Speaker 1: We're from Mahard. We're Innovation, Money and Power Collie in
Speaker 1: Silicon Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Lovelove.
Speaker 3: Live from New York. This is Bloomberg Technology coming up.
Speaker 3: The NASDAQ one hundred plunges into correction territory as the
Speaker 3: rotation from big tech continues. Plus, we break down the
Speaker 3: results from tech heavyweights Amazon and Apple, and Intel shares
Speaker 3: falling by the most since nineteen eighty two as the
Speaker 3: company offers a grim forecast and slashes thousands of jobs.
Speaker 3: The picture in financial markets is severe this Friday. The
Speaker 3: focus is the technology sector. This is the NASA one hundred.
Speaker 3: Over the course of the week, we are on track
Speaker 3: for our eight week of declines, matching the run that
Speaker 3: we saw in April of this year. We have entered
Speaker 3: a technical correction on the NASDAQ one hundred. In the moment,
Speaker 3: about eighteen names on that index in the red, fewer
Speaker 3: than twenty in the green. The story is about three
Speaker 3: names in particular. Let's bring them up. We're going to
Speaker 3: go into the earning story with Amazon and Apple with
Speaker 3: our reporters, and later a detailed look at Intel. Yes,
Speaker 3: that is a twenty eight percent decline about fifteen thousand
Speaker 3: jobs will go reduction in CAPEX and op X. They
Speaker 3: basically have admitted that they were slow to respond to
Speaker 3: their reality that their market's not going well. From a
Speaker 3: top line perspective, we are going to get deeply into Apple,
Speaker 3: which is kind of a bright spot, and let's turn
Speaker 3: to that stock.
Speaker 4: Now.
Speaker 3: We're seeing a return to revenue for the quarter, but
Speaker 3: Apple not offering much in terms of clues about an
Speaker 3: upgrade cycle. When it comes to the iPhone sixteen. Bloomberg's
Speaker 3: Mark German is standing by and you and I manning
Speaker 3: the blog last night, a lot of emphasis on Apple
Speaker 3: Intelligence being a driver iPhone sixteen in the future. I
Speaker 3: think you and I have some doubts about that.
Speaker 1: Right.
Speaker 5: Apple knows that artificial intelligence, Apple Intelligence, because they call
Speaker 5: their sweet AI services are the buzzwords that gets Wall
Speaker 5: Street going right. For the past several quarters, Apple, even
Speaker 5: before announcing it i'd been teasing its new AI futures
Speaker 5: because it knew the market, knew Wall Street analysts were
Speaker 5: wanting this, it knew some consumers were wanting this, and
Speaker 5: so they focused a great deal of the call yesterday.
Speaker 1: Tim Cook in particular as well.
Speaker 5: As basically every analyst who ask the question talking about
Speaker 5: Apple intelligence. In my view, I think that Apple Intelligence,
Speaker 5: at least this year is still very nascent, and I
Speaker 5: don't believe it will or quite frankly, should drive iPhone
Speaker 5: upgrades this September. I think that's more of a next
Speaker 5: September and iPhone seventeen cycle thing, once all the features
Speaker 5: are available and we're a year out from that release,
Speaker 5: when more people are looking to upgrade.
Speaker 3: Grade to China was a focus where there was a
Speaker 3: six percent decline in sales, but Apple told us about
Speaker 3: the impact of FX and on a constant currency basis,
Speaker 3: it would have been a three percent decline. See pass
Speaker 3: that mod What were the products stories for Apple in China.
Speaker 5: Well, first of all, there was a time when Apple
Speaker 5: was drawing at such a big rate that they didn't
Speaker 5: need to get into FX, currency headwinds or anything like that.
Speaker 6: They didn't have to contextualize.
Speaker 5: These numbers to explain that they're better than they actually
Speaker 5: look on paper.
Speaker 1: But that's one thing.
Speaker 6: But the other thing to note is.
Speaker 5: That they're doing better in China in the second half
Speaker 5: of the year so far than they were doing in
Speaker 5: the first half of the year according to them, So
Speaker 5: you're seeing a bit of an acceleration for them, and
Speaker 5: that is coming out a particularly good time given that
Speaker 5: this iPhone upgrade cycle is approaching at the tail end
Speaker 5: of this quarter, so they're going into that with a
Speaker 5: bit of momentum and that's certainly positive news for them.
Speaker 5: So it's not all bad. I mean, if you look
Speaker 5: at the quarter in general and you look at the
Speaker 5: stock market today, it's clear why Apple's in the grain
Speaker 5: and almost everyone else in the Nasdaq.
Speaker 1: One hundred is in the rey.
Speaker 5: They beat Wall Street expectations, they grew revenue five percent,
Speaker 5: they returned to revenue growth after declining last quarter, and
Speaker 5: they beat on analysts forecasts for each of their major
Speaker 5: product categories plus services. So overall, pretty good day for
Speaker 5: the company.
Speaker 3: Bloomberg's Mark Gumman, Chief correspondent, Thank you. Amazon has told
Speaker 3: investors that profits will need to take a back seat
Speaker 3: in favor of heavy spending on artificial intelligence. His CEO
Speaker 3: Andy Jase on his bullish view for the new technology.
Speaker 7: It remained very bullish on the medium too long term
Speaker 7: impact AI and every business we know and can imagine.
Speaker 7: The progress may not be one straight line for companies.
Speaker 7: Genera AI especially is quite iterative, and companies have to
Speaker 7: build muscle around the best way to solve actual customer problems.
Speaker 3: But Wall Street did not like that. Shares down more
Speaker 3: than eleven percent in today's trading session, on track for
Speaker 3: the biggest drop since April of twenty twenty two, wiping
Speaker 3: out about two hundred billion dollars. In mar Let's get
Speaker 3: analysis with Bloomberg intelligence analyst Punham Goyle, you and I
Speaker 3: were talking in real time after the numbers dropped, right,
Speaker 3: and I said, where's the capex number? We did get one.
Speaker 3: Your reaction to it, yeah, you know.
Speaker 2: It's higher than we had expected. So they did thirty
Speaker 2: point five billion dollars in the first half. They expect
Speaker 2: two eh to be higher. We didn't expect them to continue.
Speaker 6: To invest more.
Speaker 2: So it is a bit of a shocker. But that said,
Speaker 2: if you think about Amazon for the longer term, the
Speaker 2: investments will pay off. The cloud business at one hundred
Speaker 2: billion dollars runway going to two hundred billion dollars by
Speaker 2: our estimate, it's going to need the investments, and also
Speaker 2: for Amazon.
Speaker 6: To play catch up on general to AI.
Speaker 2: Right, they're lagging some of the other peers, so you
Speaker 2: need to see them step up a little bit at least.
Speaker 2: We didn't expect it to be in two h but
Speaker 2: nonetheless it's coming and we do think you'll position a
Speaker 2: better for the longer term.
Speaker 3: I still focus on the AWS top line number. Nineteen
Speaker 3: percent was better than expectations, and like forget the financials.
Speaker 3: On this program, we hear a lot about how great
Speaker 3: Bedrock is, about the utilization of the platform for many
Speaker 3: different things in the world of llm's and generative AI.
Speaker 3: Why was that not a convincing enough number.
Speaker 2: Well, we had expected mid to high teen so about
Speaker 2: seventeen percent going into it. And while nineteen percent was
Speaker 2: a good number, undoubtedly the thirty five percent plus profit
Speaker 2: margin was also great. I think the focus just shifted
Speaker 2: all on the guidance and that's where the miss was.
Speaker 2: So I wouldn't discount that two Q wasn't good. I
Speaker 2: think two Q was very good on AWS, especially.
Speaker 3: My control room and producers are showing index level. Would
Speaker 3: point out that there is a lot of red in
Speaker 3: the market's Punham and Amazon is a big factor in that.
Speaker 3: Bloomberg's Punham Goyle fantastic analysis. Let's keep a conversation going
Speaker 3: with Helena Wang, research analysts at Philip Securities, and I
Speaker 3: think let's start with Amazon. There's a micro focus on AWS,
Speaker 3: how much money is being put into investment, and then
Speaker 3: how much money's coming out in the AI story. What
Speaker 3: did you make of it, Helena.
Speaker 8: Well, I think the hot topic of the last few
Speaker 8: week has been the huge CAPPAC span, whether it's justifiable.
Speaker 8: I mean, Amazon has guided exceptional increase in CAPAC since
Speaker 8: the last quarter. In the first half of twenty pointy four,
Speaker 8: their CAPPACK was thirty point five billion. They're guiding even
Speaker 8: higher a month of the second half of the year.
Speaker 8: Just to put in comparison, their CAPPACK so the entire
Speaker 8: year last year was only forty point eight billion, So
Speaker 8: that is definitely a very significant increase.
Speaker 6: So, like all the other big.
Speaker 8: Tech companies, they're selling their story of strong AI growth,
Speaker 8: very confident in their AI game. They would like to
Speaker 8: have more capacity than they already have today, and they're
Speaker 8: claiming that they're seeing strong signals of high future demand.
Speaker 8: I guess also, if you're in the AI race, it's
Speaker 8: almost impossible for you to stop investing in AI because
Speaker 8: in the short period you would be obsolete with no
Speaker 8: means to catch up but two investors. It really requires
Speaker 8: a lot of impatience. Everyone is telling the things, so
Speaker 8: it's hard to see whether in the short term whose
Speaker 8: investment will.
Speaker 3: Pay off in the Laura Helena just focused on AWS.
Speaker 3: We've hardly discussed the retail business or even advertising. Did
Speaker 3: you see anything in those segments of the business that
Speaker 3: interested you?
Speaker 8: For AWS, it has been accelerating nicely and nineteen percent
Speaker 8: of your year. So what we especially like about AWS
Speaker 8: is there a high operating margin compared to retails.
Speaker 6: Because AWS operating.
Speaker 8: Margin is thirty six percent compared to retails, which is
Speaker 8: only single Did you so AWS right now only contribute
Speaker 8: to eighteen percent of the total revenue, So we do
Speaker 8: believe was AWS scaling up so fast it is going
Speaker 8: to take up a bigger portion of the entire revenue.
Speaker 8: So we see the real kicker for Amazon in the
Speaker 8: future would be the margin expansion brought by AWS.
Speaker 3: Let's talk about Apple. You know, I look at the numbers.
Speaker 3: It was basically a beat across the board apart from China.
Speaker 3: How much embasis do you put on China number?
Speaker 8: Well, I would see Apple is saying they still see
Speaker 8: it already as an improvement compared to the first half
Speaker 8: of the year, but the numbers.
Speaker 6: Are definitely not great.
Speaker 1: Usually when a particular market.
Speaker 8: Is not doing well, Apple will specifically point out it's
Speaker 8: not really the iPhone but actually the other product category
Speaker 8: that drag the sales. But they have not commanded like
Speaker 8: that for this particular time, so we can take it
Speaker 8: that Apple is actually iPhone is actually part of the reason,
Speaker 8: or in fact one major reason for the decline. So
Speaker 8: domestic competition from local brand is still playing a big part.
Speaker 8: Apple was giving a huge discount in order to fight
Speaker 8: the competition. That will also be called the factor that hurts.
Speaker 3: Therenny Tim Cook and Lukeimi Street got a lot of
Speaker 3: questions about how Apple intelligence will impact an upgrade cycle
Speaker 3: in October, probably when when the sixteen generation comes. Have
Speaker 3: you done the math on that.
Speaker 1: Yeah, I did so.
Speaker 8: iPhone sales still remain pretty muted. They're down one percent
Speaker 8: year of the year for the splatter, so if you
Speaker 8: actually do the mass, they're guiding for five percent.
Speaker 1: Grocery in the next fluorter.
Speaker 8: So factor in service sector which is continually growing double digit,
Speaker 8: an iPad which grew pretty well also double digit in
Speaker 8: this quarter, so we're probably not gonna give so much
Speaker 8: in the next floyer. In terms of iPhone, it's probably
Speaker 8: going to remain flat or actually perform more poorly. So
Speaker 8: we're thinking that Apple intelligence boosts for the product cycle
Speaker 8: that everyone's been waiting for. It's probably unlikely to be
Speaker 8: seen in twenty twenty four. It's more of a twenty
Speaker 8: twenty five story.
Speaker 3: If the question is if you have an iPhone fifteen
Speaker 3: or fifteen pro Promax, now do you get the iPhone sixteen?
Speaker 3: I think there's a lot more discussed around that. Helena Wang,
Speaker 3: research analyst at Philip Securities, Thank you so much for
Speaker 3: your time. Now, coming up on the show, we're going
Speaker 3: to be joined by Bernstein Research analyst Stacey Raskon to
Speaker 3: break down Intel's earnings. An Intel story that's next. This
Speaker 3: is Bloomberg Technology. Intel shares suffering their biggest drop in
Speaker 3: more than forty years, this after the company gave a
Speaker 3: grim growth forecast and laid out plans to slash around
Speaker 3: fifteen thousand jobs, signaling that the chip maker is ill
Speaker 3: equipped to compete in the AI era. I want to
Speaker 3: bring in Stacey Rascon's senior analyst at Bernstein Research, leading
Speaker 3: semiconductor coverage. I ask you where you'd like to start, Stacy,
Speaker 3: which of the many things announced and the sort of
Speaker 3: guidance given is the most important factor here?
Speaker 1: Yeah? So so lok so.
Speaker 4: I mean the quarter itself, revenues were actually not too bad.
Speaker 4: It was the gross margins that really killed them, and
Speaker 4: the guidance was clearly awful.
Speaker 1: Revenues were bad.
Speaker 4: I mean, they did a hockey stick in the back
Speaker 4: half from last quarter. Clearly the backup is not playing
Speaker 4: out the way they thought. Gross margins are are falling
Speaker 4: into the abyss as their uh, they get higher costs
Speaker 4: on their chips.
Speaker 1: You know, clearly they're in a tough spot.
Speaker 4: I mean they announced a number of actions to try
Speaker 4: to like salvage, you know, to stop the ship from sinking.
Speaker 4: They're cutting CAPEX, they're cutting off X. They actually finally
Speaker 4: suspended their dividend. You know, they had they had cut
Speaker 4: that by two thirds a year a year and a
Speaker 4: half ago, so they finally suspended it. And they're doubling
Speaker 4: down on bringing in partners that will co.
Speaker 1: Invest on manufacturing capacity.
Speaker 4: They sold recently, they sold half their fab in Arizona,
Speaker 4: they're building to Brookfield and they just sold half of
Speaker 4: their fab in Ireland Fab forty, fab thirty four to
Speaker 4: Apollo for eleven billion dollars and they got that cash flowing.
Speaker 1: Now I'm on the right.
Speaker 4: Look, this is why I've used the phrase worst earnings
Speaker 4: from Intel in my career a number of times over
Speaker 4: the last year and a half two years, and this.
Speaker 1: One probably takes it. This time, probably the worst I've seen.
Speaker 3: Yeah, as you you know, Stacey had the opportunity to
Speaker 3: speak to Intel's CFO Daves Insider when the numbers hit
Speaker 3: and we got into missed opportunity. I guess this is
Speaker 3: what he said about the data center business, and I'm
Speaker 3: trying to understand what he meant, but he basically is
Speaker 3: saying they were over exposed in CPU, and I guess
Speaker 3: therefore by extension under exposed in GPU. We all know
Speaker 3: the story. Anyone that lives or works in the world
Speaker 3: of technology knows that all of the investment is going
Speaker 3: to high performance GPU or AI accelerators. Intel has one GALDI.
Speaker 3: So explain what Dave meant there, please?
Speaker 1: Yeah, yeah, you bet so.
Speaker 4: So they have been clearly over indexed, I mean almost
Speaker 4: entirely indexed to CPOs, and there's a few things going
Speaker 4: even within CPOs. By the way, you know, they've been
Speaker 4: losing a tremendous amount of share to their smaller competitor,
Speaker 4: so that's not been good.
Speaker 9: And then over the last like you know, as the
Speaker 9: AI boom has happened, we've had a share of a
Speaker 9: shift in the spending patterns away from CPU who's toward GPS.
Speaker 4: And other types of accelerats. And by the way, there's
Speaker 4: a broader question there. You could argue is that a
Speaker 4: cyclical trend or is that a structural trend? You're like,
Speaker 4: in five years, is the data center CPU TAM bigger
Speaker 4: or smaller than it is today? And like you can
Speaker 4: legitimately argue that it's smaller. So I mean that that's
Speaker 4: that's the issue. And the problem with Intel on that
Speaker 4: one is they don't really have that much of an
Speaker 4: AI or an accelerator play.
Speaker 1: Like they have a product that's called Gouty. They said that.
Speaker 4: They're going to sell five hundred million dollars worth of
Speaker 4: it's called Gouty three this year. I mean, it's it's
Speaker 4: it's effectively a rounding error, right, I mean, you know,
Speaker 4: a MD said they're going to do four and a
Speaker 4: half billion in data center revenues, and I think people
Speaker 4: think they're going to do more than that in Nvidia,
Speaker 4: you know, data center they might be one hundred billion
Speaker 4: dollars this year, and the five hundred million doesn't make
Speaker 4: up anywhere near you know, like the the air pocket
Speaker 4: that's happened both as they've lost share in CPUs and
Speaker 4: as that spending has shifted, so that that's that's kind
Speaker 4: of the problem and and freaking gouty at this point,
Speaker 4: is is baked like that that product is shipping like
Speaker 4: very clear the general demand for a relative everything else
Speaker 4: is very very minimal, Like it's just not enough to
Speaker 4: close that.
Speaker 1: So they don't really have much of an AI story unfortunately.
Speaker 3: On Stacey just real quick on cyclical end markets for
Speaker 3: them and non cyclical. I mean, the way that the
Speaker 3: CFO put it to me is that they just hadn't
Speaker 3: responded to the realities of their revenue, hence that the
Speaker 3: reduction opex capex and the head counts. But they did
Speaker 3: seem to be some glimmers of hope that coming into
Speaker 3: the current period and the rest of this calendar year,
Speaker 3: there are improvements in those markets.
Speaker 1: Yeah, yes and no.
Speaker 4: So I think PCs in general are better than they were.
Speaker 1: Remember, though, they don't.
Speaker 4: Sell PCs, they sell CPUs, right, And they talked about
Speaker 4: that there's inventory that's digesting in the backup, which is
Speaker 4: helping to impair it's impairing some of the revenue.
Speaker 1: Now, this is something that I've been worried about.
Speaker 4: We track the CPU channel pretty religiously, and you get
Speaker 4: over shipment, you get under ship and I've been concerned
Speaker 4: that at least in Q four and Q one, I
Speaker 4: think there was a fairly significant amount of overshipment of
Speaker 4: CPUs relative to PCs, and I think they're paying for
Speaker 4: that now. So you have some cyclical downside there, I think.
Speaker 4: On the data center server side, you know, there's been
Speaker 4: some green shoots that hopefully demand is getting better again
Speaker 4: off of some awful years, but again people now having
Speaker 4: like recession worries and everything else, and again they're still
Speaker 4: losing share. The data center galuty lift isn't really enough.
Speaker 4: And then some of their other businesses. You know, they
Speaker 4: have an FPGA business called Altra, and all the FPGA
Speaker 4: companies that's the same thing. They're working off a ton
Speaker 4: of inventory and that's not really getting better. Yet they
Speaker 4: still consolidate Mobile Eye, they own most of that. Compani's
Speaker 4: own Mobile Eye reported yesterday morning. We don't cover Mobile Eye,
Speaker 4: but just factually they slash their guidance for the rest
Speaker 4: of the year and so a bunch of revenue had
Speaker 4: to come up from there. It's just not great, and
Speaker 4: part of it, I think is their own doing. Last quarter,
Speaker 4: they'd sort of suggested we'd be seeing above seasonal growth
Speaker 4: in the back half, and it's clearly clearly not having
Speaker 4: the macros.
Speaker 1: The macro is getting worse.
Speaker 4: And then on the cost side again, they've got some
Speaker 4: incremental cost headwinds that are pretty severe that are that
Speaker 4: are impacting gross margins and cash and earnings and everything else.
Speaker 3: So Stacey resk On, senior analysts at Burnsteam Research, whether
Speaker 3: or not that is and will be the worst intel
Speaker 3: print of your career. I think you break up under
Speaker 3: this down okay, very quick. We have ten seconds.
Speaker 4: Ten seconds the silver lining, the cash that they're saving
Speaker 4: from the cost cuts and the dividend you know, suspension,
Speaker 4: and the cap X cuts, and then all of the
Speaker 4: money they're bringing in they'll live.
Speaker 1: I don't know what kind of a life that will be.
Speaker 1: They'll live. That's that's probably forty billion dollars of incremental
Speaker 1: cash over the next couple of years.
Speaker 4: So they'll live. But what is what kind of a
Speaker 4: life that's going to be? I think that is the
Speaker 4: question that.
Speaker 3: We're all okay with. Stacey Resk on Burnstein Research terrific.
Speaker 3: Thank you very much. There are some positive earnings prints
Speaker 3: talk about cloud communications company Twilio reporting earnings after closing
Speaker 3: bell Thursday. CEO because much Shipshander joins us for more
Speaker 3: from San Francisco. A big focus on growth. Growth that's
Speaker 3: coming in the second half. Growth that is kind of
Speaker 3: evidence now. But this is the first time you and
Speaker 3: I have been able to speak since you've been CEO,
Speaker 3: So what have you done to change that growth trajectory?
Speaker 10: Yeah, thanks for having me. I would say, you know,
Speaker 10: we're just like running the company with a lot more discipline,
Speaker 10: a lot more operating rigor, and as it relates to
Speaker 10: growth in particular, I think we've been very focused on
Speaker 10: some of the innovation bets that we've been making, and
Speaker 10: I think, perhaps most encouragingly, we're starting to see some
Speaker 10: real signs that this combination of communications which we're the
Speaker 10: leader in contextual data, which we're also the leader in
Speaker 10: plus AI. That that combination to drive really personalized experiences
Speaker 10: for consumers visa VI the customers we support is starting
Speaker 10: to get some traction.
Speaker 3: There's been a lot of emphasis well on sort of reorganization.
Speaker 3: What does the company Twilio look like now under the
Speaker 3: changes you've made, Kozma.
Speaker 10: Look, I think the company organization is in pretty good shape. Actually,
Speaker 10: like about a year or so ago, we took steps
Speaker 10: to you know, kind of get our cost base in shape.
Speaker 10: But on the on the flip side, we also wanted
Speaker 10: to be really focused in the areas in which we
Speaker 10: wanted to grow, and so we have a communications business
Speaker 10: that we established at that time as kind of a
Speaker 10: proper business unit. We did the same thing with our
Speaker 10: segment business, establishing that with a proper business unit, they've
Speaker 10: got kind of an aligned set of metrics. And I
Speaker 10: think the benefit of that is is that it also
Speaker 10: allows for a certain level of disclosure that investors were
Speaker 10: also asking for KOSM.
Speaker 3: It is important to note that that where we are
Speaker 3: today is in part the result of activist investor interest
Speaker 3: in the company. You know, you seem to have responded
Speaker 3: to that positively taken action. Whild you just update the
Speaker 3: audience that's familiar with Twilio where we stand please, Yeah.
Speaker 10: I just think fundamentally, like we're trying to run the
Speaker 10: company well well right, I mean, I think that's something
Speaker 10: that every single one of our shareowners want. It starts
Speaker 10: with financial discipline, you know, being smart about the bets
Speaker 10: that we're making. Obviously reaccelerating top line growth over time,
Speaker 10: we see positive signs about our ability to do that.
Speaker 10: We're more optimistic about that. I think operating rigor just
Speaker 10: kind of the internal mechanics of the company, like doing
Speaker 10: that well, delivering on the things that we said we
Speaker 10: would do and actually you know, going and doing those things.
Speaker 10: And then I think when it comes to innovation, just
Speaker 10: being really focused. You know. So we're taking a handful
Speaker 10: of bets, as I mentioned, one of those is really
Speaker 10: around this notion of contextual data, using that as a
Speaker 10: means to combine it with communications to drive interactions on
Speaker 10: the other side, like you know, we serve customers ultimately,
Speaker 10: and customers keep telling us that's what they want, and
Speaker 10: I think that's ultimately what's going to yield the success
Speaker 10: of the company as well as for our share owners.
Speaker 3: Well, contextual data. But when we talk about AI and Twilio,
Speaker 3: a lot of it plays on what you're good at, right,
Speaker 3: voice intelligence, verify those products. Have you seen an AI
Speaker 3: driven acceleration or are you just saying we've been doing
Speaker 3: this a while, guys.
Speaker 10: I think it's kind of early days, to be honest
Speaker 10: with you. But you know the nature of it is
Speaker 10: sort of in the product vernacular that you just referred to, right,
Speaker 10: So voice intelligence, right, I mean it's a little bit
Speaker 10: different than from where we were, let's say a few
Speaker 10: years ago. Like, actually, what's taking place inside these calls
Speaker 10: now is the ability to harvest some of the data
Speaker 10: always with consumer consent, I might add, but harvest the
Speaker 10: data inside those interactions to pick up keywords, feed that
Speaker 10: back into an AI engine such that that information can
Speaker 10: be used to both make that particular conversation more interesting,
Speaker 10: more engaging for one of the consumers that our customers
Speaker 10: are engaging with, as well as at the same time
Speaker 10: taking that data and feeding it back in so that
Speaker 10: over time that results in a more delightful customer engagement.
Speaker 3: Coz of a Ship Chandler, CEO of Twilio, who stocks
Speaker 3: up five percent on a day when tech is down
Speaker 3: big Welcome back to Bloomberg Technology, Ed Ludlow in New
Speaker 3: York City. Let's get a check in on the markets.
Speaker 3: Big tech is under pressure yet again, with Intel and
Speaker 3: Amazon leading the way lower. They're disappointing results, pushing the
Speaker 3: Nazek one hundred into correction territory. That means falling more
Speaker 3: than ten percent since hitting a record high just last month.
Speaker 3: But a different story for Apple this morning. It's in
Speaker 3: the green despite some disappointing numbers, particularly out of China.
Speaker 3: Now and listening investors are like are applauding the company's
Speaker 3: return to revenue growth emerging from a sales slump with
Speaker 3: five percent growth year over year. There are a lot
Speaker 3: of product stories within that, joining us for more deep
Speaker 3: water asset management, managing partner, Gene Monster and Gene. At
Speaker 3: the heart of your thesis is the debate around the
Speaker 3: osborne effect technology or consumer electronics fan. We'll always think
Speaker 3: about Apple and the iPhone in that way, But why
Speaker 3: and what is the conclusion you've drawn?
Speaker 11: Well, and maybe taking a step back, the osborne effect
Speaker 11: is a phenomenon that I'm sure any Apple user and
Speaker 11: any tech user is familiar with, but they may not
Speaker 11: know that defined as such. And that's this concept of
Speaker 11: if there is a pending big product coming, it's likely
Speaker 11: that you hold off on buying the existing product. Now,
Speaker 11: every year there's a slight Osborne effect, but the more
Speaker 11: anticipation there is for a next version of an iPhone,
Speaker 11: the greater the Osbourne effect. And so I in my
Speaker 11: years of covering Apple, have seen quarters where they have
Speaker 11: guided down before a major product cycle. In the case
Speaker 11: of their guidance for September, they guided for similar revenue
Speaker 11: growth five percent for the September quarters they just reported
Speaker 11: in June, and so effectively they are bucking the Osbourne
Speaker 11: effect in front of what is a highly anticipated cycle.
Speaker 11: And why that's so important is that's a sign that
Speaker 11: consumers simply can't live without Apple devices, that they still,
Speaker 11: even though it makes sense for them to hold off
Speaker 11: for just another month or two, they can't do it
Speaker 11: because they need these phones to continue to basically live
Speaker 11: their lives. And so I think that this was even
Speaker 11: though the guides was effectively in line for September, I
Speaker 11: think it really sent a powerful message to investors the
Speaker 11: strength of their product line. I think that's why the
Speaker 11: stock is up today.
Speaker 3: Gene. The top thing here is Apple Intelligence and the
Speaker 3: impact it will all won't have. Several analysts had multiple
Speaker 3: stabs of getting Tim Cook and Luke of Maistrie the CFO,
Speaker 3: to talk about the direct impact of Apple Intelligence on
Speaker 3: an upgrade cycle. I think Tim Cook went the furthest
Speaker 3: maybe in saying that there will be a meaningful cycle,
Speaker 3: but that no sort of data. What did you make
Speaker 3: of that?
Speaker 11: And he added that they just don't know until they know,
Speaker 11: And I think he was being reasonable.
Speaker 3: I think when I make of it.
Speaker 11: As I think it's a kind of a responsible, judicious
Speaker 11: response from him. At the end of the day, it
Speaker 11: comes down to I think going forward here, you know,
Speaker 11: you take his comments and you kind of set him aside,
Speaker 11: and you have to ask yourself a very basic question.
Speaker 11: Do you think that these features basically embedding genitave I
Speaker 11: throughout many, if not all features of the iPhone. Do
Speaker 11: you think that they are going to get people excited
Speaker 11: enough that they upgrade more often and they kind of
Speaker 11: create this super cycle for the next couple of years.
Speaker 11: And well, we don't have the confirmation from management on that.
Speaker 11: I think that that is the central question, just One
Speaker 11: other piece to add ed that you alluded to is
Speaker 11: that there is these features are going to come out
Speaker 11: over the next year, and so it's not going to
Speaker 11: be this kind of aha moment on at the end
Speaker 11: of September. It's going to be where people will get
Speaker 11: the new phones, they'll get a feature, they'll get another feature,
Speaker 11: and I think collectively in fiscal twenty five, we're going
Speaker 11: to see momentum around this cycle build, but it will
Speaker 11: not be a rocket ship type of a takeoff. It's
Speaker 11: going to be more of something that's going to build
Speaker 11: momentum over the next year.
Speaker 3: In China, there has been much may gene of the
Speaker 3: third party data. If I've learned a lesson, it's probably
Speaker 3: be cautious about the third party data because sometimes Apple
Speaker 3: executives then prove you wrong. But it has been hard
Speaker 3: to gauge the iPhone's performance against some of the domestic
Speaker 3: handset makers. Did you learn anything about that market from
Speaker 3: the call? And indeed, when we spoke to the CFO
Speaker 3: Luca Maistrie on the phone, Bloomberg's Emily Chang did that one.
Speaker 3: He's saying that the underlying demand is better than it's
Speaker 3: previously been in China.
Speaker 11: Luca's comments Tim comments were that this is the most
Speaker 11: fierce competitive environment of anywhere in the world, and they've
Speaker 11: seen a macro piece to it too.
Speaker 3: And so if I.
Speaker 11: Can interpret or translate Luca's comments kind of going forward
Speaker 11: here is that essentially a Chan's been tough. It's been
Speaker 11: down for three consecutive quarters, down seven percent, US quartered
Speaker 11: down eight, down thirteen in December. The good news is,
Speaker 11: and maybe this kind of gets to Luca's point, he's
Speaker 11: probably looking forward at these camps and the comps start
Speaker 11: to get really easy in September and even easier in December,
Speaker 11: and so the probability that China returns to growth is
Speaker 11: high going forward.
Speaker 3: So I think that that is a little bit of
Speaker 3: a relief.
Speaker 11: We kind of got through what is the trough I
Speaker 11: think ultimately of China. And just to put some perspective
Speaker 11: of how much that can impact the business is if
Speaker 11: you would exclude China from the overall business. So just
Speaker 11: look at the other eighty two percent of their business.
Speaker 11: It grew about seven percent in the quarter. As you mentioned,
Speaker 11: their overall business grew at five that was reported globally,
Speaker 11: and so China has a big weight on it, it
Speaker 11: has been a weight. I think that this will convert
Speaker 11: to a tailwind in the September or highly likely the
Speaker 11: December quarter.
Speaker 3: How important were services Jane to take to the bottom line,
Speaker 3: which is where I was looking, you know.
Speaker 11: Another nice surprise is that a few quarters ago services
Speaker 11: growth dipped to just under eleven percent. It was fourteen
Speaker 11: percent in the June quarter. They guided to just over
Speaker 11: thirteen percent growth for the September quarter. And that's all
Speaker 11: in the face of what's going on in terms of
Speaker 11: this talk of regulation. There has been some more substance
Speaker 11: to regulation in Europe, and they highlighted that the europe
Speaker 11: app store accounts for about seven percent of total app
Speaker 11: store revenue, which translates to about less than one percent.
Speaker 3: Of overall revenue.
Speaker 11: But the point is is that despite these changes, these headwinds,
Speaker 11: this concern, this anxiety around investors over the past year
Speaker 11: that somehow the services segment is going to slow, it
Speaker 11: just continues year in year out. I think it's testimony
Speaker 11: to just the flywheel of their products, the ecosystem, them
Speaker 11: continuing to add, and that services number next year should
Speaker 11: get a nice boost. With this opening eye arrangement. They
Speaker 11: will likely charge for a premium version of Chat GPT
Speaker 11: next year twenty bucks a month. Apple is going to
Speaker 11: take their cut on that. I think that that is
Speaker 11: going to continue to put the services segment in kind
Speaker 11: of this mid teens growth for through end of twenty
Speaker 11: five or twenty six.
Speaker 3: Depal's asset management managing part of the gene monster, the
Speaker 3: osborne effects. That's what it's all about, thank you very much.
Speaker 3: That we're tracking is snaps snapshares falling today after revenue
Speaker 3: for the quarter missed estimates, and there's the social media
Speaker 3: company's forecast disappointed amid weakness, particularly brand spending joining us
Speaker 3: now is eMarketer. To Prince v analyst Jasmine Emburg, you
Speaker 3: just go back to the original business, the advertising based business,
Speaker 3: and where they did well and where they didn't. What
Speaker 3: was your conclusion, Well, it.
Speaker 12: Does feel like a big step back for snap given
Speaker 12: all of the work that it's been doing in overhauling
Speaker 12: its ad business. There were some positive signs in the report.
Speaker 12: We saw growth in the number of active advertisers. We
Speaker 12: saw that it was successfully able to diversify its revenue streams.
Speaker 12: The Snapchat Plus now bringing in over one hundred million
Speaker 12: dollars in revenue, and there were some improvements in its
Speaker 12: direct response advertising business, which is of course what it's
Speaker 12: been really focused on fixing and improving.
Speaker 1: The Fact that brand advertising.
Speaker 12: Though, is still so much of a headwind for Snap,
Speaker 12: tells me that there is a lot more work to
Speaker 12: do within its direct response advertising business, both to get
Speaker 12: more advertisers on board and to get them to commit
Speaker 12: more budget to the app.
Speaker 3: Just looking at the stock down almost twenty five percent,
Speaker 3: that does put it on track for its biggest drops
Speaker 3: since February, and a number of analysts cut their price
Speaker 3: targets on it. We have to kind of frame Snap
Speaker 3: in I guess the context of competition with Meta Jasmine.
Speaker 3: Is that fair to do and what would we learn
Speaker 3: if we did that?
Speaker 12: Yeah, I mean, I was actually just having this conversation
Speaker 12: yesterday about whether it's still fair to compare Snap to
Speaker 12: Meta because they really are playing in very different leagues.
Speaker 12: And one of the reasons we saw investors reward Meta
Speaker 12: despite all of that AI spending and metaverse spending that
Speaker 12: it continues to push is because it has this massive
Speaker 12: ad business and it was able to show a lot
Speaker 12: of improvement there. Snap is a much smaller ad player
Speaker 12: and so and it has struggled to keep up and
Speaker 12: it's still working to catch up with Meta, and so
Speaker 12: it really needs to be focusing on that now. It's
Speaker 12: not small by any means. We also heard that eight
Speaker 12: hundred and fifty million monthly active users were the number
Speaker 12: of users on the app now, so I think a
Speaker 12: lot of times it's framed as being the small player,
Speaker 12: but certainly isn't. But in terms of scale, definitely still
Speaker 12: smaller than Meta.
Speaker 3: Jasmin M Burger b Markets are great to have you
Speaker 3: back here on Bloomberg Technology, Thank you very much. Now
Speaker 3: coming up, we continue earnings discussions, and we're joined by
Speaker 3: rab In Aconda, CFO of door Dash, to discuss his
Speaker 3: company's earnings, which were released after the bell Thursday as well,
Speaker 3: and again a rare bright spot in what's a pretty
Speaker 3: big day of red on the screen for markets this Friday.
Speaker 3: That conversation's next. This is Bloomberg Technology back to earnings
Speaker 3: door Dash, which reported Thursday after the closing bell strong outlook,
Speaker 3: particularly on the bottom line for the fiscal third CFO
Speaker 3: Rabi and Aconda join us now for more. I'm going
Speaker 3: to do something a bit different here, Rabbi. We know
Speaker 3: the numbers, the outlooks good. I actually just want to
Speaker 3: talk a bit more about the platform and where this
Speaker 3: growth is going to come from beyond restaurants into new
Speaker 3: product categories, because I think that's a real point of
Speaker 3: emphasis for a lot of investors this morning. So give
Speaker 3: me the near and long term future of how you're
Speaker 3: going to be driving that growth.
Speaker 13: Absolutely ed yesterday somebody on the media said we are
Speaker 13: redefining convenience.
Speaker 6: That's truly what you are seeing on the platform.
Speaker 13: We went from being one product in one country to
Speaker 13: be multiple.
Speaker 6: Products in over thirty different countries.
Speaker 13: We're really excited that more than twenty percent of our
Speaker 13: users today look to door Dash to order their groceries,
Speaker 13: convenience retail products, and that.
Speaker 6: Was just from zero percent just a few years ago.
Speaker 6: And we are doing this.
Speaker 13: Successfully in over thirty countries where the demand has been
Speaker 13: overwhelmingly positive.
Speaker 3: But Rabbi, is it a specific category?
Speaker 4: You know?
Speaker 3: I think about the types of things you use an
Speaker 3: app based service to get to you conveniently, right? Is
Speaker 3: it alcohol delivery? Is it cosmetics? Beauty? Fashion? Even? What
Speaker 3: are the areas where you think, Okay, we're going to
Speaker 3: get big on this area.
Speaker 6: Grocery has been a large component for US.
Speaker 13: We have more number of users at today ordering grocery
Speaker 13: than ever before, and they're ordering more times than ever before.
Speaker 6: And the reason is we've increased the selection.
Speaker 13: On the East Coast, We've added major brands such as
Speaker 13: our hold in Wakeform. The improvement in selection is what
Speaker 13: you're seeing driving the growth in grocery.
Speaker 6: At the same time, retail is an exciting part.
Speaker 13: Consumers are very excited about getting their products instantly when
Speaker 13: they order beauty products from Sephora or Alt of Beauty,
Speaker 13: which are other.
Speaker 6: Major brands that we've added.
Speaker 13: Number Two, what we're seeing is the strength in new verticals,
Speaker 13: which is categories outside of restaurants, continues to be strong,
Speaker 13: not just in the US, but in many of our
Speaker 13: international markets as well.
Speaker 6: So you seeing strength not just in grocery. You seeing
Speaker 6: strength in retail.
Speaker 13: You're seeing strength in beauty, alcohol, many categories outside of
Speaker 13: our core restaurants business, while the restaurant's business.
Speaker 6: Continues to grow quite nicely as well.
Speaker 3: I think back to the earlier days of covering uber
Speaker 3: in this obsession with adjust sit in the ebit there
Speaker 3: was just, trust me, there was an obsession the question
Speaker 3: for door Dash is on operational profitability. You've given a
Speaker 3: pledge before on timeline. What's the latest.
Speaker 13: Our financial nonstar is driving long term free cash flow.
Speaker 13: For sure, you're seeing the business do really well in
Speaker 13: continue to drive free cash flow higher when I measure
Speaker 13: and monitor the business. To me, free cash flow is
Speaker 13: truly the health of the business and when you look
Speaker 13: at it, just Ayba does well, that's at an all
Speaker 13: time high.
Speaker 3: Robbie, you and I discussed this sort of technology side
Speaker 3: of the business as well. How do you scale by
Speaker 3: adding merchants using incentives in a way that doesn't kind
Speaker 3: of impact that maybe the more profitful side of the
Speaker 3: business on the back end solution side of things.
Speaker 13: The key for us ed is scale is what drives
Speaker 13: profitability in the business. We have more than thirty seven
Speaker 13: million consumers that shop with us every single month. What
Speaker 13: we see is when we add new categories, the overall
Speaker 13: engagement on the platform goes up.
Speaker 6: We are making the app more personalized.
Speaker 13: When you search for something on DoorDash today, we remember
Speaker 13: your preferences and the search results reflect.
Speaker 6: What's your preference on DoorDash.
Speaker 13: All of this ultimately is driving users to come back
Speaker 13: more often.
Speaker 6: They spend with us a lot more.
Speaker 13: We're driving value not just to consumers but also to merchants,
Speaker 13: and you're seeing us driving growth for merchants as well.
Speaker 13: The combination of all this is what's driving ultimately the
Speaker 13: growth as well as the profitability in the business.
Speaker 3: Rabi and Aconda DoorDash CFO. It's great to catch up.
Speaker 3: Have you back here on Bloomblight Technology. Thank you. There
Speaker 3: are other news stories. It's time for talking tech and
Speaker 3: first up, Nintendo profits free full seventy one percent. The
Speaker 3: gaming company posted just three hundred and sixty five point
Speaker 3: one million in profits in the three months through June.
Speaker 3: This is consumers hold off on purchases. Is the way
Speaker 3: a new flagship game console that replaces it's now aging
Speaker 3: switch in its seven year plus. Billionaire Jack Marer scores
Speaker 3: a win as his ant Group backed Mint hits evaluation
Speaker 3: of five billion dollars. The fintech company raised new funds
Speaker 3: as its popular e wallet service reaches more than ninety
Speaker 3: million users in the Philippines. That's according to Bloomberg calculations,
Speaker 3: and ant Group were in one quarter of the entity shares,
Speaker 3: pricing the value of the stake at one point two
Speaker 3: billion dollars and in battled short seller Andrew Left's deleted
Speaker 3: tweets are in the spotlight. The investors removed his research
Speaker 3: firm's entire tweet history last year in an effort to
Speaker 3: fend off what he called class action attorneys and trolls.
Speaker 3: Now the US Justice Department are digging through those messages,
Speaker 3: accusing Left of manipulating the market to benefit his own
Speaker 3: trading and lying to investigators. Okay coinbased CFO Alicia has
Speaker 3: spoke with Bloomberg on Thursday to discuss her company's earnings,
Speaker 3: noting growth in subscription and services and driving developer creativity
Speaker 3: on the base network. Listen to this.
Speaker 14: We're really pleased with the growth of subscription and services
Speaker 14: this quarter. As you note, we grew in every category
Speaker 14: of subscription and services and reached five hundred and ninety
Speaker 14: nine million, a new all time high for us. One
Speaker 14: of our goals has been revenue diversification, and we're pleased
Speaker 14: to see that mix play out over time. We don't
Speaker 14: look at when it will cross shanally. We look at
Speaker 14: growth of each of our revenues, diversification of all of
Speaker 14: our revenue streams, and when I look at our transaction revenue.
Speaker 1: It does EBB and.
Speaker 14: Flow with volatility for spot trading. But we're pleased to
Speaker 14: see is continued growth of that other transaction revenue. Base
Speaker 14: has become one of the biggest contributors to other transaction
Speaker 14: revenue and the building blocks are just getting started for
Speaker 14: lower cost payments. USDC on Base now is free. We're
Speaker 14: seeing twenty billion dollars of transaction volume of USDC on
Speaker 14: Base over the last two weeks. And so as we
Speaker 14: think these building blocks come together, we could see diversification
Speaker 14: of transaction revenue as well. But really please with our
Speaker 14: subscription services perform this quarter.
Speaker 15: Base double down on that Base is a relatively new
Speaker 15: product here for coinbase, how is that going to start
Speaker 15: contributing to a greater scale At the bottom line, what
Speaker 15: exactly are people using on base that is creating more
Speaker 15: of a.
Speaker 3: Cash flow stream for you?
Speaker 14: So just to remind what everybody what Base is. Bases
Speaker 14: a layer two solution, which means that it sits on
Speaker 14: top of ethereum and it's enabling faster, cheaper transactions. And
Speaker 14: so that has been our goal, driving faster and cheaper
Speaker 14: transactions to a mission that we have of one second
Speaker 14: and one cent. As I said, over the last ninety days,
Speaker 14: we saw it come down under a cent for each
Speaker 14: transaction and what that led to is three hundred percent
Speaker 14: transaction growth quarter over quarter. This is enabling developers to
Speaker 14: build new applications on top of Base that can benefit
Speaker 14: from embedded payments within that application. And we're seeing all
Speaker 14: sorts of creativity emerge in this space. We're seeing people
Speaker 14: build new social networks, we're seeing new types of games.
Speaker 14: Creativity is blooming on the Base network and that's what
Speaker 14: our focus is right now, driving that developer activity. Developers
Speaker 14: will then bring users. Those users will drive transactions, and
Speaker 14: those transactions will turn the sequencer fees that will bring revenue.
Speaker 5: To our P and L.
Speaker 14: How long does it take for that to play out?
Speaker 14: What are you modeling right now, Alisha, Well, it's early
Speaker 14: days and so what we're pleased to see is that
Speaker 14: we've become the number one layer two in terms of
Speaker 14: contracts posted. So that focus on developer activity is where
Speaker 14: our energy is right now.
Speaker 3: That was Alisha has CFO of coinbas Serah Brass Systems
Speaker 3: has start up making chips optimized for AI, has filed
Speaker 3: confidentially for an initial public offering sources say has picked
Speaker 3: the City Group as a lead bank on its IPO
Speaker 3: and that it's targeting a listing in the second half
Speaker 3: of this year. Bloomberg's Amy or here with me in
Speaker 3: New York City. You and I have been tracking this
Speaker 3: one for a little while with the teams. Interesting, let's
Speaker 3: start with the basics of what we know, timing, who's involved.
Speaker 16: So the timing is going to be in early October,
Speaker 16: so that would kind of like be the group of
Speaker 16: IPOs that is going to list and go for an
Speaker 16: offering like after Labor Day, because right now the IPO
Speaker 16: kind of window is kind of slightly shut after the
Speaker 16: July kind of flow of IPOs, and then the next
Speaker 16: window is going to be September October before everything is
Speaker 16: probably going to slow down because of the election kind
Speaker 16: of volatility.
Speaker 3: Yeah, let's see. It's an interesting decision to make, isn't it.
Speaker 3: I Mean, the reason that Cerbras is interesting as a
Speaker 3: startup as a company beyond the money it's raised and
Speaker 3: the people already on the cap table, is what it does.
Speaker 3: You know, it's very on brand for what's in vogue
Speaker 3: at the moment. What do you make of that? And
Speaker 3: and I guess it's shoppability or saleability in this market.
Speaker 16: I think a lot of people have been like talking
Speaker 16: about AI, especially with the celldown right now, is talking
Speaker 16: about whether it actually does produce money, right, But because
Speaker 16: there's been quite a lot of like a adjacent plays
Speaker 16: like redded, they were trying to tap into that market.
Speaker 16: But Sarah Bras actually is right smack in the middle
Speaker 16: of it. It produces chips. It makes the largest chip
Speaker 16: on the market, is much bigger than the others. If
Speaker 16: you think about normal chips are the size of postage stem.
Speaker 3: This one is in.
Speaker 16: The size of a dinner plate. So with more memory,
Speaker 16: with more calls, so technically faster, it can handle more data.
Speaker 16: And then it uses those chips in a supercomputer that
Speaker 16: will handle a lot of data data analysis as customers
Speaker 16: include military, government and also pharmaceutical companies in the drctorscovery process.
Speaker 16: So that's like really at the heart at the core
Speaker 16: of what people are looking for in terms of AI uses.
Speaker 3: Bloombergs Amy or breaking a lot of news recently, but
Speaker 3: this is one that's been interesting for me to be
Speaker 3: involved in as well. We have to go back to
Speaker 3: the markets. This is what it looks like this Friday.
Speaker 3: Remember on aggregate, the Nasdaq one hundred is headed for
Speaker 3: its fourth straight weekly decline, matching the run of drops
Speaker 3: we saw in April and is technically in correction territory.
Speaker 3: The big drags you see them on the screen. Amazon
Speaker 3: down nine percent, Intel down twenty six percent, on track
Speaker 3: for its biggest drop since nineteen eighty two. And then
Speaker 3: bucking that trend is Apple up two percentage points to
Speaker 3: the upside where there was a return to growth. There
Speaker 3: are some big questions about how much money needs to
Speaker 3: be spent on the infrastructure side to get us to
Speaker 3: this world where AI is generating meaningfully on the top
Speaker 3: and bottom line. It's actually been a really wonderful week
Speaker 3: to be in New York City. That does it for
Speaker 3: this edition of Bloomberg Technology. Don't forget to recap all
Speaker 3: the conversations we've had today on the podcast. They were
Speaker 3: dynamic and there is a lot going on. You know
Speaker 3: where to find it on the terminal, the Bloomberg platforms,
Speaker 3: as well as on Apple, Spotify and iHeart So right
Speaker 3: after the show, I'm jumping on a plane back to
Speaker 3: San Francisco. I'll see you next week. That does it
Speaker 3: for this edition of Bloomberg Technology. This is Bloomberg