WEBVTT - Instant Reaction: Microsoft, Meta Shares Slip After Earnings 0:00:02.520 --> 0:00:07.280 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.200 --> 0:00:12.080 This is a breaking news update from Bloomberg. 0:00:12.880 --> 0:00:16.880 Instant reaction and analysis from our three thousand journalists and 0:00:16.920 --> 0:00:18.439 analysts around the world. 0:00:19.360 --> 0:00:22.959 Big drop of earnings, as we mentioned, really three of 0:00:22.960 --> 0:00:26.880 the mag seven reporting you've got Microsoft down about three 0:00:26.880 --> 0:00:29.639 point three and a half percent. Let's just round it 0:00:29.720 --> 0:00:33.800 up here. You've got Alphabet it is up about four percent, 0:00:33.880 --> 0:00:37.279 So pressure on Microsoft, a rally in Alphabet. And then 0:00:37.280 --> 0:00:39.720 you've got Meta right now it is dropping in a 0:00:39.720 --> 0:00:42.080 big way. Tim, We've got that what down about six percent? 0:00:42.400 --> 0:00:44.840 Yeah, So long term metas as it expects a significant 0:00:44.840 --> 0:00:47.920 reduction in our federal US federal cash tax payments for 0:00:48.000 --> 0:00:50.920 remainder of twenty twenty five and future years due to 0:00:50.920 --> 0:00:54.680 the implementation of the One Big Beautiful Bill Act. But 0:00:55.560 --> 0:00:57.320 they reported a net income of just two point seven 0:00:57.360 --> 0:00:59.279 to one billion. That was a huge drop from last year. 0:00:59.320 --> 0:01:01.640 The company says that number would have actually been eighteen 0:01:01.680 --> 0:01:04.080 point six four billion if not for a one time 0:01:04.120 --> 0:01:06.399 non cash income tax charge of fifteen point nine three 0:01:06.400 --> 0:01:07.440 billion dollars. 0:01:07.920 --> 0:01:10.200 I want to know, I don't understand it so well. 0:01:10.240 --> 0:01:11.240 It's a one time charge. 0:01:11.280 --> 0:01:14.399 I get that they're paying it now, Okay, it reduces 0:01:14.520 --> 0:01:18.039 net income to something that looks way below what everybody. 0:01:17.720 --> 0:01:18.240 Thought it would be. 0:01:18.319 --> 0:01:20.399 What is this charge though, that's a question that we're 0:01:20.400 --> 0:01:24.000 going to have to ask Ivan Findsath. Why investors, we're 0:01:24.040 --> 0:01:25.039 not expecting. 0:01:24.600 --> 0:01:27.080 This because it's not like taxes changed from the year before. 0:01:27.280 --> 0:01:29.640 And why is Meta the company that has that has 0:01:29.680 --> 0:01:31.319 this hit and not these other companies. 0:01:31.360 --> 0:01:33.320 That's what I'm saying, Like, I understand the big beautiful 0:01:33.520 --> 0:01:37.279 you know bill act is going to change their tax 0:01:37.560 --> 0:01:38.560 situation going. 0:01:38.440 --> 0:01:40.400 Forward, but why they one time hit right now? 0:01:40.440 --> 0:01:43.679 But right exactly what changed from the previous year that 0:01:43.720 --> 0:01:44.560 we're seeing all of this? 0:01:44.680 --> 0:01:46.920 So they were very clear, it seemed like they want 0:01:46.959 --> 0:01:48.760 to be very clear in their communication. There was like 0:01:48.800 --> 0:01:51.840 this paragraph devoted to this in the earnings release, just 0:01:51.920 --> 0:01:55.320 below Mark Zuckerberg's commentary, Right, the street is not not 0:01:55.480 --> 0:01:56.360 buying that right now. 0:01:56.400 --> 0:01:58.400 I will also say that, you know, our Kurt Wagner's 0:01:58.400 --> 0:02:00.240 pointing out here we go from the release are current 0:02:00.320 --> 0:02:03.360 expectation is that capital expenditures dollar growth will be notably 0:02:03.480 --> 0:02:06.040 larger in twenty twenty six and twenty twenty five. I 0:02:06.080 --> 0:02:07.480 have to say that that was one of the things 0:02:07.560 --> 0:02:10.840 I was looking at in terms of their expenses and 0:02:10.919 --> 0:02:14.440 so on, have gone up about thirty two percent. 0:02:14.240 --> 0:02:15.000 Year over year. 0:02:15.840 --> 0:02:18.840 And if they're looking at spending even more, maybe there 0:02:18.840 --> 0:02:23.480 are some concerns again about the spend, the AI spend, 0:02:23.480 --> 0:02:25.560 which many say you need, you got to get ahead 0:02:25.560 --> 0:02:26.880 of all of this to meet the demand. 0:02:27.080 --> 0:02:28.520 But will that ultimately pay off? 0:02:28.560 --> 0:02:30.800 Yeah, let's put some numbers there. Sixty six billion to 0:02:30.840 --> 0:02:33.160 seventy two billion as of June. That was the twenty 0:02:33.200 --> 0:02:36.200 twenty five capex guidance for the year. Things have tightened 0:02:36.680 --> 0:02:39.600 a little bit to seventy billion to seventy two billion. 0:02:39.639 --> 0:02:41.560 It's coming in at the high end of the original range. 0:02:41.560 --> 0:02:43.200 But if that's what it's going to be for this year, 0:02:43.520 --> 0:02:46.120 and then the company says CAPEX dollar growth will be 0:02:46.160 --> 0:02:48.640 notably larger in twenty six than in twenty five, how 0:02:48.720 --> 0:02:50.639 much bigger than seventy to seventy two billion dollars is 0:02:50.680 --> 0:02:51.040 it going to be? 0:02:51.080 --> 0:02:52.280 Exactly place to the spend. 0:02:52.680 --> 0:02:54.760 I will point out the third quarter AD revenue that 0:02:54.840 --> 0:02:57.239 was a big fifty billion versus the estimate of forty 0:02:57.240 --> 0:02:58.320 eight point fifty nine billion. 0:02:58.320 --> 0:03:00.520 If you recall last quarter, we got to. 0:03:00.480 --> 0:03:03.560 This and we saw how the company was monetizing the 0:03:03.600 --> 0:03:06.320 AI spend. So there are still some more questions to 0:03:06.400 --> 0:03:07.960 be known. Again, I'm just going to pull up Meta 0:03:08.000 --> 0:03:10.399 here in the aftermarket, folks, it's down about six point 0:03:10.480 --> 0:03:13.400 six percent. Let's also talk about Microsoft because this one 0:03:13.440 --> 0:03:15.440 also under pressure, tim It's down about three and a 0:03:15.480 --> 0:03:15.960 half percent. 0:03:16.080 --> 0:03:20.120 Yeah, first quarter revenue did beat estimates. Microsoft reported revenue 0:03:20.120 --> 0:03:22.960 for the first quarter or Azure and other cloud services 0:03:23.000 --> 0:03:25.359 revenue x FX for the first quarter that beat the 0:03:25.360 --> 0:03:28.839 average Chennalist estament. Here's some numbers. Seventy seven point six 0:03:28.960 --> 0:03:31.679 seven billion that beat estimates of seventy five point five 0:03:31.680 --> 0:03:34.080 to five billion. That was for the first quarter. Earnings 0:03:34.080 --> 0:03:36.600 per share came in at three dollars and seventy two cents. 0:03:36.920 --> 0:03:39.880 Operating income came in above estimates at thirty seven point 0:03:40.000 --> 0:03:42.800 nine to six billion, that beat estimates Carol of thirty 0:03:42.800 --> 0:03:44.080 five point one billion dollars. 0:03:44.120 --> 0:03:46.200 All right, let's see if the growth rates though, you know, 0:03:46.400 --> 0:03:49.680 is what does seem like the investors are a little disappointed, 0:03:49.680 --> 0:03:51.040 as we said, the stock down three and a half 0:03:51.080 --> 0:03:53.120 percent here in the after market. 0:03:53.160 --> 0:03:55.960 What the guidance on the call. Guidance on the call. 0:03:55.920 --> 0:03:57.760 Yeah, that's true, right, and we'll find out the outlook. 0:03:58.080 --> 0:04:00.680 This stock, keep in mind, is up almost thirty percent 0:04:00.760 --> 0:04:03.160 year to date. Here in twenty twenty five. Let's head 0:04:03.200 --> 0:04:05.360 out to our Chicago News bureau. That's where we find 0:04:05.360 --> 0:04:09.080 Bloomberg Intelligence senior technology analyst Ana Anaag. We want to 0:04:09.080 --> 0:04:12.200 give you a little time to stew over this, walk 0:04:12.240 --> 0:04:14.480 us through what we've got so far from Microsoft, because 0:04:14.480 --> 0:04:16.080 investors seem a little disappointed. 0:04:17.400 --> 0:04:19.040 Yeah, I mean I don't. I don't really find a 0:04:19.040 --> 0:04:21.440 whole lot of mistakes. And there's these numbers and you 0:04:21.480 --> 0:04:24.040 look at Azure growth of thirty nine percent, I mean, 0:04:24.080 --> 0:04:27.719 given that size, that's pretty good. The margins actually stood 0:04:27.720 --> 0:04:30.920 out way, you know, way higher than what we were anticipating. 0:04:30.960 --> 0:04:33.000 We thought there was going to be pressure on margins 0:04:33.000 --> 0:04:35.240 because of all the spending and then the last lea 0:04:35.640 --> 0:04:38.800 when you look at the capex number substantially higher than 0:04:38.920 --> 0:04:41.880 the thirty billion that they talked about now in you know, 0:04:41.920 --> 0:04:44.479 to some people maybe that's a disappointment, but for us, 0:04:44.640 --> 0:04:46.680 that's a good thing because I think they have so 0:04:46.800 --> 0:04:49.880 much demand coming in. They're going to add more capacity 0:04:49.920 --> 0:04:52.599 this this year, and that's something that you know, we 0:04:52.640 --> 0:04:53.559 have been saying for a while. 0:04:53.760 --> 0:04:55.760 Well, you know, I'll ask you the same question that 0:04:55.839 --> 0:04:57.720 I asked Angelo Zino a little earlier. And maybe it's 0:04:57.760 --> 0:04:59.240 too early to tell me if we won't hear anything 0:04:59.240 --> 0:05:02.960 about on the call, But the cloud race between the 0:05:03.000 --> 0:05:07.400 three biggest providers out there, Aws, Azure, Google Cloud, is 0:05:07.440 --> 0:05:11.240 there an opportunity for Azure to get market share from 0:05:11.400 --> 0:05:15.039 from companies that might have been affected by last week's 0:05:15.080 --> 0:05:17.360 AWS outage? Is that an opportunity? 0:05:18.440 --> 0:05:21.000 Well, I typically I would say no, because they are 0:05:21.040 --> 0:05:24.000 facing the same problem today. Frankly, so when you look 0:05:24.040 --> 0:05:27.640 at some of these large install bases, it's very difficult 0:05:27.680 --> 0:05:30.760 to change your applications. But what is the bigger opportunity, 0:05:30.839 --> 0:05:33.719 not just for Amazon or not just for Microsoft, but 0:05:33.800 --> 0:05:37.720 for all of them, including Oracle, is most companies eventually 0:05:37.800 --> 0:05:40.359 will have a backup cloud provider. They don't have it 0:05:40.440 --> 0:05:42.720 right now, but that is going to be one of 0:05:42.720 --> 0:05:45.559 the bigger growth drivers down the road after the AI 0:05:45.640 --> 0:05:48.880 boom is done, you know. So, I mean, from our side, 0:05:49.000 --> 0:05:51.120 the market is big enough for all of them to 0:05:51.200 --> 0:05:54.160 prosper very very well in the coming use. 0:05:54.240 --> 0:05:57.200 I mean, honor as you said that the Azure Cloud 0:05:57.200 --> 0:06:00.360 Computing Unit posted a thirty nine percent revenue in the 0:06:00.880 --> 0:06:04.680 quarter when adjusting for currency fluctuations. That did beat the 0:06:04.680 --> 0:06:08.440 street estimate of thirty seven percent. I'm reading some you 0:06:08.480 --> 0:06:10.840 know analysis that says, well, that was a disappointed the 0:06:11.400 --> 0:06:15.320 expectations were high. What what was there a whisper number 0:06:15.360 --> 0:06:16.440 in terms of growth. 0:06:16.200 --> 0:06:16.679 On the street. 0:06:17.920 --> 0:06:20.240 No, the consensus was thirty seven. This is what the 0:06:20.240 --> 0:06:22.960 company said. Now there is if you really want to 0:06:23.000 --> 0:06:26.039 dissect it, you know badly, then you could say, well, 0:06:26.440 --> 0:06:29.960 Google Cloud growth accelerated in the quarter compared to the 0:06:30.000 --> 0:06:33.200 previous quarter, but Microsoft it was thirty nine. It's it's 0:06:33.200 --> 0:06:35.320 still at thirty nine. But you know, they are different 0:06:35.360 --> 0:06:37.840 basis that one's you know, Microsoft is running at about 0:06:37.839 --> 0:06:40.400 seventy five percent, you know, eighty billion dollars in annual 0:06:40.480 --> 0:06:43.440 run rate. You know, Google Cloud is still at thirty percent, 0:06:43.839 --> 0:06:47.400 and yet Azure growth is higher than Google's cloud growth. 0:06:47.480 --> 0:06:50.159 So you know, I think people are probably just splitting 0:06:50.160 --> 0:06:51.000 hairs at this point. 0:06:52.760 --> 0:06:55.000 Yeah, and you referenced that when you were answering my question. 0:06:55.080 --> 0:06:59.400 You reference the outage that Microsoft has having right now, 0:06:59.400 --> 0:07:01.960 this global Microsoft outage. So we should note that, yeah, 0:07:02.000 --> 0:07:05.920 just cloud cloud companies are cloud companies and sometimes it's 0:07:05.960 --> 0:07:08.560 AWS that is the outage. Sometimes it's Microsoft that that 0:07:08.600 --> 0:07:11.400 has the that has the outage. Hey, the open AI question, 0:07:11.520 --> 0:07:13.560 we talked a lot about this with you yesterday and 0:07:13.960 --> 0:07:16.040 I imagine that on the call, investors will have a 0:07:16.080 --> 0:07:19.200 lot of questions about, Okay, this close to thirty percent 0:07:19.440 --> 0:07:23.560 ownership of open II, the parent company of chat GBT, 0:07:24.240 --> 0:07:25.880 what is that going to do for Microsoft? 0:07:27.360 --> 0:07:27.560 See? 0:07:27.640 --> 0:07:29.840 I think from our side, the equity part is not 0:07:29.960 --> 0:07:33.000 what you know, for our concern, it's really the technology 0:07:33.040 --> 0:07:35.800 that Microsoft is holding on to that's really the critical 0:07:35.800 --> 0:07:37.920 piece because you know, one of the ways we think 0:07:37.920 --> 0:07:40.600 about is they will sell more products, they will sell 0:07:40.640 --> 0:07:44.360 more cloud services using that technology than they would just 0:07:44.440 --> 0:07:46.720 on the you know, share side of it. And that's 0:07:46.760 --> 0:07:49.360 a bigger thing for us because they have, you know, 0:07:49.760 --> 0:07:51.920 a hold of that for the next seven years. 0:07:52.560 --> 0:07:54.000 Hey, one of the things I want to ask you, 0:07:54.080 --> 0:07:57.240 and I know this isn't typically your coverage, but you 0:07:57.280 --> 0:07:57.840 know you're. 0:07:57.720 --> 0:07:59.520 Smart and you cover all things technology. 0:08:00.240 --> 0:08:03.920 Meta Meta down almost eight percent here in the aftermarket 0:08:04.960 --> 0:08:08.600 as you see this, Uh, what's what's the problem. There's 0:08:08.600 --> 0:08:11.360 one tax one time tax charge. I guess we're still 0:08:11.360 --> 0:08:13.520 trying to figure this out. But is it all about 0:08:13.560 --> 0:08:15.480 that or is it just that we were caught off guard. 0:08:16.680 --> 0:08:18.120 See I think that could be a lot of the 0:08:18.160 --> 0:08:20.400 noise then the number, and you know, I'm very sure 0:08:20.440 --> 0:08:22.600 they're going to give clarity on that. But the big 0:08:22.680 --> 0:08:25.440 question of the overheind On and Mega Meta always is, 0:08:25.840 --> 0:08:28.360 you know, how are you monetizing a You're spending all 0:08:28.400 --> 0:08:30.920 this money, where's the revenue you show for it? I 0:08:30.920 --> 0:08:33.720 think that's where management really needs to give and address 0:08:33.760 --> 0:08:35.920 that in a much more succinct way than they have. 0:08:36.480 --> 0:08:38.640 The other side is they don't have a cloud platform 0:08:38.800 --> 0:08:41.480 just like Google does, or Amazon does or Microsoft does. 0:08:41.520 --> 0:08:44.720 So meta is the one that needs to explain these 0:08:44.720 --> 0:08:47.319 things far better than, frankly the other three. 0:08:48.320 --> 0:08:51.320 I want to bring in Ivan find Seth, research director 0:08:51.320 --> 0:08:53.959 and chief investment officer with Tiger's Financial Partners, got over 0:08:53.960 --> 0:08:56.760 five hundred million dollars in assets under management, and pose 0:08:56.840 --> 0:09:01.000 that same question to him about meta platforms, saying that 0:09:01.040 --> 0:09:03.720 the implementation of the One Big Beautiful Bill Act led 0:09:03.760 --> 0:09:07.959 to the recognition of evaluation allowance against our US federal 0:09:08.000 --> 0:09:11.319 deferred tax assets, reflecting the impact of the US Corporate 0:09:11.600 --> 0:09:14.920 Alternative Minimum Tax. The result of one time non cash 0:09:14.960 --> 0:09:17.959 income tax charge of fifteen point nine three billion dollars. 0:09:18.440 --> 0:09:21.520 Shares carroll down seven point eight percent. Ivan, You've had 0:09:21.520 --> 0:09:23.360 some time to dig into this a little bit on 0:09:23.400 --> 0:09:26.120 the meta platform side. What's going on here? 0:09:27.480 --> 0:09:29.599 Well? All right, so the Big Beautiful Bill caused the 0:09:29.640 --> 0:09:32.440 recognition of a deferred tax asset. It's actually a non 0:09:32.520 --> 0:09:35.120 cast charge. And there while it caused a spike in 0:09:35.120 --> 0:09:38.080 their tax rates eighty seven percent for the quarter, it 0:09:38.080 --> 0:09:41.120 actually goes down significantly going forward. I think this is 0:09:41.240 --> 0:09:44.160 really a non event. It's an accounting issue, and I 0:09:44.200 --> 0:09:46.920 think any weakness is a buying opportunity in the STOP 0:09:47.040 --> 0:09:50.160 because there's so many positive long term trends that will 0:09:50.240 --> 0:09:51.720 continue to drive the STOP higher. 0:09:51.840 --> 0:09:53.520 But is that why the stock is down right now 0:09:53.520 --> 0:09:56.240 because of this one time charge affecting the bottom line? 0:09:56.280 --> 0:09:58.000 Is that is that the concern? Or is it what 0:09:58.080 --> 0:10:03.079 Carol brought up the idea of CAPEX going up next 0:10:03.280 --> 0:10:05.040 and to spend well? 0:10:05.520 --> 0:10:09.880 Now, we have seen investors make a mistake consistently in 0:10:10.000 --> 0:10:14.800 selling MATA meta platforms. On capital investment increases, they continue 0:10:14.840 --> 0:10:20.199 to invest in driving their AI capabilities, which drives increased 0:10:20.280 --> 0:10:24.679 user engagement. It drives increase return on AdSpend investment. So 0:10:25.160 --> 0:10:28.040 I like when they continue to invest. And we've seen 0:10:28.040 --> 0:10:31.160 this multiple times. If you listen to what Mark Tuckerberg 0:10:31.200 --> 0:10:34.480 does every time he invests, from the beginning from changing 0:10:34.520 --> 0:10:37.400 the company from Facebook to Meta, and when he was 0:10:37.480 --> 0:10:40.640 investing in Mobile, the stock sold off. Now most of 0:10:40.679 --> 0:10:43.240 the people engaging in Facebook and Instagram do it on 0:10:43.280 --> 0:10:45.520 their phone, So you have to listen to him, and 0:10:45.559 --> 0:10:47.400 he says what he does, and he does what he says, 0:10:47.440 --> 0:10:50.720 and he continues to create value. So on any weakness 0:10:50.720 --> 0:10:53.280 over the increase in CAPEX. And again this is positive 0:10:53.800 --> 0:10:56.040 because there's been a fear that we're going to see 0:10:56.040 --> 0:10:58.800 this AI bubble burst, that companies are not going to 0:10:58.840 --> 0:11:04.120 continue to invest. I've seen all three companies reporting today, Alphabet, 0:11:05.120 --> 0:11:10.079 Microsoft and Meta all increasing capital investment in AI development. 0:11:10.080 --> 0:11:13.200 And that's positive for the companies those three companies, and 0:11:13.240 --> 0:11:17.320 it's positive for the bullish AI investment theme. 0:11:18.000 --> 0:11:21.280 You know this fifteen percent corporate Alternative minimum tax. Yeah, 0:11:21.360 --> 0:11:23.199 I'm googling some stuff here, folks, because I want to 0:11:23.240 --> 0:11:26.079 understand stand it. It came out of the Inflyflation Reduction 0:11:26.200 --> 0:11:29.480 Act of twenty twenty two, and it generally applies I 0:11:29.520 --> 0:11:32.440 think to corporations with the average annual adjusted financial statement 0:11:32.480 --> 0:11:36.680 income exceeding a billion dollars every three consecutive years. 0:11:38.120 --> 0:11:39.560 Yeah, we're all going to be learning a little bit 0:11:39.600 --> 0:11:40.160 more about this. 0:11:40.679 --> 0:11:43.000 But Tim, you keep bringing up like why why aren't 0:11:43.000 --> 0:11:44.839 we seeing this with maybe some of the other ones? 0:11:44.920 --> 0:11:46.880 Yeah, why is metaplat? Why are we only talking about 0:11:46.880 --> 0:11:48.679 this with regard to meta platforms? 0:11:49.600 --> 0:11:51.760 They may be one of the ones that has the 0:11:51.840 --> 0:11:54.640 largest deferred tax asset and that has really to do 0:11:54.960 --> 0:11:59.640 with timing and expensing of things like R and D 0:11:59.760 --> 0:12:00.559 as an example. 0:12:01.800 --> 0:12:04.319 So you know, we're talking about a lot of things, 0:12:04.360 --> 0:12:05.960 and Ivan, we want to get you know, your view 0:12:06.000 --> 0:12:08.760 on some of the other companies that have reported ANAAG. 0:12:08.880 --> 0:12:10.280 We do want to ask you, though, what are you 0:12:10.280 --> 0:12:12.040 thinking that you want to you're going to be looking 0:12:12.040 --> 0:12:15.920 for on a call going back to Microsoft, if you will. 0:12:16.240 --> 0:12:19.079 As we continue to see that one trading lower here 0:12:19.120 --> 0:12:20.720 in the aftermarket, let me just pull it up on 0:12:20.720 --> 0:12:23.680 my Bloomberg because we have seen some pressure here the 0:12:23.760 --> 0:12:26.920 stock continuing. It's down still about three point four percent, 0:12:27.520 --> 0:12:29.520 is it? What do you want to hear from this company? 0:12:30.720 --> 0:12:33.280 I think I would be let me let me get. 0:12:33.200 --> 0:12:35.040 Ana rog first, forgive me Ivan. 0:12:34.880 --> 0:12:37.920 Okay, all right, So the biggest thing for us, who's 0:12:37.960 --> 0:12:39.599 going to be you know, what's the back half of 0:12:39.720 --> 0:12:42.920 CAPEIC spending? The CAPEX and the first sporter was very high, 0:12:43.080 --> 0:12:45.680 thirty five billion compared to thirty which they guided to. 0:12:45.920 --> 0:12:47.679 We want to know what is it going to be 0:12:47.760 --> 0:12:50.120 in the back half of the year. Are they going 0:12:50.120 --> 0:12:52.840 to slow down dramatically or is it going to keep 0:12:52.880 --> 0:12:54.280 pacing where we are right now? 0:12:54.480 --> 0:12:56.680 All right, Anaag, we know you've got research to right 0:12:56.720 --> 0:12:58.440 We're going to let you go and look forward to 0:12:58.480 --> 0:12:58.880 reading that. 0:12:58.960 --> 0:13:00.600 Ivan, we want to stay with you for a little bit. 0:13:00.840 --> 0:13:03.959 We are talking with Ivan find Seth, research director and 0:13:04.000 --> 0:13:07.760 chief investment Officer with Tigris Financial Partners on a rug run. 0:13:07.760 --> 0:13:10.480 Of course, our senior tech analyst here at Bloomberg Intelligence. 0:13:10.520 --> 0:13:14.520 I've in other companies that reported Meta obviously caught our attention. 0:13:14.640 --> 0:13:17.839 We just talked with Microsoft, are talked about Microsoft at 0:13:17.840 --> 0:13:19.679 the anarog what's your take on what we got from them? 0:13:19.679 --> 0:13:22.319 Because that stucks down about three percent here in the aftermarket. 0:13:23.400 --> 0:13:25.400 Well, right now, we're in an environment of you know, 0:13:25.960 --> 0:13:28.240 people who have been buying these stocks ahead of results. 0:13:28.280 --> 0:13:30.800 They sell into the results. But I say, I say 0:13:31.200 --> 0:13:35.920 that this AI investment theme is powerful and the companies 0:13:36.000 --> 0:13:41.160 leading it are Meta, Google and Microsoft, and you got 0:13:41.200 --> 0:13:43.160 to buy on any weakness. I want to hear from 0:13:43.160 --> 0:13:50.199 Microsoft about increase AI driven application and engagement and subscription increases, 0:13:50.400 --> 0:13:56.280 how users are buying and implementing and using copilot. Of course, 0:13:56.320 --> 0:13:58.840 you want to see growth in all key categories like 0:13:58.960 --> 0:13:59.920 cloud Azure. 0:14:01.000 --> 0:14:04.240 I mean, Azure was up thirty nine percent. That's pretty good, right. 0:14:05.080 --> 0:14:10.319 Phenomenal, and that's their big growth engine and they have 0:14:10.440 --> 0:14:15.319 been announcing huge contracts so as Google. Unfortunately, Amazon had 0:14:15.320 --> 0:14:21.520 that outage was it was disappointing but didn't really set 0:14:21.560 --> 0:14:24.680 back the stock. But these are the growth drivers that 0:14:24.960 --> 0:14:28.200 the cloud hosted AI platforms. 0:14:28.480 --> 0:14:32.200 Yeah I was. I was surprised to see Amazon stock 0:14:32.240 --> 0:14:35.320 actually higher that day, I know, but I think also 0:14:35.320 --> 0:14:37.160 speaks to the power of Amazon and like you got 0:14:37.160 --> 0:14:40.520 in a good understanding of how much it has. Remember, 0:14:40.560 --> 0:14:43.920 the company is investigating outages. This is Microsoft is investigating 0:14:43.920 --> 0:14:47.520 outages of office and game applications today also, so this 0:14:47.680 --> 0:14:50.320 kind of goes both ways. I've ben on Microsoft one 0:14:50.400 --> 0:14:51.920 more and then we're gonna get back to some more 0:14:51.960 --> 0:14:54.720 meta platforms, I think, but a small one point two 0:14:54.800 --> 0:14:58.320 percent beat on adjusted diluted EPs on Microsoft for my 0:14:58.800 --> 0:15:03.360 You know everybody the company does not give guidance in 0:15:03.400 --> 0:15:06.240 the statement and does that on the conference call. It's 0:15:06.240 --> 0:15:09.360 doing that on the conference call. Is it like worth 0:15:09.400 --> 0:15:13.440 even talking about it without even having it? Oftentimes we 0:15:13.480 --> 0:15:15.680 wait for the call to get more information, but in 0:15:15.720 --> 0:15:18.840 this case, like forward guidance coming from the call, it's 0:15:18.920 --> 0:15:19.680 kind of a moot point. 0:15:21.240 --> 0:15:25.200 Well, the disconnect in the dichotomy that exists between companies 0:15:25.280 --> 0:15:27.880 and Wall Street is that companies planned for one, three 0:15:27.920 --> 0:15:30.800 and five years and Wall Street wants to measure everything 0:15:30.800 --> 0:15:35.440 on a quarterly basis. I mean, the guidance it's somewhat important, 0:15:35.760 --> 0:15:39.720 but you wanted to see consistent growth driven by their 0:15:39.840 --> 0:15:43.880 investments in technology, the adoption and use of their technology 0:15:43.960 --> 0:15:47.720 that creates their competitive advantage, and those are the key 0:15:47.720 --> 0:15:51.400 things to look at. And we are in the first 0:15:51.440 --> 0:15:57.040 inning of the world series of AI driven economic global 0:15:57.120 --> 0:16:00.720 economic growth. And this trend is going to continue, and 0:16:00.760 --> 0:16:02.520 it's going to be powerful, and it's going to be 0:16:02.520 --> 0:16:05.600 game changing. And I think that AI is going to 0:16:05.760 --> 0:16:09.960 enhance and create many more jobs than it will eliminate. 0:16:10.600 --> 0:16:12.920 Going back to the costing though for Meta, you know, 0:16:15.400 --> 0:16:21.000 I'm just that operating margin for the third quarter down 0:16:21.000 --> 0:16:25.680 from forty three percent last year. Is that worrisome or 0:16:25.760 --> 0:16:26.720 you think manageable? 0:16:26.880 --> 0:16:30.600 Not really, Okay, We've looked at companies that have had 0:16:30.840 --> 0:16:34.240 huge growth trajectories while their margins we're contracting. In fact, 0:16:34.600 --> 0:16:37.800 Amazon doesn't focus on margin. They focus on revenue growth. 0:16:37.840 --> 0:16:40.200 They don't focus on return on capital actually, which is 0:16:40.200 --> 0:16:42.200 one of the key things we focus on. But they 0:16:42.200 --> 0:16:46.080 do drive a huge return. So you know, there are 0:16:46.120 --> 0:16:49.280 times where your growth margin can contract, but your economic 0:16:49.360 --> 0:16:52.800 margin can increase. And that is the economic margin is 0:16:52.840 --> 0:16:55.480 the difference between return on capital and cost of capital. 0:16:55.600 --> 0:16:59.080 That is the most powerful driver of shareholder value creation. 0:16:59.640 --> 0:17:02.600 So it's not so much important about what happens with 0:17:02.760 --> 0:17:08.240 growth margin. It's in fact, I've seen many companies drive 0:17:08.400 --> 0:17:12.320 huge growth by lowering their growth margin because you're just 0:17:12.359 --> 0:17:15.199 becoming more competitive and they're actually making it up on 0:17:15.280 --> 0:17:16.200 return on capital. 0:17:16.200 --> 0:17:18.080 Okay, we're going to talk about Alphabet with you in 0:17:18.200 --> 0:17:20.160 just a minute. Carol reminded me that shares are surging 0:17:20.200 --> 0:17:23.320 higher in the after hours six percent. Okay, one more 0:17:23.320 --> 0:17:25.320 on Meta platforms down eight point four percent in the 0:17:25.400 --> 0:17:30.040 after hours. Reality Labs losses for the third quarter four 0:17:30.080 --> 0:17:32.159 point four billion dollars. It's about the same as one 0:17:32.240 --> 0:17:36.480 year prior. Obviously, it's a huge investment area for meta platforms. 0:17:36.920 --> 0:17:40.480 In the press release, Mark Zuckerberg specifically calling out the 0:17:40.520 --> 0:17:43.600 success of the eyewear and saying, essentially, I don't have 0:17:43.640 --> 0:17:46.040 it in front of you to be essentially said, if 0:17:46.080 --> 0:17:48.520 we think the future is going to be what it is, 0:17:48.920 --> 0:17:50.840 this is going to be the most exciting moment for 0:17:50.920 --> 0:17:53.480 meta platforms. Ahead of us, these will be the most 0:17:53.520 --> 0:17:56.399 exciting years for meta platforms. What is the opportunity that 0:17:56.480 --> 0:17:58.440 meta platforms has when it comes to eyewear. 0:17:59.760 --> 0:18:04.320 This is going to be a tremendous communication and interactive 0:18:04.400 --> 0:18:07.199 platform and it's only going to get better in a 0:18:07.240 --> 0:18:10.000 few years. We're going to look back on these original glasses, 0:18:10.040 --> 0:18:12.040 the ones that they've launched from ray Band, the recent 0:18:12.119 --> 0:18:16.840 ones from Oakley, and the functionality in a few years 0:18:16.840 --> 0:18:19.360 from now is just going to be more and more incredible. 0:18:19.800 --> 0:18:24.000 But this ability to engage with real time information, to 0:18:24.119 --> 0:18:27.720 share pictures and images and videos in real time with 0:18:27.800 --> 0:18:30.360 other people that you're talking to and while I'm up. 0:18:30.400 --> 0:18:33.720 Mark Zuckerberg believes that the glasses are going to replace 0:18:33.800 --> 0:18:37.080 your smartphone. You're just going to keep your smartphone in 0:18:37.119 --> 0:18:40.520 your pocket, and you're going to interact with data and 0:18:40.600 --> 0:18:44.600 information and people who you're communicating with these glasses. And 0:18:44.760 --> 0:18:47.840 eventually we're going to see ones that Meta just launched, 0:18:48.200 --> 0:18:50.440 ones with displays. It's going to be all about having 0:18:50.440 --> 0:18:53.919 displays embedded in the lens so you don't even have 0:18:54.000 --> 0:18:56.199 to touch your phone. So this is going to be 0:18:56.320 --> 0:18:58.000 a huge growth opt and this is going to be 0:18:58.359 --> 0:19:00.639 what the cell phone was in the mid nineties. 0:19:00.760 --> 0:19:04.160 No rose colored glasses there right now, because Meta shares 0:19:04.200 --> 0:19:06.640 now down near their loads in the aftermarket, down about 0:19:06.680 --> 0:19:07.600 nine percent. 0:19:07.320 --> 0:19:09.840 I'm going to remember that Ivan said this is going 0:19:09.880 --> 0:19:12.000 to be what what cell phones were in the nineties. 0:19:12.040 --> 0:19:14.360 And by the way, he's not wearing any metaglasses right now. 0:19:14.400 --> 0:19:17.000 Well, and I will say our markerment really really likes 0:19:17.040 --> 0:19:19.800 him as well. Hey, we do have to ask you 0:19:19.800 --> 0:19:22.399 about Alphabet because we are seeing this one actually up 0:19:22.400 --> 0:19:24.679 about six percent here in the aftermarket. 0:19:25.560 --> 0:19:27.600