WEBVTT - Caterpillar, European, and Big Tech Earnings 0:00:01.560 --> 0:00:05.680 This is Bloomberg Intelligence with Scarletfoo and Paul Sweeney. 0:00:05.760 --> 0:00:07.880 How do you think the FED is looking at tariffs? 0:00:08.000 --> 0:00:09.240 The uncertainty of terriffs. 0:00:09.280 --> 0:00:11.760 Let's take a look at the sectors and how they performed. 0:00:11.800 --> 0:00:14.360 A lot of investors getting whipsaled every day by news. 0:00:14.160 --> 0:00:18.280 Events, breaking market headlines, and corporate news from across the globe. 0:00:18.320 --> 0:00:20.960 Could we see a market disruption of market events? 0:00:20.960 --> 0:00:23.000 So people just too exuberant out there? 0:00:23.160 --> 0:00:25.680 You see some so called low quality stocks driving this 0:00:25.800 --> 0:00:26.560 short term rally. 0:00:26.600 --> 0:00:31.400 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:31.560 --> 0:00:33.440 YouTube and Bloomberg Originals. 0:00:33.880 --> 0:00:36.239 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:36.280 --> 0:00:38.560 business stories impacting Wall Street and the global markets. 0:00:38.600 --> 0:00:40.560 Each and every week, we provide in depth research and 0:00:40.640 --> 0:00:42.479 data on some of the two thousand companies and one 0:00:42.560 --> 0:00:45.080 hundred and thirty industries that our analysts cover worldwide. 0:00:45.120 --> 0:00:47.279 Today it's another major earnings week, but we'll break down 0:00:47.320 --> 0:00:50.360 some big tech earnings from this week. Spoiler alert, the 0:00:50.520 --> 0:00:53.320 AI fuel spending search keeps racing. 0:00:53.080 --> 0:00:55.880 Ahead, plus that AI frenzy is now spilling over to 0:00:55.960 --> 0:00:59.200 heavy machinery and oil fracking. We look into how Caterpillar 0:00:59.240 --> 0:01:01.160 fared when they reported this past week. 0:01:01.280 --> 0:01:04.560 But first, Verizon, the US largest mobile service provider, reported 0:01:04.600 --> 0:01:06.839 a loss in wireless phone subscribers in the third quarter 0:01:06.880 --> 0:01:09.319 as a new chief executive officer laid out an aggressive 0:01:09.319 --> 0:01:11.399 growth strategy to reclaim market share. 0:01:11.560 --> 0:01:14.319 Dan Shulman, a former CEO of PayPal, was appointed just 0:01:14.319 --> 0:01:16.560 a few weeks ago to replace Hans Westbrook over at 0:01:16.640 --> 0:01:19.560 Verizon after two straight quarters of subscriber declines and a 0:01:19.600 --> 0:01:22.440 stock performance that has lagged the two main rivals. 0:01:22.560 --> 0:01:25.160 For more, we were joined by John Butler, Bloomberg Intelligence 0:01:25.200 --> 0:01:28.199 senior telecom analyst. I first asked John to break down 0:01:28.280 --> 0:01:29.120 Verizon's earnings. 0:01:29.360 --> 0:01:32.640 So this first of all, I'll tell you the dividend 0:01:32.800 --> 0:01:36.119 is safe, Paul. I mean, that's the good news for Verison. 0:01:36.360 --> 0:01:41.080 And it's safe because new CEO Dan Shulman, who recently 0:01:41.520 --> 0:01:45.760 replaced Hans Wesperg at the helm of Verizon, sort of 0:01:45.840 --> 0:01:49.320 laid out is his new plan for growth. I think 0:01:49.360 --> 0:01:53.920 the real watchword of the day here for Verizon is 0:01:54.000 --> 0:01:59.440 to pivot from a very technology or network oriented company 0:01:59.520 --> 0:02:02.480 to now Shulman is going to turn them into a 0:02:02.600 --> 0:02:07.000 very consumer focused company. I think he's really going to 0:02:07.120 --> 0:02:10.760 take a page out of T mobiles book, but in 0:02:10.880 --> 0:02:14.320 terms of promoting, I think, unlike T Mobile, he's going 0:02:14.360 --> 0:02:16.760 to do it in a more discipline manner. 0:02:17.520 --> 0:02:20.840 So I guess as I think about the wireless business, 0:02:20.840 --> 0:02:22.480 I mean, we all have a phone in our pocket, 0:02:23.720 --> 0:02:26.000 it just seems like the only way to grow revenue 0:02:26.040 --> 0:02:30.640 is either add subscribers, which can be expensive, or raise prices, 0:02:30.919 --> 0:02:34.480 which how long can you do that? How do you 0:02:34.520 --> 0:02:35.200 grow the business? 0:02:35.600 --> 0:02:38.839 I mean, that's one thing he talked about, was how 0:02:38.880 --> 0:02:41.320 to grow the business here. And what you're seeing with 0:02:41.360 --> 0:02:45.560 the telecoms is they're all pushing more heavily into broadband. 0:02:45.560 --> 0:02:49.400 They're doing a very good job there with Verizon, like 0:02:49.520 --> 0:02:53.320 AT and T, they've got two avenues of growth there. 0:02:53.400 --> 0:02:58.600 One is fiber broadband. Verizon is buying frontiers, so they're 0:02:58.639 --> 0:03:03.600 going to onboard about a new fiber subscribers in the 0:03:03.639 --> 0:03:07.680 new year. And the other is fixed wireless access, which 0:03:07.720 --> 0:03:10.239 is sort of that wireless link into the home. It's 0:03:10.240 --> 0:03:14.440 been very popular with people. So once you get those 0:03:14.520 --> 0:03:19.320 broadband subscribers, probably more than half of them don't have wireless, 0:03:19.400 --> 0:03:23.880 and so Verizon's game is to continue to build that 0:03:24.040 --> 0:03:27.640 broadband base and then cross sell wireless. 0:03:27.160 --> 0:03:28.040 Into that base. 0:03:28.840 --> 0:03:32.440 You've also got switching activity that goes on in any 0:03:32.440 --> 0:03:36.160 given quarter. No matter how hard the carriers try, you're 0:03:36.200 --> 0:03:39.520 always going to lose some subscribers and they're up for grabs, 0:03:39.560 --> 0:03:41.680 and I think for Verizon now was looking to get 0:03:41.720 --> 0:03:46.160 their fair share of those. And there's also modest, very 0:03:46.320 --> 0:03:52.160 modest organic growth in the business through population growth and 0:03:52.240 --> 0:03:56.480 some immigration, although immigration is down this year. 0:03:56.640 --> 0:03:56.880 YEP. 0:03:57.000 --> 0:03:58.760 I don't even know where we are, John, in terms 0:03:58.800 --> 0:04:01.760 of the five G, six G, four G. Are there 0:04:02.160 --> 0:04:05.840 technological changes coming to the wireless business or are we 0:04:05.880 --> 0:04:07.600 at kind of where we're at in terms of capacity 0:04:07.880 --> 0:04:09.000 and usage and so on. 0:04:09.960 --> 0:04:15.520 So capacity is on the rise. Spectrum is the lifeblood 0:04:15.520 --> 0:04:20.120 a wireless The more spectrum you have, the more network 0:04:20.160 --> 0:04:23.479 capacity you have. To put it in Layman's terms, for 0:04:23.880 --> 0:04:28.560 the average smartphone user, that means higher download speeds. And 0:04:28.760 --> 0:04:33.280 Verizon is currently activating what's called cband spectrum. It's very 0:04:33.360 --> 0:04:36.600 high capacity, and so you're going to see their average 0:04:36.640 --> 0:04:41.039 network speeds across the nation edge up over time as 0:04:41.080 --> 0:04:46.120 they activate that spectrum. In terms of the generational upgrades 0:04:46.120 --> 0:04:48.800 that you alluded to, the three G four G five G. 0:04:49.680 --> 0:04:53.839 We're mid cycle now. We launched five G about five 0:04:53.960 --> 0:04:57.359 years ago, and I think you'll see an upgrade to 0:04:57.520 --> 0:05:01.960 six G as we get towards twin thirty. But right 0:05:02.000 --> 0:05:04.400 now it's sort of status quo on that front. 0:05:04.880 --> 0:05:08.680 I guess the issue for of a Verizon is now 0:05:08.760 --> 0:05:11.560 going more customer centric and as you mentioned, when I 0:05:11.600 --> 0:05:14.320 read that, it seemed just like what T Mobile's been 0:05:14.320 --> 0:05:17.080 doing for years and years and years. Gone back to 0:05:17.160 --> 0:05:19.719 John Ledger, Is this a strategy you think can be 0:05:20.560 --> 0:05:21.920 successful for Verizon? 0:05:22.400 --> 0:05:23.080 We'll see. 0:05:23.200 --> 0:05:26.080 I mean that's their big challenge, right I mean, T 0:05:26.320 --> 0:05:30.559 Mobile was always the branding king. They did a great 0:05:30.680 --> 0:05:33.400 job there, just as you said, starting with John Ledger, 0:05:33.440 --> 0:05:35.240 who made himself the face. 0:05:34.960 --> 0:05:35.520 Of the brand. 0:05:35.600 --> 0:05:38.800 They really did a terrific job there. They went out 0:05:38.880 --> 0:05:42.480 as a sort of a hip, counterculture, consumer friendly brand. 0:05:43.240 --> 0:05:46.599 Verizon was at the opposit opposite end of that spectrum, 0:05:46.760 --> 0:05:52.640 leaning into their great network coverage. They still have that. 0:05:52.720 --> 0:05:55.640 They have probably the best coverage in the industry, but 0:05:55.760 --> 0:05:59.240 in terms of network speed and performance, the other two 0:05:59.400 --> 0:06:01.920 AT and TS and T Mobile have really caught up. 0:06:02.080 --> 0:06:05.960 So the challenge for Verizon now is to nurture a 0:06:06.000 --> 0:06:10.720 more consumer friendly brand image. Dare I say I'm a 0:06:10.960 --> 0:06:14.799 fun brand image? I have to chuckle. That really isn't 0:06:14.839 --> 0:06:19.279 something we would associate with Verizon. But I think Shulman, 0:06:19.400 --> 0:06:23.919 given his background at other telcos and also in a 0:06:23.960 --> 0:06:29.599 reviving PayPal, has some experience there with branding, and I 0:06:29.680 --> 0:06:32.559 think it's going to be interesting to see he does 0:06:32.720 --> 0:06:35.600 with Verizon to improve that brand image. 0:06:35.720 --> 0:06:38.960 Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analyst. 0:06:39.240 --> 0:06:39.640 This week. 0:06:39.760 --> 0:06:42.240 Boeing on Wednesday announced a four point nine billion dollar 0:06:42.279 --> 0:06:46.400 accounting charge and delayed debut for Triple seven ex Jetliner, 0:06:46.640 --> 0:06:49.480 every reminder of the long covery ahead for the US planemaker, 0:06:49.600 --> 0:06:52.800 even as rising aircraft deliveries bolster its cash. 0:06:52.880 --> 0:06:56.200 The setback underscores the challenges ahead as CEO Kelly Orbrok 0:06:56.320 --> 0:06:59.320 works to stabilize Boeing even as the company benefits from 0:06:59.360 --> 0:07:02.119 surging air orders with support from the White House. 0:07:02.279 --> 0:07:04.760 For more, we were joined by George Ferguson, Bloomberg Intelligence 0:07:04.760 --> 0:07:07.760 Senior Aerospace, Defense and Airlines analyst. We first asked George 0:07:07.760 --> 0:07:09.800 for his key takeaways on Boeing's earnings. 0:07:10.000 --> 0:07:13.160 What I saw from earnings is that the commercial airplane 0:07:13.160 --> 0:07:17.600 business had about a four hundred thirty million dollar loss 0:07:17.640 --> 0:07:20.360 when you back out that about five billion dollar charge 0:07:20.760 --> 0:07:23.600 for Triple seven. I think that number was a bit 0:07:23.640 --> 0:07:25.800 better than consensus, a little bit better than what we 0:07:25.800 --> 0:07:29.680 were looking for. I think it's another sign that commercial 0:07:29.760 --> 0:07:34.560 airplane is getting closer to break even. And then in 0:07:34.600 --> 0:07:38.360 the cash flow statement, Boeing was cash flow positive at 0:07:38.400 --> 0:07:40.960 an operating level and free cash flow. It was about 0:07:40.960 --> 0:07:44.240 a billion dollars in the operating level and free cashflow 0:07:44.640 --> 0:07:48.280 a couple hundred million. I think that, you know, that's 0:07:48.320 --> 0:07:52.600 above where consensus expected it. We saw five billion dollars 0:07:53.000 --> 0:07:56.560 an inventory get unlocked during the quarter, meaning you know, 0:07:56.840 --> 0:08:00.200 Boeing has been sitting on something like ninety billion million 0:08:00.280 --> 0:08:03.160 dollars inventory that is like eighty seven I think was 0:08:03.240 --> 0:08:06.960 exact number, and that came down to eighty two billion 0:08:07.320 --> 0:08:10.080 because they've been buying from suppliers, putting things on shelves 0:08:10.720 --> 0:08:13.360 as they try to keep the supply base healthy while 0:08:13.360 --> 0:08:15.840 they've been going through some of their challenges here, and 0:08:15.880 --> 0:08:18.760 now they're starting to take that, you know, that inventory 0:08:19.240 --> 0:08:22.200 off the shelves, put it into airplanes. That's gonna that's 0:08:22.240 --> 0:08:25.400 going to hyper drive some of the cash generation of 0:08:25.480 --> 0:08:28.080 Boeing as they bring that inventory I think down to 0:08:28.120 --> 0:08:31.880 probably a sixty or fifty billion dollar level. So I 0:08:31.880 --> 0:08:34.520 think those are both big positives in the charge was 0:08:34.640 --> 0:08:36.960 largely non cash for an airplane that I think is 0:08:37.360 --> 0:08:39.920 still very competitive, just gets delayed a bit. 0:08:40.120 --> 0:08:42.440 All right, how about the deliveries of the seven thirty seven. 0:08:42.480 --> 0:08:44.240 What's the guidance there, George, because we know that's the 0:08:44.240 --> 0:08:44.920 big cash driver. 0:08:45.200 --> 0:08:48.720 I think, yeah, so they're you know, Boeing is kind 0:08:48.760 --> 0:08:51.520 of out of the game of giving guidance right now, 0:08:51.520 --> 0:08:53.719 but they've they said, you know, the FAAS allowed them 0:08:53.720 --> 0:08:56.600 to go to forty two a month build rate, which 0:08:56.600 --> 0:09:00.120 would which would be above what they've done in in 0:09:00.120 --> 0:09:02.320 the last quarter. I think we've got a modeled at 0:09:02.320 --> 0:09:04.720 about forty four or forty five per month for the 0:09:04.760 --> 0:09:08.280 next three months because there's still some inventory airplanes they'll 0:09:08.280 --> 0:09:12.480 deliver as as well as what they're building. Just heard 0:09:12.840 --> 0:09:16.960 Kelly Orpberg say on the call that he would anticipate 0:09:17.040 --> 0:09:20.760 sort of cranking up those build rates from forty two 0:09:21.040 --> 0:09:24.280 in increments of five every six months. 0:09:24.280 --> 0:09:26.480 No sooner, obviously. 0:09:26.240 --> 0:09:29.439 Won't break unless they feel like they've got things stabilized. 0:09:29.840 --> 0:09:32.520 So I think we've got a path here to hire 0:09:32.600 --> 0:09:35.600 build rates over, you know, to the end of the decade. 0:09:36.160 --> 0:09:39.440 So you know, I would expect that as they get 0:09:39.800 --> 0:09:42.160 a year down the road here will be probably break 0:09:42.200 --> 0:09:45.440 even in this business. You know, maybe a little bit longer, 0:09:45.480 --> 0:09:47.120 but I think we'll be break even in that business. 0:09:47.160 --> 0:09:49.920 And again that's I think all part of the turnaround 0:09:49.960 --> 0:09:52.920 is getting seven three seven to perform. That's that's going 0:09:52.960 --> 0:09:55.079 to be the financial driver. 0:09:55.720 --> 0:09:58.920 So Kelly Orpberg has now been CEO for just over 0:09:59.000 --> 0:10:01.360 a year. He started in August of twenty twenty four. 0:10:01.400 --> 0:10:02.960 I can't believe it's been that long already. I know, 0:10:03.120 --> 0:10:06.280 I know, and a lot has happened, clearly. And what 0:10:06.400 --> 0:10:09.960 I didn't realize is that Boeing is still facing some 0:10:10.080 --> 0:10:14.440 labor issues. Saint Louis Aria machinists still strike. They've been 0:10:14.480 --> 0:10:16.840 striking for more than three months. What does this say 0:10:16.880 --> 0:10:19.840 about Kelly Orberg's leadership and what kind of grade would 0:10:19.880 --> 0:10:22.080 you give him, George for his leadership so far? 0:10:22.920 --> 0:10:24.840 Yeah, I mean I'd give him a very high grade. 0:10:24.920 --> 0:10:28.800 Right again, I think that, you know, the biggest thing 0:10:28.840 --> 0:10:33.359 he needed to do was like improve morale, improve quality, 0:10:34.440 --> 0:10:37.880 and it appears to you know, to be the case. 0:10:38.320 --> 0:10:41.319 I think, you know, the proof is again build rates 0:10:41.760 --> 0:10:46.120 the FA, returning some you know, giving Boeing the ability 0:10:46.160 --> 0:10:47.840 to go to forty two, and returning some of their 0:10:47.880 --> 0:10:51.880 ability to certify some of the airplanes. So I think 0:10:51.880 --> 0:10:54.040 i'd give it all high in Saint Louis right now, 0:10:55.480 --> 0:10:58.040 Saint Louis is where the defense business is centered. Out 0:10:58.080 --> 0:11:01.680 of right now, the defense business not performing great, but 0:11:01.880 --> 0:11:05.600 getting better, you know. I think there's definitely more to 0:11:05.600 --> 0:11:09.240 come in the defense business as they start building the 0:11:09.320 --> 0:11:12.560 F forty seven, which is the sixth generation fighter that 0:11:12.600 --> 0:11:15.760 they won, but that's still some preliminary work. My guess 0:11:15.840 --> 0:11:18.360 is that the sides are still a little bit a 0:11:18.400 --> 0:11:21.120 part on, you know, where they want to be for 0:11:21.160 --> 0:11:24.080 an agreement, and it's not as critical to get those 0:11:24.120 --> 0:11:27.200 folks back to the production lines as it was to 0:11:27.200 --> 0:11:32.120 get a commercial seven thirty seven machinists back to production lines. 0:11:32.160 --> 0:11:34.680 So he's probably doing the right thing for the business here, 0:11:35.200 --> 0:11:37.319 and you know, making sure he can get an agreement 0:11:37.320 --> 0:11:39.839 he can live with, especially in defense where it's harder 0:11:39.840 --> 0:11:43.640 to bear increased costs. And again i'd give I'd give 0:11:43.679 --> 0:11:46.560 him high grades. I think the company's at a turnaround 0:11:46.640 --> 0:11:47.640 right now and doing well. 0:11:47.880 --> 0:11:49.920 George about the thirty seconds left. Just we don't talk 0:11:49.920 --> 0:11:52.000 about the Triple seven much. How does that kind of 0:11:52.000 --> 0:11:55.600 figure into their portfolio, into the economics of Boeing. 0:11:56.360 --> 0:11:58.680 Yeah, when it finally gets certified, it'll be the biggest 0:11:58.720 --> 0:12:03.120 airplane in production, So it kind of replaces seven four 0:12:03.200 --> 0:12:05.920 seven and A three eighty as the queen of the skies. 0:12:06.640 --> 0:12:10.280 A three fifty dash one thousand's the closest competitor. Can 0:12:10.440 --> 0:12:13.440 it can't be as densified, It can't have as many 0:12:13.480 --> 0:12:16.200 seats inside it, So I think you'll find a seat 0:12:16.240 --> 0:12:19.480 cost advantage in the Triple seven. It's got core customers 0:12:19.920 --> 0:12:23.160 in those you know, in those Middle East carriers, those 0:12:23.200 --> 0:12:29.040 Asian carriers that are the big sort of East West connectors, 0:12:29.120 --> 0:12:31.679 And I think it'll be fine. I think the delay 0:12:31.720 --> 0:12:33.760 won't won't hurt its ability to be sold. And it's 0:12:33.760 --> 0:12:35.560 already got five hundred in the backlog all right. 0:12:35.559 --> 0:12:38.439 Thanks to George Ferguson, Bloomberg Intelligence senior Aerospace, Defense and 0:12:38.480 --> 0:12:40.000 Airlines analyst, coming up. 0:12:40.080 --> 0:12:42.600 AI demand is going so fast that the cloud giants 0:12:42.640 --> 0:12:44.880 are racing to catch up. How did that fare for 0:12:44.960 --> 0:12:47.000 some big tech earnings this week. That's next. 0:12:47.120 --> 0:12:49.800 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing end 0:12:49.800 --> 0:12:52.559 depth research and data on two thousand companies in one hundred. 0:12:52.280 --> 0:12:53.000 And thirty industries. 0:12:53.080 --> 0:12:56.440 You can access Bloomberg Intelligence via bi go on the terminal. 0:12:56.520 --> 0:12:57.559 I'm Scarlett Foo and. 0:12:57.520 --> 0:12:59.360 I'm Paul Sweeney, and this is Bloomberg. 0:13:03.400 --> 0:13:07.920 This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney 0:13:08.240 --> 0:13:09.560 on Bloomberg Radio. 0:13:10.120 --> 0:13:12.560 Demand for AI keeps growing so fast that the cloud 0:13:12.600 --> 0:13:14.920 giants are racing to catch up. At least that was 0:13:14.960 --> 0:13:18.880 the message this week from tech giants Alphabet, Meta and Microsoft. 0:13:18.440 --> 0:13:20.920 And the company they're looking to catch in Vidio. This week, 0:13:20.960 --> 0:13:23.160 the tech giant became the first company ever to have 0:13:23.200 --> 0:13:25.439 a market cap of over five trillion dollars. 0:13:25.840 --> 0:13:28.240 The AI spent is not slowing down for more. We 0:13:28.280 --> 0:13:31.640 spoke with Ana rog Rana, Bloomberg Intelligence technology analyst. 0:13:31.840 --> 0:13:34.640 See I think the common theme is that capital expenditures 0:13:34.640 --> 0:13:37.840 are going up, which means there to spend a lot 0:13:37.880 --> 0:13:43.360 more money to expand their data center footwork and need 0:13:43.600 --> 0:13:46.600 more chip capacity to take care of the AI demand 0:13:46.640 --> 0:13:48.120 that they are saying. So, I think that's the common 0:13:48.160 --> 0:13:50.960 message for all of them. When you look at Microsoft, 0:13:51.040 --> 0:13:54.520 I think their CAPEX numbers nobody was expecting would go 0:13:54.679 --> 0:13:57.199 up this much. I mean, we were expecting them to rise, 0:13:57.280 --> 0:13:59.360 but they basically came out and said, you know, we 0:13:59.440 --> 0:14:02.720 thought we'll be fine by now. But they're still capacity constrained. 0:14:02.960 --> 0:14:05.160 The demand is coming through. They talked a lot about 0:14:05.200 --> 0:14:08.960 their open AI agreement, the revised one. You know, I 0:14:09.040 --> 0:14:11.800 still think they're probably in one of the better places 0:14:12.040 --> 0:14:14.240 than they have been in the past several years. 0:14:14.600 --> 0:14:19.080 All right, let's just compare and contrast Meta and Google. 0:14:19.760 --> 0:14:22.920 We had talking about big CAPEX increases. Is that just 0:14:22.960 --> 0:14:25.440 the market saying, hey, we trust you Google with this 0:14:25.520 --> 0:14:28.560 increased spending. Maybe not so much over there at Meta. 0:14:28.840 --> 0:14:31.040 You know, if you're looking at between both of them, 0:14:31.520 --> 0:14:34.680 Google is showcasing that they are seeing the benefit of 0:14:34.720 --> 0:14:39.160 AI in actual revenue generation from their cloud business. Cloud 0:14:39.160 --> 0:14:42.960 business accelerated, It accelerated last quarter as well. We're really 0:14:43.000 --> 0:14:45.720 seeing tangible benefits. Then you have Nthropic signing up with 0:14:45.760 --> 0:14:49.760 Google Cloud to use their TPUs. They have the chip business. Also, 0:14:50.320 --> 0:14:52.680 the big question for everybody is, well, Meta, you're spending 0:14:52.720 --> 0:14:54.760 all this money, how are you going to monetize it, 0:14:54.800 --> 0:14:56.800 and they talk about, you know, they're going to monetize 0:14:56.840 --> 0:14:59.640 it internally through better ads and serving ads. Well they're 0:14:59.640 --> 0:15:01.880 still so me at some mean all the time. Anyway, 0:15:02.160 --> 0:15:04.200 the question is where is all this money going and 0:15:04.320 --> 0:15:06.800 how do you get it back? I think that's where 0:15:06.800 --> 0:15:09.920 the dichotomy is between these two vendors. And Google has 0:15:09.960 --> 0:15:12.440 i think, done a phenomenal job of explaining to the 0:15:12.480 --> 0:15:15.680 market what their AI strategy is and why is it 0:15:15.720 --> 0:15:16.480 working so well. 0:15:16.840 --> 0:15:19.440 So it's a matter of meta not telling a story 0:15:19.520 --> 0:15:22.560 to investors, a narrative that resonates with investors or that 0:15:22.640 --> 0:15:24.640 convinces investors the way that alphabet is. 0:15:25.720 --> 0:15:28.080 See, when you think about it, spending five ten billion 0:15:28.080 --> 0:15:30.200 would be okay, But when you talk about spending you 0:15:30.200 --> 0:15:34.320 know sixty seventy eighty billion dollars of AI related you know, 0:15:34.560 --> 0:15:38.280 research going into your products. Well, where is the benefit 0:15:38.320 --> 0:15:38.560 of that? 0:15:38.920 --> 0:15:41.120 How is not a new story that they're telling. They 0:15:41.320 --> 0:15:43.280 told this story last quarter, in the quarter before, and 0:15:43.320 --> 0:15:44.360 investors seem to like it. 0:15:44.480 --> 0:15:46.480 Fair point. But when you look at now, Google is 0:15:46.520 --> 0:15:49.680 showcasing that we actually see the benefits and actual numbers 0:15:49.720 --> 0:15:52.680 that we are reporting. So between the two vendors. It's 0:15:52.760 --> 0:15:54.880 very clear what I can see on the Google side, 0:15:55.240 --> 0:15:57.800 it's not so much not so much clear on the 0:15:57.800 --> 0:15:58.440 Meta side. 0:15:58.520 --> 0:16:00.640 And I think also another part of it is having 0:16:00.760 --> 0:16:03.080 used to follow that the stock is one of the 0:16:03.120 --> 0:16:05.240 reasons Meta was working so well over the last several years. 0:16:05.280 --> 0:16:08.240 It was a cost cutting story. After the metaverse debacle. 0:16:08.320 --> 0:16:10.320 You know, people were concerned about all the spending on 0:16:10.360 --> 0:16:13.400 the Meta rate, right, Yeah, it seemed like zeer. Yeah, 0:16:13.400 --> 0:16:15.480 they got that, they saw the light and they started 0:16:15.680 --> 0:16:17.560 cutting costs in the stock work O Thanks to Anna 0:16:17.600 --> 0:16:20.800 rod Rana, Bloomberg Intelligence Technology Analyst. Next, we look at 0:16:20.800 --> 0:16:24.440 earnings from one of the world's biggest producers of heavy machinery, Caterpillar. 0:16:24.600 --> 0:16:27.160 This week, Cat reported third quarter earnings and revenue that 0:16:27.200 --> 0:16:30.200 beat analyst estimates. The company stated their boost and earnings 0:16:30.240 --> 0:16:32.800 was driven by their power generators and turbines that keep 0:16:32.840 --> 0:16:34.240 AI data centers running. 0:16:34.520 --> 0:16:36.680 For more on this, we were joined by Chris Chiolino, 0:16:36.760 --> 0:16:39.320 Bloomberg Intelligence Senior US machinery analyst. 0:16:40.360 --> 0:16:43.480 It was a great quarter. You know, despite pretty elevated 0:16:43.520 --> 0:16:47.960 expectations coming into the print a bigger tariff headwind, CAT 0:16:47.960 --> 0:16:51.520 really delivered very solid three key results. It was really 0:16:51.640 --> 0:16:55.360 driven by higher volumes across all three of their core businesses, 0:16:56.160 --> 0:17:00.280 with particular strength and energy and transportation. Again, but I think, 0:17:00.280 --> 0:17:02.120 you know, one of the more encouraging signs that we 0:17:02.160 --> 0:17:06.280 took away from the results were that orders accelerated here 0:17:06.320 --> 0:17:09.240 in the quarter, and we also saw a backlog improved 0:17:09.280 --> 0:17:12.560 sequentially to a record forty billion dollars. So we think 0:17:12.600 --> 0:17:16.879 we see you know, above average production and earnings visibility 0:17:16.920 --> 0:17:18.520 as we begin to think about next year. 0:17:19.480 --> 0:17:22.680 Did the company say a lot about the power producing 0:17:22.760 --> 0:17:26.680 equipment including turbines and generators that have investors excited about 0:17:26.720 --> 0:17:29.080 it being kind of a derivative play to the AI story. 0:17:30.040 --> 0:17:33.159 Absolutely, so, you know, we continue to hear more and 0:17:33.240 --> 0:17:36.920 more about AI and data centers and Cat's exposure there. 0:17:37.880 --> 0:17:40.840 Power gens probably you know, roughly thirty percent of the 0:17:40.960 --> 0:17:44.399 energy and transportation business, roughly you know, fifteen percent of 0:17:44.440 --> 0:17:48.160 the overall enterprise, but it continues to be the fastest 0:17:48.200 --> 0:17:51.360 growing part of the portfolio. They're bringing on a lot 0:17:51.400 --> 0:17:54.080 of capacity here over these next three years. I think 0:17:54.119 --> 0:17:55.960 you really begin to see a step change as we 0:17:56.000 --> 0:17:59.959 move into twenty twenty seven, particularly on the large engines. 0:18:00.359 --> 0:18:01.720 So there is. 0:18:01.840 --> 0:18:05.159 More of a focus and investment on the energy and 0:18:05.200 --> 0:18:08.160 transportation business and it has become, you know, the biggest 0:18:08.200 --> 0:18:09.320 part of their portfolio. 0:18:09.560 --> 0:18:12.040 Wow, are there other companies or let me put it 0:18:12.040 --> 0:18:14.919 this way, who does cat compete with in that segment 0:18:14.960 --> 0:18:15.560 of the business. 0:18:16.760 --> 0:18:19.439 Yeah, so there's a number of different competitors, and it 0:18:19.480 --> 0:18:23.359 really breaks down on relative by size on some of 0:18:23.400 --> 0:18:26.080 the gen sets. Cummins is a is a big one, 0:18:26.880 --> 0:18:30.360 Siemens Energy, and then you also have a few other 0:18:30.800 --> 0:18:34.480 European and Asian players. But you know, this is certainly 0:18:35.480 --> 0:18:37.840 a market that's growing, you know, pretty exponentially. 0:18:37.880 --> 0:18:38.160 Here. 0:18:38.760 --> 0:18:41.440 Backlogs extend several years, so we think we have pretty 0:18:41.440 --> 0:18:44.159 good visibility at least through you know, the next three years. 0:18:44.920 --> 0:18:47.400 Does this part of the business mean that Caterpillar will 0:18:47.440 --> 0:18:51.840 need to rely more on domestic market opportunities as opposed 0:18:51.840 --> 0:18:53.520 to global market opportunities. 0:18:54.640 --> 0:18:57.919 So their footprint is the largest, the energy and transportation 0:18:57.960 --> 0:19:01.679 footprint is the largest in North America, But you know, 0:19:01.920 --> 0:19:04.439 I think the opportunity is global. They are a large 0:19:04.480 --> 0:19:08.400 global producer that they serve you know, essentially almost all 0:19:08.440 --> 0:19:11.159 markets around the world. I think, even particularly with an 0:19:11.240 --> 0:19:13.919 energy and transportation it's like something like one hundred different countries. 0:19:14.000 --> 0:19:17.639 So while I think the immediate near term excitement is 0:19:17.880 --> 0:19:20.359 more focused here in North America, I do think longer 0:19:20.440 --> 0:19:22.560 term there's an opportunity international as well. 0:19:23.320 --> 0:19:27.720 What's the company saying about impact, if any, on tariffs 0:19:27.760 --> 0:19:29.760 on their business now going forward? 0:19:30.680 --> 0:19:33.479 Yeah, So tariffs were actually a much bigger headwind than 0:19:33.520 --> 0:19:36.640 we anticipated in the quarter, and even KAT I think 0:19:36.640 --> 0:19:38.760 it kind of shook out somewhere around a six hundred 0:19:38.800 --> 0:19:43.479 million dollar headwind in three Q. But margins, margins were 0:19:43.840 --> 0:19:48.119 better than expected, really pretty remarkably resilient despite these price 0:19:48.280 --> 0:19:51.840 costs headwinds. Four Q will actually see a step up 0:19:51.880 --> 0:19:55.359 in the tariff costs, and then as we think about 0:19:55.440 --> 0:19:58.520 next year, you know, Kat's really been kind of hesitant 0:19:58.560 --> 0:20:01.320 to pull the pricing level on a lot of tariffs 0:20:01.320 --> 0:20:03.800 thus far. We think that's you know, more of an 0:20:03.840 --> 0:20:05.840 opportunity for them here in the near term to gain 0:20:05.840 --> 0:20:08.760 some market share. So as we think about twenty twenty six, 0:20:08.840 --> 0:20:11.160 it'll be interesting to see, you know, do they continue 0:20:11.200 --> 0:20:14.879 to offset through more costs and productivity efficiencies or do 0:20:14.920 --> 0:20:18.320 they lean into pricing a little bit more. But tariffs 0:20:18.359 --> 0:20:20.240 will step up here in the near term and then 0:20:20.400 --> 0:20:22.800 you know, twenty twenty six, it still remains to be seen, 0:20:22.840 --> 0:20:26.080 but i'd expect a demand backdrop to improve. So they 0:20:26.080 --> 0:20:28.480 certainly should have the opportunity to push pricing a little 0:20:28.480 --> 0:20:29.840 bit more aggressively next year. 0:20:30.040 --> 0:20:32.440 Our thanks to Chris Chile, you know, Bloomberg Intelligence senior 0:20:32.520 --> 0:20:33.720 US machinery analyst. 0:20:34.080 --> 0:20:36.879 We move next to news from the logistics company UPS. 0:20:37.040 --> 0:20:39.600 This week, UPS said it expects to cut thirty four 0:20:39.680 --> 0:20:42.600