WEBVTT - Oracle Kicks Off $20 Billion Capital Raise 0:00:02.560 --> 0:00:04.240 Bloomberg Audio Studios. 0:00:04.720 --> 0:00:07.100 Podcasts. Radio. News. 0:00:13.420 --> 0:00:16.970 Bloomberg Tech is live from the heart of Silicon Valley 0:00:17.510 --> 0:00:19.770 with Ed Ludlow in San Francisco. 0:00:23.070 --> 0:00:25.550 This is Bloomberg Tech coming up. Oracle kicking off a 0:00:25.550 --> 0:00:30.270 $ 20 billion capital raise to finance its AI infrastructure spending. Plus, 0:00:30.330 --> 0:00:34.629 anthropic revenue hits nearly $ 17 billion in Q3 before its 0:00:34.670 --> 0:00:38.010 blockbuster IPO. We've got details on the amended S1. And 0:00:38.150 --> 0:00:40.849 Apple is trading at the priciest levels since 2008. Can 0:00:41.470 --> 0:00:45.519 the $ 1 trillion rally continue? That's an earnings story, too. 0:00:46.479 --> 0:00:48.320 Let's get to our top story. The race for capital 0:00:48.360 --> 0:00:51.839 heating up to start the week. Alphabet tapping the European 0:00:51.860 --> 0:00:55.830 debt markets. Oracle looking to raise $ 20 billion combined through 0:00:55.910 --> 0:00:59.550 debt and equity. Bloomberg's Brady Ford joins us with more. 0:00:59.570 --> 0:01:01.090 Let's go to the Oracle piece first because we knew 0:01:01.110 --> 0:01:04.380 this was coming, right? Investor Day, they outlined their plans, 0:01:04.420 --> 0:01:07.720 what they'll need on capital. And when cash flow turns positive, 0:01:08.160 --> 0:01:08.860 what do we need to know here? 0:01:09.400 --> 0:01:11.800 The big question the last week or two has been 0:01:11.959 --> 0:01:14.950 how deep does the hyperscaler spending go and how much 0:01:14.990 --> 0:01:15.750 will they need. 0:01:15.569 --> 0:01:17.590 To issue or borrow to make it happen? 0:01:18.130 --> 0:01:21.280 Last week, Oracle said for their current investment cycle for 0:01:21.300 --> 0:01:23.920 the next couple of years. They will need just 20 0:01:23.920 --> 0:01:26.980 billion more. And that's what we're seeing happen today. Stocks 0:01:27.020 --> 0:01:29.679 are trading down a bit, maybe coming sooner than expected. 0:01:29.780 --> 0:01:32.260 But the big question is, how far does all this 0:01:32.280 --> 0:01:32.979 spending go? 0:01:33.440 --> 0:01:35.840 Just real quick, just before we came to air, Bloomberg 0:01:35.900 --> 0:01:39.150 reporting that Meta, the parent of Facebook, has asked Citigroup 0:01:39.170 --> 0:01:41.890 and Morgan Stanley to put together some fixed income calls 0:01:41.970 --> 0:01:43.170 today and tomorrow. 0:01:43.470 --> 0:01:45.270 What may follow? U.S. 0:01:45.350 --> 0:01:50.010 Dollar-denominated offering and also a separate euro-denominated offering today. All 0:01:50.060 --> 0:01:52.940 according to a Bloomberg source who say Morgan Stanley is 0:01:52.980 --> 0:01:55.020 coordinating the logistics. So it looks like Meta is getting 0:01:55.060 --> 0:01:57.440 going on the debt side of things this Monday as well. 0:01:57.720 --> 0:02:00.210 We'll bring you more when we have it. Then there's Alphabet, Alphabet, 0:02:00.250 --> 0:02:02.230 the parent of Google. You and I were talking a 0:02:02.230 --> 0:02:05.070 lot like post earnings, negative free cash flow. We know 0:02:05.090 --> 0:02:08.220 what the CapEx story is. They, too, are looking to 0:02:08.240 --> 0:02:09.419 the debt markets, but in Europe. 0:02:09.880 --> 0:02:10.139 Right. 0:02:10.220 --> 0:02:13.260 Raising some money over there in Europe. And I think 0:02:13.300 --> 0:02:16.230 the backdrop for all of this is that people are 0:02:16.270 --> 0:02:19.990 getting nervous about all this spending and hyperscalers are needing 0:02:20.050 --> 0:02:23.549 to offer more, more interest, higher. 0:02:23.310 --> 0:02:25.139 Rates to be able to get this capital. 0:02:25.160 --> 0:02:27.679 I mean, a company like Alphabet or Oracle, they can 0:02:27.720 --> 0:02:30.739 afford it, but. It's getting to be a more difficult 0:02:30.800 --> 0:02:32.200 fundraising environment for them. 0:02:32.300 --> 0:02:35.290 Interestingly, they both have $ 125 billion of debt each on 0:02:35.310 --> 0:02:36.990 the balance sheet, but look at their net debt and 0:02:37.010 --> 0:02:38.970 their relative cash positions, and they're like two. 0:02:38.870 --> 0:02:39.650 Very different stories. 0:02:39.850 --> 0:02:42.350 Bloomberg's Brady Ford, thank you very much, and happy Monday 0:02:42.370 --> 0:02:45.030 to you. I want to go to what's happening in markets. Basically, 0:02:45.430 --> 0:02:48.600 in technology stocks, things are pushing higher. We're kind of rebounding, 0:02:48.660 --> 0:02:51.940 but remember Friday. The Nasdaq 100 had its biggest drop 0:02:52.220 --> 0:02:54.919 since June. It was down on the week for the 0:02:55.020 --> 0:02:58.220 third straight week of weekly declines, the longest streak of 0:02:58.260 --> 0:03:01.570 weekly drops since March. Yes, there's green on the screen 0:03:01.610 --> 0:03:05.190 right now. Generally, there's a bit of anxiety, particularly in 0:03:05.210 --> 0:03:07.940 the AI trade. And on a sort of longer time horizon, 0:03:07.980 --> 0:03:10.500 technology stocks have been under pressure. I want to dive 0:03:10.540 --> 0:03:13.000 deeper into that. Joining us now is Celine Wu, Portfolio 0:03:13.040 --> 0:03:16.179 Manager at Lazard Asset Management. And actually, you know, Alphabet's 0:03:16.200 --> 0:03:20.900 a name that you're very focused on. This is so interesting. 0:03:21.700 --> 0:03:24.560 They continue to raise capital through the avenues available to them. 0:03:26.100 --> 0:03:28.920 Negative free cash flow. We know the CapEx story. How 0:03:28.940 --> 0:03:29.739 do you feel about all that? 0:03:30.300 --> 0:03:35.260 I mean, obviously, the concerns are mainly about this timing gap, right, 0:03:35.280 --> 0:03:39.360 between this big CAPEX commitment of fund and the monetization 0:03:39.400 --> 0:03:42.380 of all the spending that is happening. I think investors 0:03:42.420 --> 0:03:44.840 need to be a little bit more patient because the 0:03:45.000 --> 0:03:48.370 underlying demand dynamics that we learned from all the top 0:03:48.380 --> 0:03:52.330 hyperscalers earning this quarter has been pretty impressive, right? The 0:03:52.370 --> 0:03:57.340 top three hyperscalers were able to grow 40%, 50%, 100%. 0:03:57.340 --> 0:04:00.280 on top of the level of $ 100 to $ 200 billion 0:04:00.760 --> 0:04:03.260 in annual run rate revenue. I think that's pretty impressive. 0:04:03.280 --> 0:04:07.540 And they're still talking about stretched customer backlog. So, I mean, 0:04:07.600 --> 0:04:10.520 I think the underlying demand dynamics remain really healthy, and 0:04:10.580 --> 0:04:12.400 we just have to be a little bit more patient 0:04:12.800 --> 0:04:15.680 just to understand how the monetization has come through. 0:04:15.940 --> 0:04:18.780 The monetization is coming through. There's lots of competing data points, right? 0:04:18.960 --> 0:04:22.040 So Google Cloud, 100% year-on-year growth. 0:04:22.420 --> 0:04:24.940 Like, that's pretty amazing. It's impressive. I guess. 0:04:25.990 --> 0:04:28.480 The point of distinction, if you did Microsoft and Alphabet 0:04:28.500 --> 0:04:30.420 side by side, because they reported on the same day, 0:04:30.880 --> 0:04:35.719 Microsoft increasingly cash flow positive and Alphabet increasingly pushing into 0:04:35.760 --> 0:04:36.640 negative free cash flow. 0:04:36.660 --> 0:04:37.620 Is it as simple as that? 0:04:38.700 --> 0:04:41.960 Well, I think we tend to try to oversimplify certain 0:04:42.000 --> 0:04:43.969 data points, especially in the near term. But when you 0:04:44.010 --> 0:04:45.870 actually take a step back and look at what you're 0:04:45.890 --> 0:04:49.030 trying to do, I think Alphabet really stands out because 0:04:49.070 --> 0:04:53.600 you're really going... fully vertically integrated, the full stack, the 0:04:53.620 --> 0:04:55.870 strategic advantage they're trying to build. I mean, in fact, 0:04:55.880 --> 0:04:58.589 they're the number one company in terms of the custom 0:04:58.610 --> 0:05:03.090 chips that is also becoming part of their cloud revenue, right? Also, 0:05:03.150 --> 0:05:05.250 they're trying to sell some of them offerings to the 0:05:05.290 --> 0:05:09.390 third party. So if you actually look at company specific, directionally, 0:05:09.410 --> 0:05:11.980 it seems like they're on the same and very similar direction, 0:05:12.040 --> 0:05:15.460 but what is actually happening quarter over quarter can be 0:05:15.500 --> 0:05:17.600 a little bit different. So we have to take a 0:05:17.620 --> 0:05:19.520 grain of salt when we actually look at some of 0:05:19.560 --> 0:05:22.000 the difference in terms of cash flow dynamics. 0:05:22.930 --> 0:05:25.729 We could also bring what we learned from Anthropix updated 0:05:25.830 --> 0:05:29.430 S1 into this. You have the capital expenditure commitments or 0:05:29.450 --> 0:05:34.510 the spending commitments across public companies and private companies. The 0:05:34.550 --> 0:05:38.240 net conclusion is what? That the demand picture is intact 0:05:38.600 --> 0:05:40.100 given their confidence on spending. 0:05:40.480 --> 0:05:44.240 The net conclusion, I think the most important conclusion is Anthropix, 0:05:44.420 --> 0:05:47.300 which is one of the biggest customers for the hyperscalers 0:05:47.339 --> 0:05:50.000 today and then one of the biggest spenders of all 0:05:50.040 --> 0:05:55.470 these AI computing chips and infrastructure are showcasing pretty impressive 0:05:56.490 --> 0:05:58.350 growth rate. I mean, the revenue, I think, is a 0:05:58.390 --> 0:06:03.229 third quarter that came out today, $ 17 billion. But on 0:06:03.290 --> 0:06:08.040 top of that, more importantly, the unit economics have improved significantly. 0:06:08.060 --> 0:06:10.180 What's the metric you look at there, unit economics? 0:06:10.200 --> 0:06:11.960 So the compute cost to the revenue, right? 0:06:12.000 --> 0:06:12.210 Yes. 0:06:12.310 --> 0:06:15.490 I believe the number used to be, what, 10 times just, what, 0:06:15.510 --> 0:06:19.530 three years ago? Has rapidly come down to 50% level, right? 0:06:19.730 --> 0:06:23.089 I mean, that's really impressive. And their cash balance, right, 0:06:23.390 --> 0:06:26.719 as of third quarter was close to $ 100 billion. So 0:06:26.760 --> 0:06:29.160 this is actually the business model that is able to 0:06:29.279 --> 0:06:33.000 generate profits in the middle of this rapid growth when 0:06:33.020 --> 0:06:35.750 you still need a lot of, you know, capex numbers 0:06:35.870 --> 0:06:39.390 to continue the growth. And I think that's really key 0:06:39.450 --> 0:06:43.029 credential in the validation. Also really important to read through 0:06:43.070 --> 0:06:46.010 for the hyperscalers, again, because this is one of their 0:06:46.050 --> 0:06:48.550 largest customers and biggest vendors of the competing chips of 0:06:48.570 --> 0:06:48.930 the world. 0:06:49.390 --> 0:06:53.180 It is so interesting that we still continue to be 0:06:53.240 --> 0:06:58.660 very fixed on the spending. I'm not an economist, but 0:06:58.680 --> 0:07:04.110 in my limited study of market economics, demand running far 0:07:04.170 --> 0:07:07.930 ahead of a market's ability to supply, for those on 0:07:07.950 --> 0:07:10.230 that side of the table, that's an enviable position to 0:07:10.270 --> 0:07:10.990 be in, isn't it? 0:07:11.560 --> 0:07:15.720 Definitely. And then also pretty unprecedented, right? No one has 0:07:15.820 --> 0:07:19.670 seen something like this. This is probably the biggest technological 0:07:19.730 --> 0:07:22.850 transformation in our lifetime and in history as well. And 0:07:22.870 --> 0:07:25.250 I would like to quote what Andy Jesse said during 0:07:25.270 --> 0:07:28.790 the earnings call. He said it would be really convenient 0:07:28.850 --> 0:07:31.390 if they can spread the CapEx for the next 25 years. 0:07:31.910 --> 0:07:35.210 But that's not the reality. There has to be the disconnect. 0:07:35.270 --> 0:07:37.750 There has to be the timing gap. And that's why 0:07:38.270 --> 0:07:39.690 I like to say the investors need to be a 0:07:39.710 --> 0:07:43.600 little bit more patient Yes, the quarter over quarter results 0:07:43.640 --> 0:07:47.220 are very important, guidelines and everything, but I think the 0:07:47.260 --> 0:07:50.580 longer term, I believe that these companies can actually come through, 0:07:50.620 --> 0:07:54.610 then the economics and the monetization can improve much materially, 0:07:55.010 --> 0:07:57.330 and that's what they're investing today, and they're investing further. 0:07:57.900 --> 0:08:00.620 Celine Wu, Portfolio Manager at Lazard Asset Management. It's great 0:08:00.640 --> 0:08:02.040 to have you back on the show. Thank you very 0:08:02.080 --> 0:08:04.000 much for being with us. Okay, coming up, we're going 0:08:04.020 --> 0:08:06.440 to get kind of back to private markets. Matt Withyla 0:08:06.460 --> 0:08:08.660 from Wellington Management joins us. But we're going to talk 0:08:08.680 --> 0:08:12.440 about Anthropic's upcoming public debut and the new financial details 0:08:12.580 --> 0:08:14.870 just out in the amended regulatory filing. 0:08:15.190 --> 0:08:17.330 That's next. This is Bloomberg Tech. 0:08:20.570 --> 0:08:25.710 Bloomberg Tech. 0:08:29.290 --> 0:08:32.059 And for our picks, amended S1 puts third quarter revenue 0:08:32.120 --> 0:08:35.280 at nearly $ 17 billion. That's up 12-fold from the same 0:08:35.320 --> 0:08:39.120 period a year earlier. Net loss, $ 23. 3 billion, up from 0:08:39.120 --> 0:08:43.280 $ 12. 1 billion. Here, back at the desk, Bloomberg's Bailey Lipschultz. 0:08:43.620 --> 0:08:46.320 Let's go through it. I mean, you know, the S1A hits. 0:08:46.660 --> 0:08:48.070 It was going to hit at some point. 0:08:48.470 --> 0:08:50.590 We go with the third quarter revenue number. 0:08:50.970 --> 0:08:53.030 It's slightly higher than what we reported previously. What else 0:08:53.050 --> 0:08:53.370 do you see? 0:08:53.650 --> 0:08:56.069 Yeah, modestly higher than what we reported about a month ago, 0:08:56.110 --> 0:08:57.949 but not all that much, especially when you talk to 0:08:57.990 --> 0:09:00.790 folks on the buy side. The things that investors really 0:09:00.809 --> 0:09:04.090 were calling out from this refreshed financial statement was, A, 0:09:04.110 --> 0:09:07.010 the cost of compute going up pretty markedly from quarter 0:09:07.050 --> 0:09:09.469 over quarter, or even in particular year over year. And 0:09:09.490 --> 0:09:11.750 the one big thing that we flagged on the terminal 0:09:11.790 --> 0:09:13.770 and that investors have been talking about is the commitments. 0:09:14.230 --> 0:09:15.990 A company committed to spend $ 895 billion in the out years. 0:09:18.770 --> 0:09:21.390 About $ 448 billion of that through the end of the decade. 0:09:21.410 --> 0:09:23.900 And Ed, interestingly enough, in the next 12 months, when 0:09:23.940 --> 0:09:27.520 you include October, about $ 70 billion committed to be spent. 0:09:27.540 --> 0:09:29.579 So this is a company, as we've reported, looking to 0:09:29.620 --> 0:09:32.590 raise more than $ 86 billion. Well, they've already got about 0:09:32.590 --> 0:09:35.030 $ 70 billion they plan on raising. on spending in the 0:09:35.050 --> 0:09:36.870 next 12 months. So where it goes from there will 0:09:36.890 --> 0:09:39.689 be interesting. The one thing we did not get is 0:09:39.730 --> 0:09:43.410 an October revenue run rate update. That is one area 0:09:43.450 --> 0:09:46.390 that is still blocked out on the S1. So we 0:09:46.530 --> 0:09:49.110 should expect to see that in a refresh filing. Again, 0:09:49.190 --> 0:09:51.130 that would be through the end of October. So a 0:09:51.450 --> 0:09:53.750 bit of tight work, Ed, to turn that around in 0:09:53.790 --> 0:09:54.130 two days. 0:09:54.870 --> 0:09:58.170 We also did not get a price range, details of 0:09:58.190 --> 0:10:01.230 the offering in terms of target range, etc. 0:10:03.050 --> 0:10:04.670 I think it is useful. 0:10:04.710 --> 0:10:06.530 Just remind us of where we're at and what our 0:10:06.570 --> 0:10:09.270 reporting has said about the road to the public markets 0:10:09.320 --> 0:10:10.939 for Anthropic from this point. 0:10:11.260 --> 0:10:13.300 So what we had expected, as you mentioned, third quarter 0:10:13.380 --> 0:10:14.400 numbers were going to be dropped in. 0:10:14.460 --> 0:10:15.420 That's what we got today. 0:10:15.500 --> 0:10:17.920 We will now, based on the filing, expect to get 0:10:18.020 --> 0:10:21.530 some type of new run rate update, again, including the 0:10:21.570 --> 0:10:23.650 end of October. That likely will take place over the 0:10:23.690 --> 0:10:26.190 coming days. And then, as you mentioned, next week is 0:10:26.210 --> 0:10:28.849 when we should get the targeted range and offer size. 0:10:28.929 --> 0:10:31.610 Then we will know the valuation the company is targeting, 0:10:31.890 --> 0:10:35.589 the expected total raise, and that'll lay the groundwork formally 0:10:35.850 --> 0:10:38.620 for a formal marketing period for the company to price 0:10:38.650 --> 0:10:41.750 its IPO in the days or week ahead of that 0:10:41.820 --> 0:10:43.459 Thanksgiving holiday here in the U.S. So it'll be an 0:10:43.540 --> 0:10:46.740 interesting week next week, and then obviously all eyes will 0:10:46.760 --> 0:10:49.640 be on the company and its pricing ambitions in the 0:10:49.679 --> 0:10:50.300 week that follows. 0:10:51.140 --> 0:10:52.820 Okay, Bloomberg's Bailey Lipschultz, thank you very much. 0:10:52.840 --> 0:10:54.560 I want to go a bit deeper on a metric 0:10:54.600 --> 0:10:57.700 that Bailey just went through, and that's today's big number, 0:10:57.700 --> 0:11:02.020 $ 895. 4 billion. That is how much Anthropic says it has 0:11:02.080 --> 0:11:06.010 in committed spending in this latest S1A. I want to 0:11:06.020 --> 0:11:08.559 go into it a little bit more. So of that $ 895. 0:11:08.429 --> 0:11:08.730 4 billion, $ 447. 0:11:08.630 --> 0:11:14.929 5 is by the end of 2030. Almost $ 70 billion 0:11:14.970 --> 0:11:17.150 is due over the next 12 months. The balance is 0:11:17.210 --> 0:11:21.950 due right up until 2045. It's anticipated in large part. 0:11:22.309 --> 0:11:25.800 What do anthropic investors make of all of those updates? 0:11:26.370 --> 0:11:29.070 Matt Withyla is head of late-stage growth at Wellington Management, 0:11:29.110 --> 0:11:32.760 which has been an investor in this company since 2025. 0:11:32.750 --> 0:11:34.330 It's great to have you back on the show, Matt. 0:11:34.809 --> 0:11:37.330 I mean, sometimes you just want to put the numbers away. 0:11:37.910 --> 0:11:39.370 What's the story here with Anthropic? 0:11:39.390 --> 0:11:39.949 What are we learning? 0:11:40.390 --> 0:11:42.630 I mean, I think the incremental that we've learned over 0:11:42.690 --> 0:11:45.630 the past day with the new Q3 filings is the 0:11:45.650 --> 0:11:48.890 fact that, one, growth remains incredibly high for this business. 0:11:48.960 --> 0:11:53.400 It's growing 1,200% year over year. Two, the company remains profitable. 0:11:53.440 --> 0:11:56.240 So they're doing this and generating all this revenue, not 0:11:56.300 --> 0:11:59.640 to no end, but to real operating profit. And three, 0:11:59.780 --> 0:12:02.319 as you highlighted, I think that the company is setting 0:12:02.400 --> 0:12:05.660 out to commit to large commits of spend over the 0:12:05.700 --> 0:12:08.450 coming decade. And that's all in support of the demand 0:12:08.470 --> 0:12:09.000 that they're seeing. 0:12:10.050 --> 0:12:13.170 Q3, adjusted operating income, $ 2. 5 billion with a 15% margin. 0:12:13.190 --> 0:12:14.930 Gap operating loss, $ 567 million with a negative 3% margin. 0:12:20.510 --> 0:12:23.579 everyone's trying to understand the unit economics, right? You might 0:12:23.620 --> 0:12:26.660 have heard that earlier in the show. What a dollar 0:12:26.679 --> 0:12:29.300 of spend on compute gets you in terms of revenue. 0:12:29.679 --> 0:12:31.620 How do you digest that? 0:12:31.640 --> 0:12:34.059 I think that the company has repeatedly shown that they 0:12:34.080 --> 0:12:37.040 can squeeze more and more margin out of that dollar 0:12:37.080 --> 0:12:40.310 of revenue by being incredibly efficient on the compute side. 0:12:40.610 --> 0:12:43.410 And if I think back to how Anthropic has evolved, 0:12:43.429 --> 0:12:45.590 I think one of the key things that they've done 0:12:45.870 --> 0:12:48.830 ever since inception is ensure that their models can run 0:12:48.870 --> 0:12:51.630 on a variety of hardware types. They're not beholden to 0:12:51.840 --> 0:12:54.900 one particular type of silicon. They can run on NVIDIA. 0:12:54.960 --> 0:12:56.920 They can run on Google TPUs. They can run on 0:12:56.940 --> 0:13:01.300 the Amazon hardware. And so it's that plus the recursive 0:13:01.360 --> 0:13:04.230 learning that the company is doing with its inference is 0:13:04.309 --> 0:13:07.369 what is driving more and more margin dollars out of 0:13:07.490 --> 0:13:08.870 each dollar of revenue generated. 0:13:10.040 --> 0:13:13.680 I think one other really interesting metric to me was 0:13:13.780 --> 0:13:16.709 how much is still being spent on training relative to 0:13:16.770 --> 0:13:21.230 running inference, right? Clearly, training is still a major focus 0:13:21.250 --> 0:13:24.989 for Anthropic. But for investors, how do you go with that? 0:13:25.230 --> 0:13:28.980 You want to see more commercialization, right? 0:13:29.280 --> 0:13:31.959 You do want to see commercialization, but what is at 0:13:31.980 --> 0:13:35.710 the tip of the spear of commercialization is what the 0:13:35.880 --> 0:13:38.530 models are delivering. And the only way you stay at 0:13:38.570 --> 0:13:41.530 the frontier, which I think anybody would argue is an 0:13:41.590 --> 0:13:45.630 important characteristic of Anthropic, in order to stay at the frontier, 0:13:45.670 --> 0:13:48.150 you really have to do a lot of training in 0:13:48.190 --> 0:13:50.920 order to develop the best models and therefore have the. 0:13:50.880 --> 0:13:51.920 Most inference revenue. 0:13:52.280 --> 0:13:54.540 And so I think that that is a really important 0:13:54.660 --> 0:13:57.460 justification for the spend they do on the training side. 0:13:58.200 --> 0:13:59.600 I find this so fascinating. 0:13:59.620 --> 0:14:02.300 It's like the fixation that we have with the iPhone 0:14:02.640 --> 0:14:04.849 upgrade cycle. I know it's different, but one of the 0:14:04.870 --> 0:14:07.949 things that jumped out at me, model versions released in 0:14:07.970 --> 0:14:12.750 the six months ended September 30th, 2026, accounted for over 80% 0:14:12.750 --> 0:14:15.490 of our revenue for the three months ended September 30th. 0:14:15.510 --> 0:14:17.710 In other words, more than 80% of that Q3 revenue 0:14:18.090 --> 0:14:20.950 came from models that released in the preceding six months, 0:14:21.290 --> 0:14:22.630 like being at the frontier. 0:14:22.710 --> 0:14:23.290 Yeah, sorry, Matt. 0:14:23.370 --> 0:14:25.010 I was going to say, I think that's exactly right. 0:14:25.050 --> 0:14:27.400 And I think that if you look at how the 0:14:27.460 --> 0:14:30.160 model cadence has gone, Anthropic had a big model drop 0:14:30.340 --> 0:14:34.020 in September. And I think the belief is that some 0:14:34.060 --> 0:14:37.460 of this October ARR number that is blank in the 0:14:37.900 --> 0:14:41.570 S1 on page 198 will be filled in and that 0:14:41.760 --> 0:14:44.530 I think there's general consensus that that number will be 0:14:44.670 --> 0:14:48.570 strong because of the model releases that were released in September. 0:14:48.890 --> 0:14:51.280 And so I think being at the frontier does provide 0:14:51.340 --> 0:14:53.800 and generate outside return for the business. 0:14:54.600 --> 0:14:57.739 You know, there's market penetration and then there's also the 0:14:58.260 --> 0:15:01.140 competitive environment, right? So I'm just hitting you with stats, 0:15:01.180 --> 0:15:05.380 but price cuts from new models and contractual discounts shaped 0:15:05.440 --> 0:15:09.240 about $ 600 million off Q3 revenue. That's in page 161 0:15:09.240 --> 0:15:13.880 of the S1A. What would that be evidence of? That they, 0:15:14.080 --> 0:15:16.160 you know, they're still in a race here. 0:15:16.660 --> 0:15:19.180 They're still in a race. They're in a competitive environment. 0:15:19.460 --> 0:15:22.140 And I think that Q3 number reflects the fact that 0:15:22.590 --> 0:15:25.510 In Q3, they did not have a large model release 0:15:25.570 --> 0:15:28.670 until towards the end of that quarter. And they faced 0:15:28.690 --> 0:15:33.150 some competition from OpenAI releasing their frontier model. And so 0:15:33.170 --> 0:15:35.760 I think that maybe put some pressure on the pricing 0:15:35.880 --> 0:15:39.380 capability of the business in Q3. And I think what 0:15:39.500 --> 0:15:41.720 is most exciting to me is the fact that they 0:15:41.760 --> 0:15:45.370 were able to navigate through that pricing environment and still 0:15:45.410 --> 0:15:47.270 generate operating income. 0:15:48.480 --> 0:15:50.300 Matt, I appreciate you coming on the show. 0:15:50.360 --> 0:15:50.580 Right. 0:15:50.640 --> 0:15:52.640 I get that there is a limit to what we 0:15:52.680 --> 0:15:56.820 can discuss in practice with the S1A now out. But 0:15:56.900 --> 0:16:00.040 like Anthropic going public is a big moment, you know, 0:16:00.420 --> 0:16:04.980 for industry, for private markets, for your portfolio. 0:16:05.060 --> 0:16:07.040 Would you just speak a little bit about that? 0:16:07.380 --> 0:16:10.800 Summarize what you think this this sort of foreshadows in 0:16:10.850 --> 0:16:12.470 terms of everyone else going to the market? 0:16:12.800 --> 0:16:15.530 Yeah, I think it's a really important milestone because if 0:16:15.570 --> 0:16:18.130 you look back at how this year has proceeded, the 0:16:18.170 --> 0:16:20.390 market has been waiting for kind of the big three 0:16:20.430 --> 0:16:23.850 to come out. We had SpaceX go out first, Anthropic, 0:16:24.870 --> 0:16:27.040 I believe, will be public in the coming weeks here, 0:16:27.400 --> 0:16:29.860 and then OpenAI. And I think what's unique about this 0:16:29.980 --> 0:16:33.820 is these companies are not coming public with $ 100 million, 0:16:33.820 --> 0:16:34.840 $ 100 billion. 0:16:34.680 --> 0:16:36.140 Of market cap. 0:16:36.380 --> 0:16:38.700 They're coming public at north of a trillion dollars of 0:16:38.730 --> 0:16:41.430 market cap. And so I think this is just validation 0:16:41.470 --> 0:16:46.229 of the fact that the public market isn't dead. IPOs 0:16:46.270 --> 0:16:48.890 are not a thing of the past. The public market 0:16:48.930 --> 0:16:51.730 has just been sleeping. And these IPOs are starting to 0:16:51.970 --> 0:16:54.930 wake up and reinvigorate the. 0:16:55.150 --> 0:16:57.000 Activity in the public side. 0:16:57.380 --> 0:16:58.960 And I think that's one of the benefits that we 0:16:59.020 --> 0:17:01.960 have as investors here at Wellington is the fact that 0:17:02.180 --> 0:17:03.860 we can see that whole picture. We can see the 0:17:03.900 --> 0:17:06.480 private markets. We can see the public markets. And we've 0:17:06.600 --> 0:17:10.159 always been of the belief that These late-stage private companies 0:17:10.320 --> 0:17:15.179 are growing into exciting stories for the public market and 0:17:15.240 --> 0:17:19.000 are not doing it and staying trying to be perpetually private, 0:17:19.020 --> 0:17:19.359 if you will. 0:17:20.260 --> 0:17:22.810 Matt Withile, head of late-stage growth at Wellington Management. Thank 0:17:22.830 --> 0:17:25.959 you so much for being back with us on Bloomberg Tech. Now, 0:17:25.980 --> 0:17:28.550 coming up, the next test for the tech trade on deck, 0:17:29.190 --> 0:17:32.830 Apple results. Out after the closing bell, stock down about 0:17:32.850 --> 0:17:35.310 a percentage point, treading water ahead of that. This is 0:17:35.350 --> 0:17:48.530 Bloomberg Tech. Shares of Apple falling ahead of its earnings 0:17:48.570 --> 0:17:51.939 report today after the closing bell. Early order trends for 0:17:51.980 --> 0:17:55.020 its newest product slate and profitability measures top of mind 0:17:55.060 --> 0:17:58.629 for investors. Bloomberg's Ryan Vestelica. joins us with the preview. 0:17:58.990 --> 0:18:01.350 There's kind of like, you know, there's the corporate earnings 0:18:01.410 --> 0:18:04.629 story and then there's the stock story slightly separately. So 0:18:04.650 --> 0:18:08.060 let's start with expectations for earnings. What are the metrics 0:18:08.119 --> 0:18:09.880 that the street's looking for with Apple? 0:18:11.160 --> 0:18:13.300 Well, I think the major thing is that people really 0:18:13.359 --> 0:18:15.820 want to get a sense of the demand for the 0:18:16.040 --> 0:18:19.220 iPhone Duo, so the foldable iPhone. Now, I think there's 0:18:19.240 --> 0:18:22.280 some positive early indications that there is a lot of 0:18:22.340 --> 0:18:26.120 consumer interest, but how much of that reflects supply availability? 0:18:26.440 --> 0:18:29.590 How much of that reflects, you know, demand being taken 0:18:29.630 --> 0:18:32.689 from other forms of the iPhone, including the Pro and 0:18:32.770 --> 0:18:35.450 Pro Max models? If we are seeing a lot of 0:18:35.609 --> 0:18:38.830 higher-end customers, paying up for the foldable phone, I think 0:18:38.850 --> 0:18:41.030 that's going to be a very positive signal for their 0:18:41.070 --> 0:18:45.810 ability to continue growing average revenue per device and so forth. 0:18:45.830 --> 0:18:48.070 That's going to be a major thing that people are 0:18:48.090 --> 0:18:50.540 going to be watching for in order to justify how 0:18:50.600 --> 0:18:53.960 much the stock has been moving up this year and 0:18:54.960 --> 0:18:57.379 as another potential indication for growth accelerating. 0:18:58.260 --> 0:19:00.020 Okay, so let's go there. You got this piece out 0:19:00.080 --> 0:19:03.690 on the Bloomberg today. Apple's $ 1 trillion rally leaves no 0:19:03.770 --> 0:19:05.570 room for error on earnings. 0:19:05.609 --> 0:19:09.520 There's been this run up. Tell me the stock story. 0:19:10.720 --> 0:19:10.980 Sure. 0:19:11.359 --> 0:19:14.220 So a major factor behind Apple's gain this year, it 0:19:14.260 --> 0:19:18.090 is actually the top performing member of the Mag 7. 0:19:18.090 --> 0:19:21.010 It's almost, I think, 30% or so. And a lot 0:19:21.030 --> 0:19:24.050 of that is because it is seen as an alternative 0:19:24.390 --> 0:19:28.670 to AI. So whenever there is some kind of consternation 0:19:28.780 --> 0:19:31.840 or fear about the state of the AI trade, Apple 0:19:31.880 --> 0:19:36.060 is a very common place that investors are rotating into. Obviously, 0:19:36.160 --> 0:19:39.220 it isn't spending money on CapEx with AI in the 0:19:39.260 --> 0:19:42.369 way that the hyperscalers are. So it doesn't have questions 0:19:42.530 --> 0:19:46.629 about negative cash burn. It doesn't have questions about the 0:19:46.850 --> 0:19:48.950 ROI side of things. Now, there are plenty of people 0:19:48.990 --> 0:19:51.720 who say Apple needs to be more aggressive in AI. 0:19:52.040 --> 0:19:54.430 But at the moment, the fact that it doesn't have 0:19:54.490 --> 0:19:57.710 those spending risks is something that people view really in 0:19:57.770 --> 0:20:01.210 its favor. So that's really helped the stock outperform, especially 0:20:01.270 --> 0:20:04.300 over the past month, past six weeks or so, when 0:20:04.340 --> 0:20:07.720 we started to see other AI names really taking a 0:20:07.780 --> 0:20:11.620 step back. However, this has really resulted in an elevated 0:20:11.680 --> 0:20:15.950 valuation for Apple. I believe it's trading around its most expensive... 0:20:15.910 --> 0:20:19.050 since 2007. So like I said, there are a lot 0:20:19.070 --> 0:20:22.200