11:55.360 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:11:55.520 --> 0:11:58.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:58.600 --> 0:12:02.080 Auto with the Bloomberginess app. Listen on demand wherever you 0:12:02.080 --> 0:12:05.080 get your podcasts, or what's us Live on YouTube. 0:12:05.760 --> 0:12:07.920 Lots of earnings coming out across the tape this week. 0:12:07.960 --> 0:12:09.719 One of the busier weeks out there. One of the 0:12:09.800 --> 0:12:13.120 names is Peloton or they can just not seem to 0:12:13.120 --> 0:12:16.400 get any positive momentum going in that business. It kind 0:12:16.400 --> 0:12:19.000 of for me at least, I'm like, does this company 0:12:19.000 --> 0:12:20.880 need to be public? You know, it seems like they 0:12:20.920 --> 0:12:22.280 should maybe be a private company. 0:12:22.280 --> 0:12:25.200 But what did everyone call it the most expensive code rack. 0:12:25.200 --> 0:12:27.160 Cot rap That's right exactly, Keith, it wrong enough, and 0:12:27.240 --> 0:12:30.400 she covers Peloton as well as all of the media 0:12:30.720 --> 0:12:32.880 and entertainment names for Bloomberg Intelligence. 0:12:33.559 --> 0:12:35.920 What's the story this time, Keitha. With Peloton, they just 0:12:35.960 --> 0:12:37.360 reported some results. 0:12:38.400 --> 0:12:41.920 Yeah, Paul, So they had their biggest product refresh ever 0:12:42.040 --> 0:12:45.400 in their history last fall. They had this huge price 0:12:45.480 --> 0:12:49.720 increase that they implemented across all of their subscription offerings. 0:12:49.960 --> 0:12:52.240 And even with all that and the benefit of a 0:12:52.280 --> 0:12:56.560 holiday quarter, they basically disappointed on the sales number. And 0:12:56.640 --> 0:12:58.520 you know, you have them kind of making all of 0:12:58.520 --> 0:13:01.640 these making all of these cost efficiencies, You have a 0:13:01.679 --> 0:13:04.920 lot of cost cuts. They are definitely making good progress 0:13:04.920 --> 0:13:07.800 when it comes to profit, but boy, the top line 0:13:07.840 --> 0:13:10.800 is just not moving and that's really causing a lot 0:13:10.840 --> 0:13:12.240 of fear among investors. 0:13:12.800 --> 0:13:15.480 And we always introduce U Gita as our media and 0:13:15.640 --> 0:13:18.200 entertainment analysts here Bloomberg Intelligence. 0:13:18.480 --> 0:13:21.280 Peloton makes exercise. 0:13:20.720 --> 0:13:23.240 Bikes, but for a while it was trying to frame 0:13:23.280 --> 0:13:28.440 itself as a media company. Much how reliant is it 0:13:28.600 --> 0:13:31.120 on that software on the media side of its business? 0:13:32.320 --> 0:13:35.640 Oh, it absolutely depends on the content, Scarlett. It is 0:13:35.679 --> 0:13:38.960 the content that gave it it's cult following that you know, 0:13:39.040 --> 0:13:42.560 gives it all of those sticky, affluent customers. The problem 0:13:42.600 --> 0:13:45.280 for Peloton, right now is they're just not able to 0:13:45.320 --> 0:13:47.760 move the needle. And yeah, you have all of these 0:13:47.880 --> 0:13:49.960 new features that they're adding. I mean, you know you 0:13:50.040 --> 0:13:52.720 have all of these AI powered features they're calling they've 0:13:52.720 --> 0:13:55.680 added it to their entire product lineup. You know, they're 0:13:55.720 --> 0:13:57.880 allowing you to kind of integrate all of your health 0:13:57.960 --> 0:14:01.440 data from like garment and you know, basically making it 0:14:01.480 --> 0:14:04.600 really really comfortable for the user. But those are all 0:14:04.640 --> 0:14:09.520 really just incremental, they are not transformational. And basically the 0:14:09.559 --> 0:14:11.880 company just coming out and saying that, you know, the 0:14:11.880 --> 0:14:14.720 the upgrade cycle that they were expecting from the existing 0:14:14.760 --> 0:14:19.400 customers just hasn't happened. So you know, it's You're absolutely 0:14:19.440 --> 0:14:21.560 right that this is a content company in many ways 0:14:21.560 --> 0:14:23.720 because you know, it relies on the content, but it 0:14:23.720 --> 0:14:27.600 also needs the sales of its hardware to happen in 0:14:27.680 --> 0:14:29.600 order for people to get access to that content, and 0:14:29.680 --> 0:14:31.440 that just is not taking off. 0:14:32.040 --> 0:14:34.880 Have you ever used a peloton before? We have in 0:14:34.920 --> 0:14:39.000 our house, and do you follow any of the Karen from. 0:14:38.920 --> 0:14:41.440 The Jersey Shore rides that every single day bides the 0:14:41.480 --> 0:14:44.960 bike and the treadmill thing in our home. 0:14:46.640 --> 0:14:48.240 You can't hide them. We don't have a basement. If 0:14:48.280 --> 0:14:50.280 you can now take a forty five dollars pill from 0:14:50.360 --> 0:14:53.160 him and hers? Why would you need a bit more? 0:14:53.160 --> 0:14:55.360 So you need to keep tone up when you're losing weight, 0:14:55.480 --> 0:14:56.720 and so they do the weight program. 0:14:56.800 --> 0:14:58.720 So we use it. We haven't we use it, but 0:14:58.800 --> 0:15:00.040 we're they're just not monetizing. 0:15:00.120 --> 0:15:00.600 Uh. 0:15:00.640 --> 0:15:03.480 Sokeitha real quickly, this is almost a time now at 0:15:03.520 --> 0:15:06.000 one point nine billion market cap are people calling for 0:15:06.040 --> 0:15:09.360 this company to go private to be sold? I mean 0:15:09.440 --> 0:15:12.000 it doesn't seem to work as a publicly traded company. 0:15:12.960 --> 0:15:15.200 Yeah, it doesn't fall. And you know, there's been so 0:15:15.320 --> 0:15:17.840 much of chatter about whether an Apple or an Amazon 0:15:17.880 --> 0:15:21.200 should buy this company. Nothing of course, has materialized. There's 0:15:21.200 --> 0:15:23.840 also been you know, constant rumors about private equity maybe 0:15:23.880 --> 0:15:26.280 kind of coming in milking it for whatever free cash 0:15:26.320 --> 0:15:29.520 flow they can get. But again it's nobody really knows 0:15:29.520 --> 0:15:31.520 what's going to happen here, all. 0:15:31.480 --> 0:15:33.640 Right, So I guess I just don't know. 0:15:33.800 --> 0:15:35.600 You know, what's interesting because some of the trainers they 0:15:35.640 --> 0:15:38.120 have huge followings on social media and they're and they're 0:15:38.400 --> 0:15:41.640 selling stuff all like crazy. So Keitha, does does Peloton 0:15:41.680 --> 0:15:45.600 get any of the you know, the their employees, you know, 0:15:45.720 --> 0:15:47.800 social media side hustle revenue at all. 0:15:49.120 --> 0:15:52.520 No, not really. I mean it's it's just I guess 0:15:52.560 --> 0:15:53.600 it's good for the brand. 0:15:54.240 --> 0:15:55.040 But that's about it. 0:15:57.680 --> 0:16:00.000 Stay with us. More from Bloomberg Intelligence coming up. 0:16:03.840 --> 0:16:07.520 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:07.600 --> 0:16:10.320 weekdays at ten am. He's done on Apple, Coarclay, and 0:16:10.320 --> 0:16:13.600 Android Auto with the Bloomberg Business app. Listen on demand 0:16:13.640 --> 0:16:17.200 wherever you get your podcasts, or watch us live on YouTube. 0:16:18.240 --> 0:16:21.560 Another area of movement is in the world of luxury Stually, 0:16:21.560 --> 0:16:22.720 a lotter put out some results. 0:16:22.960 --> 0:16:25.240 Market doesn't like it. The stocks down twenty two percent. 0:16:25.280 --> 0:16:25.440 Here. 0:16:25.480 --> 0:16:27.600 Let's check in with deb Ak and she covers all 0:16:27.640 --> 0:16:30.760 the luxury good companies for Bloomberg Intelligence. She's based in 0:16:30.800 --> 0:16:34.000 our London office. Boy, what did Esday Lauder have to 0:16:34.000 --> 0:16:35.400 say here that so spooked the market? 0:16:36.200 --> 0:16:42.440 Deb I think that, you know, we're if we think 0:16:42.480 --> 0:16:45.600 about two years where they've been turning around the US 0:16:46.240 --> 0:16:48.480 and all of a sudden for the Americas, they came 0:16:48.560 --> 0:16:50.960 in flat with the US doing a little bit better, 0:16:51.040 --> 0:16:56.080 but the Latin side pulling somewhatern results and the expectation 0:16:56.200 --> 0:17:00.560 for Q three and Q four is quite subdued. A 0:17:01.040 --> 0:17:01.880 four Q to come. 0:17:01.960 --> 0:17:04.080 So this is their two key report where. 0:17:03.960 --> 0:17:06.480 Actually they beat on the top line, they beat a 0:17:06.480 --> 0:17:09.479 little bit on margin, then they raise their EPs, but 0:17:09.560 --> 0:17:13.200 it all kinds of sits EPs. It's mid or four 0:17:13.240 --> 0:17:18.240 cents below mid consensus ranger on EPs. So although it 0:17:18.359 --> 0:17:22.520 was a beat, it wasn't transformational. And so we have 0:17:22.640 --> 0:17:25.359 yet we have the Americas. We have also the fact 0:17:25.400 --> 0:17:29.200 that Europe is a little bit kind of stabilized, subdued. 0:17:29.920 --> 0:17:32.200 And then when you think about the China market, which 0:17:32.240 --> 0:17:35.600 was one of their big transition markets, they are expecting 0:17:35.640 --> 0:17:38.440 for the second half mid single digit growth. I've had 0:17:38.480 --> 0:17:42.199 some good mid growth in the first half, but you 0:17:42.520 --> 0:17:46.440 still have a big issue with travel retail. So when 0:17:46.480 --> 0:17:50.560 you consider North America and what's happening with department stores 0:17:50.600 --> 0:17:53.199 and then transitioning there to about thirty percent of the 0:17:53.240 --> 0:17:57.160 portfolio overall ninto more multi and then you have some 0:17:57.200 --> 0:18:02.439 retailers in travel retail out of China actually changeovers in retailers, 0:18:02.480 --> 0:18:07.040 which is conflicting and causing issues with their supply chains. 0:18:07.400 --> 0:18:10.080 It isn't an easy story for the next few months ahead. 0:18:10.200 --> 0:18:13.639 And the stock rallied massively ahead of results or thirty 0:18:13.640 --> 0:18:15.080 percent over the three months. 0:18:15.280 --> 0:18:17.120 Yeah, and if you expand that to over the past 0:18:17.160 --> 0:18:19.840 twelve months, the stock had served eighty percent more than 0:18:19.880 --> 0:18:22.280 eighty percent. So there is a lot, a lot built 0:18:22.280 --> 0:18:27.280 into optimism here with this new CEO is the worst 0:18:27.280 --> 0:18:30.200 then behind the company dev I mean, given what we heard, 0:18:30.560 --> 0:18:32.399 sure the results were not good enough to keep the 0:18:32.400 --> 0:18:35.840 stock moving higher. But have you know, have the restructuring 0:18:35.880 --> 0:18:39.000 costs really been priced in and it's done your skies ahead? 0:18:40.280 --> 0:18:42.240 I think so, yes, but I don't think it's going 0:18:42.280 --> 0:18:44.960 to be as quick as some expected. If we think 0:18:44.960 --> 0:18:48.679 about the market overall, the beauty market and what the 0:18:48.720 --> 0:18:52.479 CEOs said and he reiterated it, they're looking for about 0:18:52.800 --> 0:18:55.359 three percent growth in the beauty market this year, and 0:18:56.480 --> 0:18:59.160 others such as Laurel will say that the market should 0:18:59.160 --> 0:19:03.399 grow around four plus. And that's because they Laurel and 0:19:03.440 --> 0:19:07.960 some others have a higher exposure into high end fragrances, 0:19:07.960 --> 0:19:12.480 which are faster growth versus steal order. But aside from that, 0:19:12.960 --> 0:19:15.760 you probably get that. You know, the idea from Steludo 0:19:15.920 --> 0:19:20.040 for the full year is not to three percent on 0:19:20.400 --> 0:19:23.440 constant currency, and they're hoping to get to the top 0:19:23.560 --> 0:19:26.040 end of that. But that would mean that they're kind 0:19:26.040 --> 0:19:28.800 of running a little bit behind the market still, but 0:19:28.880 --> 0:19:31.280 that's because they have high travel retail and not so 0:19:31.359 --> 0:19:35.600 much exposure as appeers on the fragrance side. So where 0:19:35.720 --> 0:19:39.199 valuation sits right now, it's built in expectation that this 0:19:39.720 --> 0:19:42.639 one point two to one point six billion restructuring costs 0:19:42.640 --> 0:19:45.560 which is on track, does come through and that everything 0:19:45.600 --> 0:19:49.280 cleans up through fiscal twenty seven. The company is shifting 0:19:49.359 --> 0:19:52.560 to annual estimates only, which I think the US market 0:19:52.600 --> 0:19:56.800 in particular won't like guidance only, you know, to try 0:19:56.880 --> 0:19:59.919 and prevent volatility, but when it isn't a clear road ahead, 0:20:00.040 --> 0:20:03.600 that's often needed to be able to really understand quarter 0:20:03.600 --> 0:20:06.720 by quarter what's happening. So I think there are pros 0:20:06.760 --> 0:20:10.040 and cons to this company overall, and I can understand 0:20:10.080 --> 0:20:11.199 why it's down today. 0:20:12.000 --> 0:20:15.439 What is este later saying about the market in China 0:20:15.560 --> 0:20:17.960 and what are they saying about Chinese consumers in general? 0:20:18.520 --> 0:20:20.800 Are where are they shopping? Are they coming to Europe? 0:20:20.800 --> 0:20:22.520 Are they coming to the US? Are they staying in 0:20:22.560 --> 0:20:23.440 Japan and China? 0:20:25.200 --> 0:20:30.960 Japan, no, China. South Korea has taking some share and 0:20:30.640 --> 0:20:34.439 some kind of domestic move out of China there's a 0:20:34.440 --> 0:20:38.120 little bit of transition into Europe, but overall the way 0:20:38.160 --> 0:20:41.320 that esther Lord used to account for their travel retail 0:20:41.359 --> 0:20:44.320 in Europe and they shifted it, so it's separated with 0:20:44.520 --> 0:20:47.720 China separate and then Asia, and within Asia you have 0:20:47.760 --> 0:20:51.760 the travel retail business, so it's very clear what's happening 0:20:51.800 --> 0:20:54.399 over there. So China is picking up, it's mid single 0:20:54.440 --> 0:20:57.560 digit growth, but it's still down where it was versus 0:20:57.600 --> 0:21:01.159 two years ago. There's still a lot of repaired to do, 0:21:01.520 --> 0:21:04.399