Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Bloomberg Tech is a
Speaker 1: live from Coast to Coast with Caroline Hide in New
Speaker 1: York and Va Lowe in Sentrancisco.
Speaker 2: This is Bloomberg Tech coming up. Salesforce sell off as
Speaker 2: lackluster top line growth forecast suggests AI isn't paying.
Speaker 3: Off just yet.
Speaker 4: Plus, Apple plans.
Speaker 5: To up its AI game with a web search for
Speaker 5: Siri as it leans towards Google's Gemini for its next
Speaker 5: gen voice assistant.
Speaker 2: An HPE, where there's a profit squeeze as AI hits
Speaker 2: the server maker's margins despite demand.
Speaker 4: First, let's take a look at the broader markets.
Speaker 5: You're going to dig into the details of these earnings.
Speaker 5: Z I look at a context that it's up three
Speaker 5: ten percent on the NASDAG. We are digesting pretty woful
Speaker 5: labor data once more, but all eyes on the FED
Speaker 5: to cut ninety chance the money markets that there will
Speaker 5: move as soon as this month, as we still are
Speaker 5: looking at what the Senate is discussing on the future
Speaker 5: of the FED and who's actually sitting on it.
Speaker 2: There's a lot going on this week, but software in
Speaker 2: particular now earnings in that context are driving markets lower
Speaker 2: in this case. So Salesforce is talking of its kind
Speaker 2: of historic growth rates, but the outlook for its top
Speaker 2: line growth, particularly as it relates to AI, it's just
Speaker 2: not there yet. We're going to get into the analysis
Speaker 2: in just a second now, Figma, this is its first
Speaker 2: earnings post IPO at the end of July.
Speaker 6: Big drop on the stock.
Speaker 2: Remember it jumped to one hundred and fifty percent in
Speaker 2: its debut. Carrow, you were there, you lived through it.
Speaker 2: It basically met estimates, but it just shows how high
Speaker 2: and lofty expectations of the market are. Right now, I
Speaker 2: want to dig into numbers, starting with Salesforce. Let's get
Speaker 2: out to Blomberg Intelligence senior tech analyst and rag Rana.
Speaker 2: Maybe you caught Benny off on the call, maybe you
Speaker 2: caught him in interviews on other networks. He was talking
Speaker 2: up about like Salesforce growth rates and a RAG they
Speaker 2: are better than anyone out there. But the story seems
Speaker 2: to be the out and how AI is contributing.
Speaker 7: What do you think? Yeah, I think the expectations were
Speaker 7: a little bit high in that case from the AI
Speaker 7: contribution point of view, But if you look at results
Speaker 7: from Workday and other tech companies, out there. We are
Speaker 7: still struggling to see discritionary it spending bounce back. We
Speaker 7: have not seen any of that stuff. And given the
Speaker 7: size of a company salesforces, you're going to see the
Speaker 7: impact of that on bottom lines. If there are no
Speaker 7: massive secrets out there, you're not going to see revenue
Speaker 7: acce rate. And I think that's the story, which is,
Speaker 7: you know, I think common to most of the software landscape,
Speaker 7: except the companies that you know only work on AI, infrastructure, parking.
Speaker 7: If you leave them alone, the rest of the industry
Speaker 7: is struggling.
Speaker 5: Right now, what do you make the first numbers from Figma,
Speaker 5: because in many ways it was a company that pivoted
Speaker 5: well embraced generator of AI was able to show how
Speaker 5: it's working for its bottom line as a public company.
Speaker 4: We are seeing a tunnel in the shares.
Speaker 7: Yeah, I would say that my expectations were pretty bad
Speaker 7: or wrong in this case. I was looking for a
Speaker 7: revenue to improve because of a price increase they have
Speaker 7: put in. But it seems like, you know, they basically
Speaker 7: met the expectations that they gave. And to be very frank,
Speaker 7: in an IPO landscape, it doesn't work like that. The
Speaker 7: first few quoters. You really need to showcase, you know,
Speaker 7: an improvement in fundamentals. This just shows that there is
Speaker 7: a lot they have to do in order to get
Speaker 7: and I would say match up to the valuation that
Speaker 7: they have achieved right now.
Speaker 5: An Agrana holding yourself accountable. We appreciate that. Bluemeg Intelligence.
Speaker 5: We always love the expertise. Let's get a broader look
Speaker 5: at the tech sector right now because Carol Schlife is
Speaker 5: with us BIMO Private Wealth Chief market Strategist.
Speaker 4: Carol, it's been a while.
Speaker 5: Great to have you on Bloomberg Tech and more broadly,
Speaker 5: how are you thinking of the software story the AI
Speaker 5: winners versus Lewis's right now.
Speaker 8: Now we really first up, thanks for having me on.
Speaker 8: It's great to be back again, and it really is important.
Speaker 8: It takes you know, investors are very black and white.
Speaker 8: They want to see instantaneous results, but all of this
Speaker 8: stuff takes some time to filter through a figure out
Speaker 8: how we're going to deploy it. But the software and
Speaker 8: that moving away from, if you will, the picks and
Speaker 8: shovels of building out the infrastructure into the use cases
Speaker 8: and how that factors in. That is definitely a way
Speaker 8: that we see things playing out in the intermediate to
Speaker 8: longer term because you're not going to be able to
Speaker 8: get away from AI. A lot of companies are trying
Speaker 8: to figure out how to deploy it, how to use it,
Speaker 8: how to train their employees in using it. Because you've
Speaker 8: got those early adopters who are using it actively, and
Speaker 8: you've got the others that are not as willing to
Speaker 8: be on the bleeding edge, if you will, of the
Speaker 8: day to day use case.
Speaker 5: What therefore, is the likelihood that some of the older
Speaker 5: companies with big presence in the market, such as a salesforce,
Speaker 5: can fend off new competition. How much you having to
Speaker 5: build that in to an invest the risk right now
Speaker 5: that we are seeing a totally new cohort come to
Speaker 5: a powerful place in general to AI, you are, but.
Speaker 8: You're also seeing those the old line, old guard have
Speaker 8: the cash flow to be able to snap up some
Speaker 8: of those. It's almost like a whales and krill kind
Speaker 8: of scenario out there, and you look at, for example,
Speaker 8: in the build out of the infrastructure, You've got a
Speaker 8: lot of that going on too, where the largest companies
Speaker 8: are buying up the smaller companies in the competition, so
Speaker 8: that really smart, really useful competition. One of the ways
Speaker 8: they get leverage and into a lot of end users too,
Speaker 8: is through the distribution channel of some of those larger companies.
Speaker 8: So there's a use case to be made or an
Speaker 8: investment case to be made for a whole lot of
Speaker 8: sizes in that software industry.
Speaker 2: Carol, I really appreciate that the command you've got over
Speaker 2: what's happening right particularly in software. We've been talking about
Speaker 2: it all week. I mean, one of our guests this
Speaker 2: week said that September was the most hated month for investors.
Speaker 2: But basically, you know, we're going back to old fashioned
Speaker 2: earnings talk. Did they meet or excited high expectation, particularly
Speaker 2: in software sense? Not really? Did AI have a tangible
Speaker 2: contribution to top line growth?
Speaker 9: Not?
Speaker 4: Really?
Speaker 2: Is that the way that you approach a week like this, Well, I.
Speaker 8: Think a piece of it is is investors have to
Speaker 8: understand where what timeframe they're using, and where their expectations are,
Speaker 8: because you know, we've looked at a lot of these
Speaker 8: companies and you've got very active. When you step back
Speaker 8: from it, you look at the margins on these companies
Speaker 8: relative to most of the rest of the S and
Speaker 8: P those margins are great margins are cash flowing businesses,
Speaker 8: and as we all know, once you put a software
Speaker 8: system into a company, it's really hard to make a
Speaker 8: decision to change that or move that. And so from
Speaker 8: that perspective, I think investors have to ask themselves on
Speaker 8: an absolute basis, are these companies generating the kinds of
Speaker 8: revenues that I want? Even if they didn't be what
Speaker 8: the wildest expectations that I was hoping for. Because the
Speaker 8: industry tends to run or investors tend to run ahead
Speaker 8: of themselves, and the whisper numbers always a little bit
Speaker 8: higher than where they're at, and yet the companies, the
Speaker 8: industry in general are generating amazing returns.
Speaker 2: Carol, this week we talked at about concentration risk, and
Speaker 2: the more sanguine of your peers in the market would say, well,
Speaker 2: we look at profit estimates for the MAG seven in particular,
Speaker 2: but tech generally so much better than the S and
Speaker 2: P five hundred aggregate. But you have concentration risk. How
Speaker 2: are you thinking about that at the moment.
Speaker 8: I think one of the ways that we deal with
Speaker 8: it is barbelling portfolios and really leaning into that diversification
Speaker 8: because there is concentration risk. You've also got higher valuations overall,
Speaker 8: and you've got markets that are primed for perfection if
Speaker 8: you will, so they don't, they don't leave. That doesn't
Speaker 8: leave much wiggle room other than when you get big
Speaker 8: pullbacks like we had in April. It's one of the
Speaker 8: reasons why I think the pullback was so short lived
Speaker 8: back then and the reset was quick is people who
Speaker 8: have been sitting on the sidelines looking for an opportunity
Speaker 8: to get in dead. So one of the ways that
Speaker 8: you deal with that is you school yourself to expect
Speaker 8: some level of volatility, don't freak out when it first happens,
Speaker 8: and maybe own some other industries, some other segments, some
Speaker 8: other parts of the globe, and maybe some fixed incomers
Speaker 8: to balance the portfolio and to allow it to be
Speaker 8: able to ride through those storms.
Speaker 4: Diversification key.
Speaker 5: But just going back to the concentration risk and the
Speaker 5: area of hardware having been the most loved.
Speaker 4: Salesforce is down thirty.
Speaker 5: Percent basically year to date with looking at Broadcom up
Speaker 5: thirty percent year to date, and we got their earnings
Speaker 5: after the ball is hardware and picks and shovels still
Speaker 5: where it's at Carol, Well, I think.
Speaker 8: A piece of it. We're not through with that build
Speaker 8: ut segment yet, but you know, a piece of the
Speaker 8: questions you're starting to ask yourself is particularly as it
Speaker 8: relates to data centers and some of the other things
Speaker 8: that are going on. It's great if you can put
Speaker 8: them up, if you can put a side, then not
Speaker 8: in my backyard, and sorts of pushback you're getting in
Speaker 8: some of those, but then when you're getting told it's
Speaker 8: going to take five or six years to hook it
Speaker 8: to the grid. So there's lots of different ways to
Speaker 8: play the hardware and the buildout and who's got capacity
Speaker 8: and able to do it. But there's a whole other
Speaker 8: segment of bringing in some of the reshoring activities that
Speaker 8: are going on as well.
Speaker 2: Carol, it's got to that time of the show where
Speaker 2: I ask you the impossible question, what happens next in
Speaker 2: the balance of twenty twenty five for the technology sector?
Speaker 2: Your big predictions, please, We.
Speaker 8: Do think that you'll see continued grind higher. I mean,
Speaker 8: markets have been climbing a wall of worry technology as
Speaker 8: well all year, and we think you'll see a continued
Speaker 8: sort of grudging climb higher. You know, many company managements
Speaker 8: have told us they're nauseously optimistic for this final quarter,
Speaker 8: and I would think we're in that camp too.
Speaker 2: Carol's life a bemo private wealth. It's great to have
Speaker 2: you back on the show and we always appreciate a prediction.
Speaker 2: Thank you very much. Now we have some breaking news
Speaker 2: crossing the Bloomberg time or. Rhode Island and Connecticut have
Speaker 2: sued the Trump administration over the administration order blocking further
Speaker 2: construction of a nearly completed offshore wind palm, which was
Speaker 2: meant to provide power to the two New England states.
Speaker 2: You'll remember, Carra, August twenty second, the administration issued that
Speaker 2: stop work order. We also had the companies involved have
Speaker 2: a parallel suit against the US in order that the
Speaker 2: wind farm work can continue. But the breaking news right
Speaker 2: now is that Rhode Island and Connecticut, two of the
Speaker 2: New England states, participating in a suit against the administration,
Speaker 2: trying to get the judge to allow that work to
Speaker 2: move forward.
Speaker 4: What we got next future.
Speaker 5: Of energy is important to AI. We go back to
Speaker 5: aied coming up, Apple looking to go toe to toe
Speaker 5: with Open AI. Of course company it has a partnership with,
Speaker 5: but it's launching its own AI web search, integrating it
Speaker 5: in SyRI.
Speaker 4: We'll dig into that next. This is Bloomberg Tech.
Speaker 5: Apple said to be launching its own AI web search
Speaker 5: tool integrated into Siri, basically rivaling the likes of Open AI.
Speaker 5: Of Perplexity megs Mark German joins us, Now, it is
Speaker 5: such a thoroughly reported piece you put out yesterday and
Speaker 5: moved the stock. What's interesting is who's going to be
Speaker 5: helping build the underlying LLM and generator of AI within it.
Speaker 5: And it's not Perplexity, and it's seemingly not anthropic either.
Speaker 6: Yeah, that's right. We've known for some time that Apple's
Speaker 6: launching an overhauled version of Siri around March. This is
Speaker 6: going to include delayed features like the ability to tap
Speaker 6: into your personal data to fulfill queries. Obviously it's surprising
Speaker 6: it couldn't do that till now after launching fifteen years ago.
Speaker 6: But the feature that we didn't know was coming until
Speaker 6: yesterday is an AI web search tool, sort of an
Speaker 6: answer engine. Siri right now is able to answer questions,
Speaker 6: broad strokes of information it can provide, can control your phone,
Speaker 6: send messages, and what have you. What it doesn't do
Speaker 6: well is tap into the open web to get information
Speaker 6: and to still it down for you in the way
Speaker 6: that AI search engines today can do things like perplexity,
Speaker 6: things like CHATCHGPT. So now Apple will be launching their
Speaker 6: own answer engine that's going to come in March as
Speaker 6: part of an update called iOS twenty six point four,
Speaker 6: and over time I anticipate them to integrate it into Safari,
Speaker 6: into Spotlight and other parts of its operating systems. You know,
Speaker 6: Google Search is very important to Apple. It makes them
Speaker 6: roughly twenty billion plus per year. But the industry is shifting.
Speaker 6: You know, how many times are you going to Google
Speaker 6: Search right now? Probably fewer than you used to a
Speaker 6: lot of people are doing their searches from CHATCHGPT or perplexity.
Speaker 6: It's an increasing number of people. So this is important
Speaker 6: for Apple for its long term.
Speaker 2: Few world knowledge answers is just one part. You know,
Speaker 2: you're reporting shows us what the market has actually been
Speaker 2: asking for, which is when this revamp SERI comes as
Speaker 2: a package, so spring next year. I see basically three parts, right,
Speaker 2: a Siri redesign, a health AI subscription service, and then
Speaker 2: some conversational features on the home devices which we've discussed
Speaker 2: on the show What are we waiting for? That's coming
Speaker 2: in March?
Speaker 6: Mark in total, So what's coming in March is this
Speaker 6: AI search product I mentioned. The ability to tap into
Speaker 6: personal data to fulfill queries, things like who did I
Speaker 6: meet with a month ago? What song did ED text
Speaker 6: me last week? The ability to fulfill queries based on
Speaker 6: on screen content. You're looking at a picture of someone,
Speaker 6: tell me more. And then you have voice based navigation,
Speaker 6: so using your voice to control your phone, move around
Speaker 6: your operating system, telling Siri to like something on Instagram.
Speaker 6: Later in the year, you'll see the Health Plus subscription service,
Speaker 6: which is basically an AI agent for health. And you're
Speaker 6: also going to see a visual redesign for Siri later
Speaker 6: next year, and then the year after is likely when
Speaker 6: you're going to see the conversational Siri tied to that
Speaker 6: new robotic home device, the tabletop Robot, which is essentially
Speaker 6: a virtual person to have in your workspace to help
Speaker 6: you get things done throughout your day.
Speaker 5: So my question is, first, ed, what song did you
Speaker 5: message Mark German?
Speaker 10: Was it?
Speaker 2: I believe it was, Yeah, it was Pink Pony Club.
Speaker 2: That's no surprise any regular followers on social media. But
Speaker 2: I'm interested, Like you know, when I look at how
Speaker 2: Siri works right now, or Apple Intelligence, it summarizes what's
Speaker 2: in my email. It often will be like, here's your
Speaker 2: Spotify playlist of the day. Spotify sends updates as well.
Speaker 2: What would you have sent, Mark Carrot?
Speaker 5: What would I have sent? I? Did you see Oasis?
Speaker 5: So probably an Oasis song? But Mark Brawley, the question
Speaker 5: that I'm also going to ask you is, therefore I
Speaker 5: go back to the underlying technology here, the relationship between
Speaker 5: Google and Apple. We've just had such an update on
Speaker 5: it from Judge.
Speaker 4: Meta this week.
Speaker 5: That's going to be integral for what's going to be
Speaker 5: building the underlying technology for this product.
Speaker 6: Right Ah, Yes, you asked me that earlier.
Speaker 5: I did not answer the question, So.
Speaker 11: Go for it.
Speaker 10: Yes.
Speaker 6: So Apple has talked to open Ai and Thropic and
Speaker 6: Google most recently to partner with them to rebuild Siri
Speaker 6: as one of the components underlying the new Serie engine,
Speaker 6: and a lot of signs right now are pointing to
Speaker 6: them working with Gemini. Google has built a model for them.
Speaker 6: The two companies signed an agreement earlier this week a
Speaker 6: formal evaluation agreement. This doesn't mean they have a commercial agreement.
Speaker 6: That means they've agreed for Apple to evaluate a model.
Speaker 6: They're fine tuning it, and they're heavily considering it. They've
Speaker 6: also considered Anthropic very heavily, and they still are for
Speaker 6: different parts of Siri. The problem is is that Anthropic
Speaker 6: wants north of one point five billion a year and
Speaker 6: then revenue number that's going to escalate annually for the
Speaker 6: next three years, and that is a pretty a very
Speaker 6: big dollar amount to pay for technology like this. In
Speaker 6: Apple's mind, they feel they have little leverage here, and
Speaker 6: Google's a longtime partner and obviously that partnership is going
Speaker 6: to continue, so it all seems to fit. So we'll
Speaker 6: see what ends up happening, but I'm thinking Google.
Speaker 10: As of now.
Speaker 2: Bloomberg's Mark German, who, as Cary said, very detailed report
Speaker 2: on what happens next with Siri, Thank you very much. Meanwhile,
Speaker 2: open AI rival deep Seek's said to be developing an
Speaker 2: AI model with more advanced AI agent features. I want
Speaker 2: to get out to our AI editor Bloomberg Seth Figureman.
Speaker 2: Very interesting story that Bloomberg broke because like deep Seek,
Speaker 2: actually despite the sort of volatility of April, which deep
Speaker 2: Seat calls in markets. It moves slower than some of
Speaker 2: the other Chinese names working on models, but the whole
Speaker 2: point is that this is a gentic AI. They want
Speaker 2: something that goes beyond the chatbot.
Speaker 12: Yeah, that's right. I think we've all been a little
Speaker 12: bit surprised at how little we've heard from deep Seek
Speaker 12: in the last eight months since up ended the markets.
Speaker 12: We've seen a lot of products from Chinese and US rivals,
Speaker 12: and there's a lot of speculation mat what's going on
Speaker 12: behind the scenes. There are other challenges that might be facing,
Speaker 12: but what we've hurt and reported today is that its
Speaker 12: focus is really trying to make a splash in the
Speaker 12: agent market. And you know, for viewers here, this has
Speaker 12: really been where the tech industry has shifted to in
Speaker 12: the last six months or so. Open the eye, Anthropic,
Speaker 12: Google and others are all pushing out AI agent products.
Speaker 12: I think what Deepseeek is trying to do is basically
Speaker 12: build a new model that has agentic capabilities you know,
Speaker 12: embeded within it so that it can field more complex,
Speaker 12: multi step tasks on your behalf with minimal intervention. Again,
Speaker 12: a lot of companies are trying to do this, and
Speaker 12: we are seeing very mixed range of execution here, and
Speaker 12: it seems like deep Sea probably wants to make sure
Speaker 12: they put out something that will move the needle in
Speaker 12: this potentially crowded market.
Speaker 5: But the crowding really for deep Seek is its popularity
Speaker 5: in China. At the moment, is still the most popular
Speaker 5: chatbot tool. But as we say, Ali Baba Tencent, they've
Speaker 5: just had a rapid rate of innovations in their models.
Speaker 4: When do we anticipate R two will come out?
Speaker 12: Yeah, so again we gotta know if this one is
Speaker 12: R two, but this model is supposed to come out
Speaker 12: before the end of the Year's interesting though, is that
Speaker 12: Ali Baba tends up the ones you mentioned haven't been
Speaker 12: as active I think in the agent marketplace. I mean,
Speaker 12: they're doing a lot of image and digo generation technology,
Speaker 12: a lot of more sophisticated chatbots manners which we and
Speaker 12: others have covered, which is originally from Chinese origin, but
Speaker 12: now trying to move into Singapore. They have made a
Speaker 12: bigger splash with agent products, So there might be a
Speaker 12: bigger market within China and globally if deep Sea can
Speaker 12: do something competitive on the agent front. But it's hard
Speaker 12: to say right now how much it'll be different from
Speaker 12: what's out there.
Speaker 4: Seth Fiegerman breaking it down on Deep Seat. We so
Speaker 4: appreciate it.
Speaker 5: It is time now for talking tech and first up.
Speaker 4: Red Note so its.
Speaker 5: Valuation served nineteen percent in just three months.
Speaker 4: I think thirty one billion dollars now. The social media
Speaker 4: firm emerged the year this year.
Speaker 5: As a real viable competitor to TikTok, which faces threats
Speaker 5: of a ban in the United States. Remember some Red
Speaker 5: Note investors anticipate in an imminent IPO plus s k
Speaker 5: Heinex is set to pay two week seven billion dollars
Speaker 5: in bonuses to twelve labour tensions. Now, the company's labor
Speaker 5: union has improven landmark agreement allocating ten percent of the
Speaker 5: company's annual profitence to a bonus pool of its thirty
Speaker 5: three thousand, six and twenty five employees. For twenty twenty
Speaker 5: five alone, employees could receive only eighty thousand.
Speaker 4: Dollars in bonus.
Speaker 5: And in Vidia's venture capital arm is set to invest
Speaker 5: in Honeywell's Quantinum for.
Speaker 4: The first time.
Speaker 5: In Vidier is the latest big name backer behind the
Speaker 5: quantum computing company with the latest investment set to value
Speaker 5: quantinum at ten million dollars ed.
Speaker 2: All right, this week British finance app Revelue offered a
Speaker 2: secondary share sale with a seventy five billion dollar valuation.
Speaker 2: We covered it on the show Bloomberg's learned that Revolute
Speaker 2: is putting in extra work to remain private while retaining
Speaker 2: talent and appease some of its VC backers. Let's get
Speaker 2: out to bloombost Tom Metcalfe, who's been following the company.
Speaker 2: So this is like some financial engineering, like different valuations
Speaker 2: on different transactions. But there is one big point here,
Speaker 2: which is that Revolute wants to stay private.
Speaker 11: Why yeah, exactly exactly that it's the age old story
Speaker 11: of you know, get you get a little bit more
Speaker 11: flexibility as a private company, and if you can put
Speaker 11: off quite a tricky task of keeping those investors happy
Speaker 11: your employees happy as well, then you're able to I think,
Speaker 11: do you get a competitive of entries against any public peers.
Speaker 11: You know, it's very few sort of startups that can
Speaker 11: do this. They always grab the attention. But you know,
Speaker 11: it's that blend valuation that's really interesting. There is a
Speaker 11: little bit of kind of give and take here, like
Speaker 11: on the primary they again given out a lower evaluation,
Speaker 11: employees get a pretty decent one, and then they actually
Speaker 11: are buying back some shares from a very select class
Speaker 11: of investors at a different valuation as well, and.
Speaker 4: A forty five billion dollar valuation.
Speaker 5: But that's probably a lot of upside if you've been
Speaker 5: a very early investor. But more broadly, I mean you
Speaker 5: cover the billionaires here, right, the CEO really does seem
Speaker 5: to be up there in terms of his own valuation
Speaker 5: as a billionaire.
Speaker 4: Now, yeah, exactly.
Speaker 11: I mean I remember, gosh's been years now since been
Speaker 11: tracking these folks, and you know, when Stronsky came out,
Speaker 11: you've seen Revolute go through a whole range of valuations.
Speaker 11: But unlike Klana, which is sort of the earlier of
Speaker 11: hearing startup, I always kind of compare it with those
Speaker 11: paper valuations. It should be clear they're on paper, so
Speaker 11: you know, until that crystallizes, it's a long way off,
Speaker 11: like kind of money in the bank, I suppose. But
Speaker 11: whereas Clara had a very much roller coaster riders now
Speaker 11: just about to IPO, Revolute always seem to be in
Speaker 11: a position where it could pick and choose when it
Speaker 11: could go out for new money. So its valuation has
Speaker 11: very much been steady or in recent years or even
Speaker 11: months as jump. So it was thirty three billion, then
Speaker 11: forty five, that's hits sixty five and now seventy five.
Speaker 11: But that's on a second evaluation.
Speaker 5: Of course, next Toron Sky two hundred and first richest person.
Speaker 5: If you're basing it on that seventy five billion dollar valuation,
Speaker 5: Bloomberg's Tom Metcalf brilliant to have you, Thank you, Welcome.
Speaker 4: Back to Bloomberg Tech.
Speaker 5: Let's get straight to earnings now, because shares of HPE
Speaker 5: they are training higher throughout this morning. The company reporting
Speaker 5: fiscal third quarter earnings that did show operating margin and
Speaker 5: the serving unit had narrowed, but the CEO Antonio and
Speaker 5: Arry on the call telling investors, look, it's going to
Speaker 5: return to roughly ten percent by the end of the
Speaker 5: current period. Well, now we've got him here to explain
Speaker 5: a little bit more. HPE CEO Antonio n Airy. We
Speaker 5: get into how you're building out this business, how Juniper
Speaker 5: adds to the networking side, but for now, the AI systems,
Speaker 5: the server unit, how is profitability to improve?
Speaker 13: Well, good morning, Caareran thanks for having me. We are
Speaker 13: very pleased with our quarter. It turned out to be
Speaker 13: very solid with record breaking performance on revenue and we
Speaker 13: expand the profitability sequentially. And to your question around the
Speaker 13: server segment, we deliver what we say we will do.
Speaker 13: But most importantly, our traditional server business return it to
Speaker 13: a historical level. And so when I think about you four,
Speaker 13: we're going to see a return to approximately ten percent
Speaker 13: for the quarter because of the momentum in traditional servers,
Speaker 13: which by the way, group double digits here over here,
Speaker 13: and the balance of AI mix between sovere and an
Speaker 13: enterprise which now represents more than fifty percent of our
Speaker 13: orders compared to the service providers.
Speaker 4: So the AI serve a bit is that to improve?
Speaker 5: How well broadly is the AI system's profitability improving as
Speaker 5: we see this monumental buildout of infrastructure.
Speaker 13: Well, as I think about the AI servers, I think
Speaker 13: it's important character to think about different customer types and
Speaker 13: how we participate in each of the segments. So we
Speaker 13: think about the service providers and the hyper scales and
Speaker 13: the mother buildings where a lot of the capital expenses
Speaker 13: are taking place. To your point, we are now going
Speaker 13: to lead. We're networking for AI. We are extremely pleased
Speaker 13: we close the Juniper transaction. Junior is already a reference
Speaker 13: in many of those buildouts, and that's where how we're
Speaker 13: going to lead in that particular segment of the market.
Speaker 13: And we're going to sell the server compute platforms whether
Speaker 13: our partner where it makes sense from a profitability perspective.
Speaker 13: But what we saw in the last couple of quarters
Speaker 13: in particular discorder, sovereign and neoclouds and enterprise now represent
Speaker 13: more than sixty percent of the market. There, we participate
Speaker 13: in a slightly different approach which the market profile is different.
Speaker 13: We lead with a rack scale integrated architecture for the
Speaker 13: sovereign space, and we lead with an integrated solution for
Speaker 13: enterprise Enterprise group for the seventh Conservative quarder and we
Speaker 13: double the number of logos. And then in sovereign we
Speaker 13: grew more than two hundred and fifty percent. And we
Speaker 13: want some marquee deals in the Middle.
Speaker 2: East, Antonio, that might be the answer. Actually, I've studied
Speaker 2: the traditional server business and the storage business, and you're
Speaker 2: doing better than your peers Dell net app. But why
Speaker 2: are the dynamics better for you when you have these
Speaker 2: analogous businesses with those other names I mentioned.
Speaker 13: Is multiple things. First, in the enterprise traditional server, we
Speaker 13: see a refreshed cycle taking place or age infrastructure with
Speaker 13: more richly configured servers. And we have two phenomenal platforms
Speaker 13: which is HP pro I and Jene eleven and Gene twelve.
Speaker 13: We did a fantastic job in really hitting the sweet
Speaker 13: spot to the market with better performance per core, lower
Speaker 13: energy consumption, better security, quantum proof for the maother and
Speaker 13: two worldad optimization. And so now as we go to
Speaker 13: the June twelve that AUP continues to growth and the
Speaker 13: ability to attach services is much higher. As I go
Speaker 13: to the storage business, we really transform the entire industry
Speaker 13: in my mind by deploying a consistent architecture, whether it
Speaker 13: is structural data block storage, or whether it is obstructural
Speaker 13: data which you need for AI. And that's what we
Speaker 13: call the object data with file ingestion, so the customer
Speaker 13: can do one one investment with a peace of mind
Speaker 13: as they grow their data needs for AI. So I
Speaker 13: think that's what's resonating in the market. But often we
Speaker 13: have a fantastic go to market. We play in one
Speaker 13: hundred and seventy two countries and that reach together whether
Speaker 13: partner is a major differentiation. In addition to the fact
Speaker 13: that Green Lake provides through AI dream and life cycle
Speaker 13: management serpability.
Speaker 2: Those are the things specific to you, Antony, Would you
Speaker 2: give me an outlook for enterprise IT spending and because
Speaker 2: we have a lot of macro uncertainty right now, and
Speaker 2: you must see in the pipeline that how that uncertainty
Speaker 2: is really manifesting.
Speaker 13: I was based on our pipeline. First of all, is
Speaker 13: solid across the three segments we participate in networking, server,
Speaker 13: and hybrid cloud. It is uniform across the three geos.
Speaker 13: There was another question in another interview, did how North
Speaker 13: America versus oldiers are doing North America very very well
Speaker 13: for us this quarter? And so I think the demand
Speaker 13: will continue to be there. Every enterprise have to modernize
Speaker 13: and deploy AI. We as a company are deploy AI
Speaker 13: very extensively. We see the productivity improvements across many functions
Speaker 13: and many businesses, so that will continue. But at the
Speaker 13: same time, there is a way to modernize the legacy
Speaker 13: by freeing up space, power and cooling so you can
Speaker 13: deploy this new technology. So we are very confident about
Speaker 13: the outlook, and with Juniper, that outlook becomes even stronger
Speaker 13: because now we have a complete portfolio networking that makes
Speaker 13: us unique as we want to build the best networking
Speaker 13: business in a modern, secure, cloud, native and AI driven portfolio.
Speaker 4: And you're expecting to cut costs.
Speaker 5: I think we're seeing six hundred million dollars in cost
Speaker 5: savings are expected by that combination, Antonio. Cost savings are
Speaker 5: necessary for many businesses right now as you think about
Speaker 5: some of the pressure from tariffs, your bird's eye perspective
Speaker 5: on how much that's implicating your business right now.
Speaker 13: You have to have a mindset of continuously transform the company.
Speaker 13: That's a fact, and you know the future belongs to
Speaker 13: the fastest said all the time. But the at least
Speaker 13: six hundred million dollars in synergies is related just to
Speaker 13: the Juniper transaction, and are re iterated that yesterday and
Speaker 13: then there is an incremental three hundred and fifty million
Speaker 13: dollars through three key strategic levers. Continue to optimize our portfolio,
Speaker 13: continue to optimize the workforce, and aggressively deploy this set
Speaker 13: of technologies and other core is not just a cost
Speaker 13: take out, is a way to improve the experiences and
Speaker 13: become more efficient and agile in this market which you
Speaker 13: have to react and in the moment. So we are
Speaker 13: very encouraged about what we're seeing and Juniper actually give
Speaker 13: us the opportunity to rethink some of the processes we
Speaker 13: have had for a long time.
Speaker 2: Here, Antonio, I ask you this every Coquo house the
Speaker 2: relationship in partnership within video, but is Jensen one would
Speaker 2: see it right for the supply chain and the partners
Speaker 2: they give great visibility to future iterations product right. They
Speaker 2: commit to the annual cadence of new GPU. They're increasingly
Speaker 2: involved in the networking through mv link. Is anything changing
Speaker 2: for you because of the way that video operates generationally
Speaker 2: technology to technology every year.
Speaker 13: We have a fantastic strong partnership at the company level
Speaker 13: and at the personal level. Jensen is available in the moment.
Speaker 13: If I need something, he picks the phone and we
Speaker 13: chat that we solve it. But I will say the following.
Speaker 13: I think from a collaboration perspective, from a core engineering perspective.
Speaker 13: The proof of that is our AI factor for enterprise
Speaker 13: with our private CLOUDI we actually took a very different
Speaker 13: approach together with a video we integrated entire Nvidia AI
Speaker 13: suite of software inside our green lay cloud. We took
Speaker 13: a software down into infrastructure and together we provide an
Speaker 13: integrated solution for our enterprise customers. That's a testament how
Speaker 13: you co engineer despite the fact a lot of the
Speaker 13: value is on the GPU, but reality is the software
Speaker 13: and the experience that you deliver. On the other hand,
Speaker 13: now with networking, we have another set of opportunities because
Speaker 13: above the MVY link and the spectrum as you refer to,
Speaker 13: you need a full data center architecture. Nvidia does not
Speaker 13: participate into that. Our major competitors obviously our Cisco and Arista,
Speaker 13: but Juriper has become the reference for many of these
Speaker 13: large AI deployments. But I do believe together with the
Speaker 13: Nvidia we can do a better job in a way.
Speaker 13: We deploy that copex and we run that infrastructure from
Speaker 13: an opex perspective using AI technologies for that matter, in
Speaker 13: full manage the network. So we are very excited about that.
Speaker 13: And look, you know in the last ward that we
Speaker 13: announced new innovation together with Nvidia, the RTX six thousand pro,
Speaker 13: the latest Ultra you know Blackwell, we are committed to
Speaker 13: be time to market with Jensen and team.
Speaker 5: I'm interested by the adoption and generative AI by the
Speaker 5: companies that are helping them become a reality. Of course,
Speaker 5: benefits your share price, which is near a record high, Antonio,
Speaker 5: But how is it benefiting your employees or indeed, how
Speaker 5: are the pilot's runn because there's been a lot of
Speaker 5: questions about whether there's been efficacy there since the MIT report.
Speaker 13: Yeah, I think it's fair to say, Carol, we went
Speaker 13: from generative AI to agentic AI, and I think about,
Speaker 13: you know, agentic KI as the next evolution for what
Speaker 13: really enterprise needed. And my view is that AGENTAKI will
Speaker 13: transform business processes by simplifying them, automating them and then
Speaker 13: bring intelligence to it. In our company, we are using
Speaker 13: agentic ai aggressively in our offers. So Green Lake Intelligence,
Speaker 13: which we announce it June, is one of the most
Speaker 13: comprehensive clouds that includes a gent ki no reserveability in
Speaker 13: the way deploy and manage infrastructure and so forth. On
Speaker 13: the other hand, as a company, we have deploying agentki
Speaker 13: across finance. Our CFO is incredibly aggressive on this, so
Speaker 13: she is on the leading edge on this. Our marketing
Speaker 13: team uses for demand generation and the brand capaigns and
Speaker 13: targeting segments where it makes sense, and our services team
Speaker 13: is used to provide better support experiences in our supply chain.
Speaker 13: We use it for forecasting and planning, and there is
Speaker 13: many other examples of that, and so I think this
Speaker 13: generative I now became agent KI. In the future, of
Speaker 13: course will be the robotics part, but the productivity level
Speaker 13: we see in is pretty significant and we are not
Speaker 13: put of a concept. We have deployed more than sixty
Speaker 13: use cases across the company and we have more than
Speaker 13: two hundred in testing as we speak. Some will fail,
Speaker 13: Carol run, and that's fine, and the mentality there needs
Speaker 13: to be fell fast and improved and focus on our
Speaker 13: return and investor capital.
Speaker 2: Antonio, you've been CEO since the start of twenty eighteen.
Speaker 2: Where does HPE sit today relative to your big vision
Speaker 2: for what HPE is can or should be against your peers.
Speaker 13: When I became CEO, I had a vision to be
Speaker 13: an edge centric, cloud level and data driven company. We
Speaker 13: invested at the edge was the Ruba acquisition, and we
Speaker 13: delivered tremendous value for our shoholders from seven hundred and
Speaker 13: fifty million dollar revenue all the way to over five billion,
Speaker 13: and obviously now the next move was the acquisition of
Speaker 13: Juniper to make this company a networking centric company because
Speaker 13: I believe the next AI era here is the convergence
Speaker 13: of networking cloud and then obviously the business process that
Speaker 13: we will run as an enterprise, and that to me
Speaker 13: is the core foundation that have been envisioned for our
Speaker 13: company going forward, and on that core foundation we deliver
Speaker 13: the best cloud and AI experiences. So is continue to
Speaker 13: be shaped. I'm very pleased with the progress, but let's
Speaker 13: not forget it's not just the division itself. It's how
Speaker 13: you execute with the culture and a set of values
Speaker 13: that makes us unique. And HP has been recognized also
Speaker 13: along the way as one of the best places to
Speaker 13: come and work by many surveys and magazines and institutions.
Speaker 13: So my view is that we are shaping the future,
Speaker 13: but ultimately is about delivering Shopholder value and we are
Speaker 13: going to be positioned for the next three year to
Speaker 13: accelerate that value as you see today because our stock
Speaker 13: price still undervalue in terms of multiples. Our goal is
Speaker 13: to deliver that value accelerator for our shareholders and be
Speaker 13: relevant to our customers in this new environment we live.
Speaker 2: In, I should have disasked you if your stock price
Speaker 2: was undervalued. Antonio Anderi, President and CEO of HP. Will
Speaker 2: leave it there, but a really robust conversation, thank you
Speaker 2: very much. Coming up, tech leaders are set to gather
Speaker 2: a President Trump's brand new Rose Garden for a discussion
Speaker 2: about AI. We're gonna have more on that next. This
Speaker 2: is Bloomberg Tech, President.
Speaker 5: Trump and the First Lady. Well, they're set to host
Speaker 5: a group of tech leaders.
Speaker 4: And the newly renovated Rose Garden.
Speaker 5: Those joining include Mark Zuckerberg, Tim Cook, Satia Nadella for
Speaker 5: an event on AI education Bloemos Katherine Lucy joins us.
Speaker 5: Now this really is a powerful Rose Garden meeting.
Speaker 10: Yeah, it's quite a lineup, right. A lot of bald
Speaker 10: faced names are expected, both for a event with the
Speaker 10: as you said, with the First Lady around AI and
Speaker 10: AI and children, but also for a reception the President
Speaker 10: is hosting on the newly repaved Rose Garden, which he
Speaker 10: has made clear he wants to use more as a
Speaker 10: space to host gatherings at the White House.
Speaker 2: Catherine, I went to d C for the Winning the
Speaker 2: AI Race speech. The President made. So while this is,
Speaker 2: you know, it's a nice thing with the CEOs, go
Speaker 2: at the heart of it, what is this administration's attitude
Speaker 2: to AI. I feel like there has been a lot
Speaker 2: of traffic of leaders from California Silicon Valley going to
Speaker 2: the White House to discuss that issue.
Speaker 10: Yeah, the President and his ministers have been very clear
Speaker 10: they are intered investing in AI. They have put a
Speaker 10: big action plan around AI. They have had a lot
Speaker 10: of tech CEOs in not US today obviously, but throughout
Speaker 10: this year as they look for ways to invest in manufacturing,
Speaker 10: to invest in domestic production, to support tech centers. They've
Speaker 10: also been closely aligned with chip manufacturers. So there's been
Speaker 10: a lot of activity in this space throughout the year.
Speaker 2: Bloomberg's Caafine Lucy with the reporting. Thank you very much.
Speaker 2: Let's stick with recent news from the Trump administration. The
Speaker 2: president has torn up a Biden era compromise that allowed
Speaker 2: some of the world's biggest chip makers to maintain operations
Speaker 2: in China. I want to get out to Bloomberg's senior editor,
Speaker 2: Mike Shephard. We're talking about validated end user authorizations or VEUS,
Speaker 2: and there's been this pipeline of breaking news announcements around it.
Speaker 2: There's a little bit of pressure on the chip stocks.
Speaker 2: Why are we focused on what the president's doing in
Speaker 2: this domain?
Speaker 9: Well, this ends this so called blanket waiver that had
Speaker 9: allowed the company's Samsung sk Heinex in TSMC to avoid
Speaker 9: becoming collateral damage ed in the US effort to reign
Speaker 9: in China's artificial intelligence ambitions, and that efforts included imposing
Speaker 9: export restrictions not only in US com companies, but also
Speaker 9: on businesses in Europe and elsewhere that supplied those makers
Speaker 9: with facilities in China. Samsung and sk Heinex are South
Speaker 9: Korean companies and they do have facilities in China, and
Speaker 9: even though they are not Chinese flagged, they were nonetheless
Speaker 9: targeted by potentially these export restrictions. So the waivers were
Speaker 9: designed to spare them from feeling the brunt of it,
Speaker 9: and it would allow them to ship in semiconductor manufacturing equipment, materials, chemicals,
Speaker 9: and things needed to keep those plants running. And it
Speaker 9: was really critical for Samsung and Skhinis to have that
Speaker 9: ability to not have to go to the US government
Speaker 9: for permission every single time they needed to make a shipment.
Speaker 9: It allowed them to keep those facilities running, and it
Speaker 9: has become a complication for them and for their suppliers too.
Speaker 5: Kara, I mean what a labor impact is going to have.
Speaker 5: I mean, we see the US government trying to brush
Speaker 5: it off. It's going to be easy to facilitate.
Speaker 4: But remind us of why the current.
Speaker 5: Administration was so worried about this particular loophole as they
Speaker 5: call it.
Speaker 9: Well, you know, Caro, I mentioned data leakage, and that,
Speaker 9: of course, you know, the idea that tech from these
Speaker 9: factories could somehow leak into the Chinese market, and that
Speaker 9: China would be able to somehow copy or mimic or
Speaker 9: use this technology in some fashion, or these materials in
Speaker 9: some fashion learning they know how. But there is also
Speaker 9: another factor. We're seeing more than just South Korea and
Speaker 9: Taiwan getting caught up in the tug of war between
Speaker 9: the US and China, this is also a tug of
Speaker 9: war with allies with South Korea and Taiwan and the
Speaker 9: US over competition over trade. The Commerce Department made clear
Speaker 9: that look, they see this as a question of leveling
Speaker 9: the playing field not just with China, but with companies
Speaker 9: from South Korea. And Taiwan. They want to make sure
Speaker 9: that advantages given through these way are also not unfairly
Speaker 9: putting US companies in an unfair position themselves. So this
Speaker 9: is why the waivers have ended, and it's going to
Speaker 9: set up four months of intense negotiations for these companies
Speaker 9: to figure out how to proceed.
Speaker 5: In most my Shepherd, we thank you from Washington. Now
Speaker 5: coming up French AI firm Mistral. It's solidifying its position
Speaker 5: as one of Europe's most valuable tech startups.
Speaker 4: We talk about the funding that's going on now.
Speaker 3: Discipling their tech. French AI start up Mistral is.
Speaker 5: In talks to raise a new investment that will value
Speaker 5: the company at fourteen billion dollars in most. Cake Clark
Speaker 5: joins us now with the story, it's a high evaluation.
Speaker 4: This is really the French startup, the European version of
Speaker 4: open ai.
Speaker 14: Exactly.
Speaker 4: Has it got any niche a tool to compete against
Speaker 4: the rest.
Speaker 14: It's developing open source models, so that's one of its
Speaker 14: that's its niece. But it's also a European company me
Speaker 14: as you said, so perhaps people in Europe would prefer
Speaker 14: to use a European homegrown AI company as opposed to
Speaker 14: chat to BT.
Speaker 2: Or Entthropics Claude, It's interesting where the capitules coming from.
Speaker 2: It's also based on the news flow of this week.
Speaker 2: Forteen billion dollars is modest, right, Kate, relative to Anthropic.
Speaker 14: That's exactly right. I was thinking, Wow, this seems cheap
Speaker 14: compared to anthropics one hundred and eighty three billion dollar
Speaker 14: valuation and open AI's five hundred dollars billion dollar, five
Speaker 14: hundred billion dollar valuation, and so.
Speaker 5: Many cross over in some of them where the capital
Speaker 5: is coming from at the moment, because we all focused
Speaker 5: on the fat that Anthropic kind of went to the
Speaker 5: Middle East when many thought they.
Speaker 14: Wouldn't exactly, and we don't know who's leading this Mistral around.
Speaker 14: I have been told it is not likely to be
Speaker 14: a Middle East investor, but we'll see, and we're we're
Speaker 14: doing that reporting to find out. But it does have
Speaker 14: several US venture capital firms that are backers of Mistral,
Speaker 14: Andries and Horowitz is one of the major investors, which
Speaker 14: is also a firm that is invested in other US lms.
Speaker 2: Very quick, Kate, just summarize demand. I'm seeing a lot
Speaker 2: of newsflow, deal flow, primary secondaries, the appetite is still
Speaker 2: there for these AI startups.
Speaker 14: There is an incredible amount of appetite for these AI startups.
Speaker 14: There's words cannot really even describe how much appetite there
Speaker 14: is for an open AI and anthropic even if a stroll,
Speaker 14: investors are extremely excited to put their money into these
Speaker 14: large language models and into the application layer AI companies.
Speaker 2: Bloomberg's k Clark great reporting as always, and yeah, there's
Speaker 2: a lot going on, Carrot.
Speaker 5: That does it for this edition of Bloomberg Tech, where
Speaker 5: there is insatiable demand for content, whether it be on
Speaker 5: Open ai or Mistrial and many others.
Speaker 2: Yeah, hardware or software, we got it all. So check
Speaker 2: out the podcast. You know where to find it on
Speaker 2: the Bloomberg terminal as well as online on Apple, Spotify, Nihart.
Speaker 2: From San Francisco, New York City, This is Bloomberg