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Speaker 2: It is Bloomberg Business Weekdaily. That's Carol Masser, I'm Tim Steneveek.
Speaker 2: I'm watching shares at Amazon in the after hours up
Speaker 2: eight and a half percent right now. The company reported
Speaker 2: net sales for the third quarter that beat the average
Speaker 2: analyst estimates. We're talking about one hundred and eighty point
Speaker 2: one seven billion dollars that's up thirteen percent year over year.
Speaker 2: The estimate was for one hundred and seventy seven zero
Speaker 2: point eight two billion dollars AWS coming in net sales
Speaker 2: excluding fax up twenty percent versus nineteen percent year over year.
Speaker 2: SMOs for seventeen point nine percent. As far as that
Speaker 2: forecast looks, Seeson at sales of two hundred and six
Speaker 2: billion to two hundred and thirteen billion. The estimus for
Speaker 2: two hundred and eight billion dollars, so kind of on
Speaker 2: the high like yeah, sad performance. Yeah.
Speaker 3: Putum Goyle is Bloomberg Intelligence Senior Analyst for e commerce
Speaker 3: andth Leisure. She joins us from the Bloomberg Intelligence Princeton Bureau.
Speaker 3: Let's go to you, God Putham. This looks like a
Speaker 3: really strong report on a lot on a lot of metrics.
Speaker 4: It definitely is. I mean, they hit it out of
Speaker 4: the park. Sales were very get across the board across
Speaker 4: all business segments, AWS, online advertising, even physical stores. So
Speaker 4: from a top line perspective, very very encouraging results. In fact,
Speaker 4: AWS was probably the bright spot here. Twenty percent gains.
Speaker 4: We haven't seen that in a while. On the margin side,
Speaker 4: I think AWS did really well, but then when it
Speaker 4: came to North America margins, they were weaker than we expected.
Speaker 4: So it's the only one area that I saw some skepticism,
Speaker 4: and I think that's largely due to their ability to
Speaker 4: want to maintain low prices to make sure the consumer
Speaker 4: keeps coming back and investing in its fulfillment.
Speaker 2: So you think that margins took a hit because Amazon
Speaker 2: is keeping prices low why, I.
Speaker 4: Mean, they want to drive market share gains. Right, So
Speaker 4: if you think about what's happening in retail this year,
Speaker 4: tariffs have clearly added to costs, and many retailers have
Speaker 4: decided to offset those costs through efficiencies to try to
Speaker 4: keep an old prices steady or raise them selectively, So
Speaker 4: that could be part of the pressure. And then also
Speaker 4: you know Amazon has stepped up its game on shipping
Speaker 4: where it was the leader and it still is the leader,
Speaker 4: but they're continuing to invest there to get items to faster,
Speaker 4: same day, etc.
Speaker 3: Yeah, they still do it right there, definitely completing on
Speaker 3: that one. Hey Ludlow, come on into our conversation, co
Speaker 3: host of Bloomberg A B Tech on Bloomberg Television. Watching
Speaker 3: these numbers, I mean, investors are sending shares of Amazon
Speaker 3: much higher here in the aftermarket, stock up about nine percent.
Speaker 5: The cloud computing division accounts for the majority of operating income, right,
Speaker 5: and this return to growth year and year of above
Speaker 5: twenty percent for the first time since twenty twenty two.
Speaker 5: It's absolutely timely. You know, I think Google gave us
Speaker 5: a lot of evidence that GCP, their cloud offering, has
Speaker 5: a lot of momentum at the moment, but this is
Speaker 5: a bit of a barnstormer from Amazon to say, actually,
Speaker 5: on every metric that we track, AWS is doing really well.
Speaker 5: One of the headlines that you spotted really excellent, the
Speaker 5: appreciation in their investment on Nthropic that had a non
Speaker 5: operating income impact to the bottom line, right. But also
Speaker 5: they're talking a pretty fierce game about their custom training
Speaker 5: chip Trainium too and calling it a multi billion dollar business.
Speaker 5: And what we've seen in the past is when Amazon
Speaker 5: hasn't necessarily put a specific dollar figure on something but
Speaker 5: said this AI thing is in the billions of dollars,
Speaker 5: the market has given them a lot of credit for
Speaker 5: giving us at least like a little bit more detail.
Speaker 2: Ed where does the Trainium to model fit in?
Speaker 6: Well, this is why I bring Google up.
Speaker 5: You know, when we broke the story that Anthropic had
Speaker 5: done a deal with Google for the use of one
Speaker 5: million TPUs Google's custom AI card or accelerator, it was
Speaker 5: a bit of a black eye for Amazon because Amazon
Speaker 5: is also a major investor in Anthropic, and Amazon and
Speaker 5: Anthropic have this large project called Project Rainier, a data
Speaker 5: center in Indiana. What they're saying is that this is
Speaker 5: a multi billion dollar run rate business. The offering their
Speaker 5: in house chip to third party customers. We don't know
Speaker 5: any more than that, but it does indicate that both
Speaker 5: Ranthropic and for other customers outside of Anthropic, that it's
Speaker 5: a viable business. You know, they've invested a lot of
Speaker 5: money on custom silicon and at least on the one
Speaker 5: headline we have on that it's paying dividends, so to speak.
Speaker 3: He speaking of dividends and paying dividends and put them.
Speaker 3: I want to go back to you on the retail
Speaker 3: side of this. I mean, we know that Andy Jassey,
Speaker 3: the CEO of Amazon, has really been working on improving profitability.
Speaker 7: Of that business automation.
Speaker 3: We've had their key head of robotics talking about what
Speaker 3: Amazon continues to do at that company in terms of
Speaker 3: automation and robotics. So what else can you give us
Speaker 3: in terms of color on the retail side of the business,
Speaker 3: which is something that so many of us right identify
Speaker 3: very clearly with when it comes to Amazon.
Speaker 4: Yeah, I think, look, they're making all the right investments
Speaker 4: to improve profitability. In the longer term, Amazon's retail businesses
Speaker 4: finally break even the profitable it took a long time
Speaker 4: to get here, and I think automation will be the
Speaker 4: next leg of growth to drive that further. But as
Speaker 4: I mentioned, you know earlier, AWS is driving their EBIT margins,
Speaker 4: so AWS can compensate these investments to a certain extent
Speaker 4: and advertising because the margins here are just so much
Speaker 4: higher than they'll ever be able to get in the
Speaker 4: retail business.
Speaker 2: How is how is the advertising business during PUNAM?
Speaker 4: It's doing really well, like brow twenty two percent in
Speaker 4: constant currency in the quarter, so right where we expected.
Speaker 4: And I think you know that's a high profit business.
Speaker 4: It's about seventy five to eighty percent profit margins by
Speaker 4: our estimates, and that's flowing right to the bottom line.
Speaker 4: We see it going to one hundred million dollars. So
Speaker 4: there's a lot of improvement that they can build in
Speaker 4: advertising and really drive that business higher from here.
Speaker 2: Where's that coming from? Is that coming from interstitials placed
Speaker 2: in Amazon Prime Video, which I think you know, cut
Speaker 2: a lot of people off guard when they started doing that.
Speaker 2: Was it last year maybe? Or yeah? Or is it
Speaker 2: or is it coming from like products that are paid
Speaker 2: for placement.
Speaker 4: I think it's a combination of both. You're absolutely right
Speaker 4: these ads are driving incremental revenue. But if you think
Speaker 4: about the base of this revenue base. It's still coming
Speaker 4: from product advertisements. The ads do how and they will
Speaker 4: become a larger driver as the ad business grows in size,
Speaker 4: But the core of it is still product advertisement.
Speaker 7: Hey, put them before we let you go.
Speaker 3: What's kind of top of mind for you and the
Speaker 3: areas that you cover with Amazon that you would be
Speaker 3: asking on the earnings call.
Speaker 4: On the retail side, it's really about holiday and how
Speaker 4: that's going. The October Prime Day deals that they had,
Speaker 4: how that's going and how the customer is responding. We
Speaker 4: think the customers are still holding up. Well, are they
Speaker 4: seeing the same thing and how do they see holiday
Speaker 4: shaping out to be? Where we're entering holiday?
Speaker 7: All right?
Speaker 8: Love it?
Speaker 1: Love it.
Speaker 3: Looking out for Punham's research too. That will hit the
Speaker 3: Bloomberg Punam Oil as Bloomberg Intelligence senior hours for e
Speaker 3: commerce and at leisure. We want to go back to
Speaker 3: the co host b Tech on Bloomberg TV every day
Speaker 3: eleven am to noon on Bloomberg Television, Ed Ludlow still
Speaker 3: with us at as you continue to pour over that release,
Speaker 3: what else is catching your attention?
Speaker 5: Yeah, I mean Punham gave us the story with Amazon
Speaker 5: dot com. Right, most of the audience are going to
Speaker 5: be more familiar with the e commerce business than they
Speaker 5: are with the cloud computing business. They are number one
Speaker 5: in cow computing, and as Punam put it so succinctly,
Speaker 5: the profit is compensated for the less profitable e commerce
Speaker 5: side through cloud. But Andy Jasse's really focused on retail
Speaker 5: being more profitable. Tim is absolutely right that you look
Speaker 5: at advertising and the role that that's played there and
Speaker 5: it has been improved. I would also just note that
Speaker 5: in the quarter, Amazons numbers reflect almost two billion dollars
Speaker 5: in severance costs. That's the other story of Amazon right now,
Speaker 5: getting rid of the blow.
Speaker 2: That was the previous quarter, right, not the current quarter.
Speaker 6: Previous quarter exactly.
Speaker 2: Yeah, is the current quarter going to take a hit
Speaker 2: right now or is it going to be the upcoming quarter.
Speaker 2: It's always tough with this stuff because we don't know
Speaker 2: how these employment agreements work.
Speaker 5: Yeah, but the third quarter operating income was twenty one
Speaker 5: point seven billion dollars, almost twenty two billion dollars without
Speaker 5: charges when you strip the charges out, and so you
Speaker 5: know this is a profitable business overall because of cloud.
Speaker 5: It's a funny thing to say but what's a couple
Speaker 5: of billion, you know to right size the company? And
Speaker 5: that is the thing here. Amazon has been inconsistent on
Speaker 5: this point. At one time Andy Jesse said that right
Speaker 5: sizing the company eliminating roles was because of the advent
Speaker 5: of AI. But the communication this past week when they
Speaker 5: cut fourteen thousand corporate roles was it was more about
Speaker 5: bloat and middle management, right sizing areas and simplifying the
Speaker 5: management structure more than anything. So it's hard to know
Speaker 5: which of those two stories is the predominant of prevailing
Speaker 5: one here. But yeah, it's for Amazon, like it's a
Speaker 5: one time charge that so what all right?
Speaker 3: We want to bring into the conversation to Eric Clark,
Speaker 3: chief investment officer at ACIVASQ Global Advisors and portfolio manager
Speaker 3: for the Alpha Brands Logo ETF, which has Amazon and
Speaker 3: Apple and Alphabet and Microsoft and Netflix in its holdings.
Speaker 3: Ed Lolo is going to stay with us. He's, of course,
Speaker 3: co host of b Tech on BTV.
Speaker 7: Eric, come on in on Amazon. You like this?
Speaker 2: I love it.
Speaker 9: I mean I think the market loves it too. How
Speaker 9: are you guys? I think the setup into the quarter
Speaker 9: was pretty attractive because people were nervous about AWS and
Speaker 9: losing market share, so the stock sold off into the
Speaker 9: print and then you get some reality that Amazon is
Speaker 9: still doing Amazon.
Speaker 2: Well, how do you read into this report in the
Speaker 2: context of the layoffs that we learned about earlier this week?
Speaker 2: Did Amazon need to do those layoffs? Do you see
Speaker 2: it as a directional shift for the company? Obviously they
Speaker 2: were doing pretty well with this same headcount.
Speaker 9: I mean, you're going to hear more and more of this,
Speaker 9: and I don't love that as a consumer investor, But
Speaker 9: the reality is, when you're implementing AI through your business,
Speaker 9: and you're obviously serving other companies doing the same thing,
Speaker 9: right sizing of your headcount is a big part of
Speaker 9: the story. And so with robot in warehouses plus all
Speaker 9: the typical right sizing, it's a very large company, a
Speaker 9: very large employer. So I think we're we're going to
Speaker 9: have to hear about that across most companies certainly deploying
Speaker 9: AI because they're getting a lot of efficiencies and might
Speaker 9: not need the same kind of people.
Speaker 3: Hey, Ed, I know you're doing double duty for us
Speaker 3: and for our TV team, but you know, I'm just
Speaker 3: thinking about all these names, these hyperscalers, these big tech
Speaker 3: that have been reporting, as Zanna Agrana said, they're not
Speaker 3: apples to apples, even though we sometimes.
Speaker 2: Get we're getting apple.
Speaker 3: We put them together and it's going to be back
Speaker 3: to to talk Apple with us. But how are you
Speaker 3: thinking against kind of the big cap technique?
Speaker 6: Smart question?
Speaker 7: Yeah, this fits well.
Speaker 5: So what they all have in common is capital expenditures.
Speaker 5: So okay, on the one hand, they will have capital expenditures.
Speaker 5: It's what they then are able to say on the
Speaker 5: other that they've been inconsistent. Meta didn't say anything about
Speaker 5: growth related to AI, and the stop fell precipitously. I
Speaker 5: go back to the trainium too headline from aws hit
Speaker 5: being a multi billion dollar business, their commitment to invest
Speaker 5: in infrastructure, but also giving us a number for what's
Speaker 5: come online. The kind of fighting talk from Andy Jasse
Speaker 5: on the AWS growth and its ties to AI specifically,
Speaker 5: investors seem to be rewarding any more little bits of
Speaker 5: information that you can get that shows something coming out
Speaker 5: of the investment that's happened in prior quarters. And so
Speaker 5: while they all have capex in common, the story they
Speaker 5: have to tell about literal top line growth as it
Speaker 5: relates to AI has been very different, and Amazon has
Speaker 5: something to say here clearly.
Speaker 3: All right, Ed, we know you're going to probably head
Speaker 3: over to the TV side, but you're going to come
Speaker 3: back with us a little bit later on when Apple
Speaker 3: reports in just a few minutes. Our Ed Ludlow, of course,
Speaker 3: co host of b Tech on BTV, still with us,
Speaker 3: as though.
Speaker 2: Eric Clark, Hey, Eric, I want to bring you back
Speaker 2: into this conversation. All the companies that we love to
Speaker 2: talk about are in your Logo US fund. That's the
Speaker 2: ticker logo US. Amazon is one of the top ten
Speaker 2: holdings in there. It's about four point three percent of
Speaker 2: the portfolio. Are you buying more on this?
Speaker 9: I don't know that I'm going to chase any because
Speaker 9: it'll be interesting to see if we get a little
Speaker 9: bit of fade. You know that some of the Bears
Speaker 9: might come out and say that, well it was a beat,
Speaker 9: but they're still losing market share to Google and to Azure,
Speaker 9: but off of such a big scale. I just don't
Speaker 9: think that's a very you know, wise decision or a
Speaker 9: wise conclusion to make. And people still give the retail
Speaker 9: business no respect. Margins are going to keep going up
Speaker 9: with head count's going to be right size, there's just.
Speaker 2: Yeah, why do you say margins are going to go up?
Speaker 2: They're eating tariffs right now? Well, it wouldn't.
Speaker 9: Let's say, let's say I would bet you that there's
Speaker 9: at least a more than fifty to fifty chance that
Speaker 9: these tariffs get rolled back, whether it's the Supreme Court
Speaker 9: doing it or the administration saying that we need actual
Speaker 9: growth and tariffs might not be you know, pro growth
Speaker 9: in that perspective. I just think there are too many
Speaker 9: efficiencies to be had that will eventually lead to margin expansion.
Speaker 2: This is part of a much bigger conversation. But those
Speaker 2: tariffs are supposed to at least partially offset the revenue
Speaker 2: decreases coming from the One Big, Beautiful Bell Act. So
Speaker 2: thanks cuts right that are included as part of that.
Speaker 2: So how do how does that square for the fiscal
Speaker 2: I mean, look, this is not a conversation about the
Speaker 2: fiscal health, but this all affects the consumer at the
Speaker 2: end of the day, and that's what you look at
Speaker 2: it does it does? I mean, the smaller companies don't
Speaker 2: have as many levers to pull to try to to
Speaker 2: keep prices where they are, and I think this massive
Speaker 2: headcount is being underappreciated too, because that's a pretty large
Speaker 2: number that ultimately will have an effect on their ability
Speaker 2: to keep prices which drives traffic.
Speaker 9: And Amazon, Walmart, you know, Costco. There's still the three
Speaker 9: brands that people are turning to when they're looking to
Speaker 9: save money. So there's at this amount of scale globally,
Speaker 9: there's a lot of operating efficiencies that keep margins higher.
Speaker 9: And I still think the cost to serve goes down
Speaker 9: and continues to go down, which pushes margins up over time.
Speaker 9: And I just don't think the tariffs are pro growth.
Speaker 9: And it's midterm elections next year. Pro growth is going
Speaker 9: to get a lot more focus as we head into
Speaker 9: twenty twenty six.
Speaker 3: Hey, if you're just joining us. Amazon out with earnings.
Speaker 3: Just shortly after the market closed, Amazon's cloud unit posted
Speaker 3: the strongest growth rate in almost three years, so reassuring
Speaker 3: investors concerned that the largest seller of rented computing power
Speaker 3: was losing ground to rivals AWS. Amazon Web Services posted
Speaker 3: revenue of thirty three billion dollars, an increase of twenty
Speaker 3: percent from the prior year and the biggest year over
Speaker 3: year rise since the end of twenty twenty two, analysts
Speaker 3: on average had estimated about eighteen percent growth. We are
Speaker 3: still looking at this stock up about nine point two
Speaker 3: percent in the after market. We've seen it up as
Speaker 3: much as ten percent, but again, investors definitely all.
Speaker 7: In on what they got.
Speaker 2: Okay, So Eric on the AWS side is I know,
Speaker 2: you look at the consumer, but AWS powers this company
Speaker 2: from a profitability perspective. Still more room in your view
Speaker 2: for AWS to get market share. That was a question
Speaker 2: that a lot of people had going into this call.
Speaker 9: You know, I mean, I've been listening to a bunch
Speaker 9: of calls from a bunch of different tech companies and
Speaker 9: retail companies. There is so much demand for these products
Speaker 9: and services and tools that I think there's enough business
Speaker 9: to go around for everybody. And you know, I understand
Speaker 9: that Google has Gemini and Azure has open ai and
Speaker 9: chat youpt, but you know, don't underestimate anthropic and its role.
Speaker 9: Every company is going to do things a little bit differently,
Speaker 9: and the inference is obviously the most important part long term.
Speaker 9: So I think there's enough business to go around, and
Speaker 9: I have learned not to underestimate Amazon's management team. The
Speaker 9: stock can lag when they're in these big capex cycles
Speaker 9: and then it plays WI could catch up with with
Speaker 9: the monetization part of it. But they've said now for
Speaker 9: two quarters that they their business is stable enough at
Speaker 9: the retail and at aws that they can fund the
Speaker 9: growth while not you know, spending too much. Meta got
Speaker 9: crushed because the expense structure is out of control, and
Speaker 9: I don't see that here with Amazon.
Speaker 2: So to be fair, alphabet is your fifth biggest holding
Speaker 2: in your logo ETF, so you are able to kind
Speaker 2: of get exposure to both. We do, we do.
Speaker 9: I mean the Google the Google quarter was was was stellar.
Speaker 9: Growth is strong, and that you know clearly with that
Speaker 9: big acquisition on cybersecurity that that is the next phase
Speaker 9: of Google rather than search, because we know search might
Speaker 9: be a bit of a melting ice cube over time,
Speaker 9: but it is a slow moving melting ice cube, and
Speaker 9: so they're they're doing exceptional things and clearly underestimated looking
Speaker 9: at the stock over the you know, over the last
Speaker 9: couple months, Erica.
Speaker 3: Do you want to go back to Amazon again? Still
Speaker 3: up about nine percent here in the aftermarket. You know,
Speaker 3: you mentioned anthropic and in the release I did a
Speaker 3: search as soon as it came out because investors and
Speaker 3: analysts were curious about that net income increased to twenty
Speaker 3: one point two billion in the third quarter for Amazon
Speaker 3: compared with fifteen point three billion in the third quarter
Speaker 3: one year ago.
Speaker 7: Third quarter twenty twenty five.
Speaker 3: Net income includes pre tax gains of nine and a
Speaker 3: half billion included in non operating income from their investments
Speaker 3: in Anthropic, so that investment paying off.
Speaker 9: Very much so, and the same thing could be said
Speaker 9: about Microsoft and and open Ai. So you know, they've
Speaker 9: picked a bunch of the megacaps have all picked a
Speaker 9: handful of these companies, And obviously it's about computing, power
Speaker 9: and energy because the demand is clearly there. They just
Speaker 9: need to be able to serve the demand. And the
Speaker 9: good news is they don't do it all in one
Speaker 9: or two quarters. This is probably sustainable demand and sustainable
Speaker 9: growth for the next couple of years for all these companies.
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 2: up after this.
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Speaker 7: Apple is out. Let's get to it, folks.
Speaker 2: Okay, well, there were some beats and there were some misses.
Speaker 2: Let's start with the missus fourth quarter Greater China revenue
Speaker 2: a big, big miss there, fourteen point four nine billion dollars.
Speaker 2: The stimus for sixteen point four to three billion dollars
Speaker 2: overall revenue, though coming in above one hundred billion dollars
Speaker 2: that for the first time ever. For the September quarter
Speaker 2: Greater China revenue twelve percent below CONCESSUS estimate. Services came
Speaker 2: in with a nice beat. Another miss, surprisingly, the iPhone
Speaker 2: forty nine point zero three billion versus forty nine point
Speaker 2: three billion dollars.
Speaker 3: Yeah, Mark Kerman saying operating expensive expenses which everyone is
Speaker 3: now closely watching. Things to meta came in line with
Speaker 3: expectations of fifteen point nine one billion. I'm sure we
Speaker 3: will hear more about investing on the call that's coming
Speaker 3: from our Markerman, who covers Apple so closely and looks
Speaker 3: at consumer tech overall.
Speaker 7: Let's get to it with Jay Goldberg.
Speaker 3: He's senior alys Semiconductors and Electronics at Seaport Research Partners.
Speaker 3: He's got to buy on Apple, joining us from San Francisco.
Speaker 7: Take it away, Apple, what do you think?
Speaker 6: Yeah, it looks it looks okay.
Speaker 10: It's it's not perfect, it's not totally clean, but it's
Speaker 10: it's got some good stuff.
Speaker 6: It's got some you know, okay stuff.
Speaker 2: The yeah, go ahead, Carol, Well what's good?
Speaker 7: What's okay?
Speaker 6: I mean, just go on.
Speaker 10: Against my numbers, it looks like services is much stronger
Speaker 10: than I expected. iPhone was good. iPad was surprisingly good.
Speaker 10: I don't know if anyone tracks that anymore, but iPad
Speaker 10: was good, and gross margins were better than expected. I've
Speaker 10: been a little cautious about gross margins and consumer companies
Speaker 10: lately because memory prices are going up. But that's not
Speaker 10: I don't see that in Apple's numbers. So, you know,
Speaker 10: the China stuff. You pointed that out.
Speaker 6: I think that's that's concerning, not entirely surprising.
Speaker 2: It's not surprising. Back twelve percent below consensus. Why so
Speaker 2: it surprised some people.
Speaker 10: Yeah, I mean, just given the state of the world,
Speaker 10: I think expecting too much from an American company selling
Speaker 10: it to China right now is going to always disappoint.
Speaker 10: But you know, hopefully we have a trade deal and
Speaker 10: that all goes away.
Speaker 2: It's a trade truce, I think is the way that
Speaker 2: we heard about it today. Trade is a trade truce,
Speaker 2: and not for that to go away.
Speaker 6: I think.
Speaker 10: So I think more and more practically what was going
Speaker 10: on in China is the iPad, the iPhone err is
Speaker 10: not available there.
Speaker 6: It's hard to get here.
Speaker 10: Production I hasn't fully ramped yet, and I think that's
Speaker 10: going to be the real hit, right, And this is Apple.
Speaker 10: They know how to get their supply chain in time
Speaker 10: for the year end holiday shopping season. And I don't
Speaker 10: think I've had I don't think the iPhone Air is
Speaker 10: readily available in China, So I think that will that
Speaker 10: will help. And so if you're a Chinese consumer, you're
Speaker 10: looking at it, you see the iPhone air coming, You're
Speaker 10: going to hold off on your iPhone purchases now and
Speaker 10: wait for that, all right.
Speaker 3: Shares of Apple now up about one percent here in
Speaker 3: the aftermarket, So bounce it around, no doubt about it.
Speaker 7: Are Mark German on our live.
Speaker 3: Blog, who covers Apple and often is breaking exclusives on
Speaker 3: the company, noting that while China is harsh, they are.
Speaker 7: Likely pleased investors.
Speaker 3: They are likely pleased with the overall revenue growth of
Speaker 3: eight percent, the giant services number, that's something Jay just
Speaker 3: pointed out, and the six percent year over year iPhone
Speaker 3: growth overall a solid quarter, So top of mind for you, like,
Speaker 3: what is it that you would what do you want
Speaker 3: to know more from when it comes to Apple here, Jay, I.
Speaker 10: Think I'm willing to wait on the AI story. I
Speaker 10: know your previous guest was talking about that, and he's
Speaker 10: absolutely right. The AI story is important for Apple, but
Speaker 10: I don't think it's important today.
Speaker 6: I can wait six months, nine more. It's a year
Speaker 6: for them to sort it out.
Speaker 10: Right When remember when Apple Maps launched whatever ten years ago,
Speaker 10: it was terrible, it was a joke. Now I use
Speaker 10: Apple Maps more than I use Google Maps. It's gotten
Speaker 10: it's gotten better. Sometimes Apple just takes a while to
Speaker 10: get there. So I'm okay waiting with it. They need
Speaker 10: to solve it, that's really important, but they don't need
Speaker 10: to solve it this quarter. I would like to just
Speaker 10: hear them talk about supply chain and what's going on
Speaker 10: in China, and you know what's driving What are the
Speaker 10: dynamics of the iPhone business?
Speaker 6: I think that's the most important.
Speaker 2: Is there a compelling reason for people to upgrade to seventeen,
Speaker 2: to the iPhone seventeen.
Speaker 10: I think the air is pretty intriguing. I'm on the fence.
Speaker 10: I usually upgrade every year. I think I'm gonna hold
Speaker 10: OUTO because I'm pretty sure they're gonna have a foldable
Speaker 10: phone next year, so that'll be exciting. But I think that,
Speaker 10: you know, everyone I talked to has the air is
Speaker 10: just it raves about it, like they're enthusiastic about this
Speaker 10: iPhone in a way that I haven't heard people be
Speaker 10: enthusiastic about an iPhone in many years.
Speaker 7: Just a rehash.
Speaker 3: We've got now of Apple up about one point eight
Speaker 3: percent here in the after market. So this is despite
Speaker 3: those disappointing sales in China which did fall short of
Speaker 3: analyst estimates, but strong over sales in the overall sales
Speaker 3: in the period. Hey, let's go to our LA bureau
Speaker 3: for a moment. We're going to come back to Jay
Speaker 3: Goldberg in just a minute or two. Marcus Bloomberg, news
Speaker 3: Managing editor for Global Consumer Technology.
Speaker 7: He is out there in our LA.
Speaker 3: Bureau mark fascinating in a short period of time, twelve
Speaker 3: minutes to see the stock being sold off a little
Speaker 3: bit to now rallying almost two percent walk us through
Speaker 3: this quarter.
Speaker 7: What stands out here.
Speaker 11: Yeah, what stands out here is iPhone obviously grew tremendously
Speaker 11: six percent year over year. They beat in nearly every
Speaker 11: product category except the iPad. Had an extremely slight miss
Speaker 11: on Wall Street forecast, and again those are just forecast
Speaker 11: numbers that get made up anyways, so I don't think
Speaker 11: too big of a deal there. The big one, though,
Speaker 11: is a big line and miss in Greater China. I
Speaker 11: think some of that can be attributed to the iPhone
Speaker 11: Air delay, which was not expected, and they originally announced
Speaker 11: the iPhone Air they anticipated a September release alongside the
Speaker 11: other models. That model has been doing decently in China
Speaker 11: since it was released just about a week ago.
Speaker 6: Now.
Speaker 11: The other thing to point out is the seesaw you saw. Originally,
Speaker 11: the stock dipped on the China development, and maybe iPhone
Speaker 11: sales weren't as strong as some had anticipated. But Tim
Speaker 11: Cook told news outlets that got pre briefed on the
Speaker 11: Apple earnings results earlier today that the December quarter would
Speaker 11: grow ten to twelve percent on an annual basis, which
Speaker 11: is obviously a fantastic jump for them. That is a
Speaker 11: year over year growth on holiday period we have not
Speaker 11: seen for a very long time, and Apple hasn't provided
Speaker 11: guidance in a very long time because of COVID and
Speaker 11: everything that's happened since then.
Speaker 10: So it's pretty signific.
Speaker 2: Yeah, shares up two point nine percent as we speak
Speaker 2: right now. Mark, just one more question for you, and
Speaker 2: then I know you got to run on China, and
Speaker 2: the big miss on China you said it's not too
Speaker 2: surprising yet still came in twelve percent below consensus estimates
Speaker 2: is I'm not going to say Apples should throw in
Speaker 2: the towel in China, but how vulnerable is Apple in China?
Speaker 11: They're certainly vulnerable in China, but they have obviously a
Speaker 11: big retail portfolio there of about fifty stores. As I've
Speaker 11: said multiple times, they need to start launching products that
Speaker 11: are specific to the Chinese market. They still don't have
Speaker 11: their AI strategy together in China, and so we'll see
Speaker 11: once AI is implemented in iPhones in China next year,
Speaker 11: if that begins helping turn some things around, and we'll see.
Speaker 11: You know, we're going to have some pent up demand
Speaker 11: in China now for the current court or the first
Speaker 11: court or the holiday period because the iPhone Air didn't
Speaker 11: go on sale in September during the September period.
Speaker 3: All right, Mark, we know you get to run over
Speaker 3: to the TV side, so appreciate you jump on with us.
Speaker 3: Mark German, he's Bloomberg News Managing editor for Global Consumer Tech. Really,
Speaker 3: as we remind everybody, our go to on Apple breaking
Speaker 3: all these exclusives, and right now the stock is trending
Speaker 3: higher now, up about three point five percent. I will
Speaker 3: point out that Mark mentioned some news that the chief
Speaker 3: financial officer had shared with some various media outlets. I'm
Speaker 3: just looking at the Financial Times and again just going
Speaker 3: back to that Apple gave a bullish outlook for its
Speaker 3: crucial holiday sales period, reported record annual profit today, the
Speaker 3: CFO Kevin Perrick saying Apple expects total company revenue to
Speaker 3: grow ten to twelve percent year over year in the
Speaker 3: three months to December, with iPhone revenue growing double digits.
Speaker 3: So that's what Mark was talking about, and that is
Speaker 3: probably why we are seeing Apple shares do that turnaround
Speaker 3: now up almost four percent in the after market.
Speaker 2: Yeah, yeah, pretty remarkable to see the turnaround, but you
Speaker 2: know that's what happens, and you get more detail from executives.
Speaker 2: The call hasn't even started yet, so we'll wait for
Speaker 2: the call also to start, and maybe we'll see some
Speaker 2: more movement there too. Just to repeat. Fourth quarter i'pad
Speaker 2: revenue coming in ever so slightly below estimates at six
Speaker 2: point nine to five billion dollars. Products revenue coming in
Speaker 2: above estimates. Greater China revenue a big miss there, fourteen
Speaker 2: point four nine billion dollars, twelve percent below consensus estimates
Speaker 2: of sixteen point four to three billion dollars. Fourth Quarter
Speaker 2: earnings for share coming in above estimates at one dollar
Speaker 2: and eighty five cents. MAC revenue beating at eight point
Speaker 2: seven three billion dollars. Fourth Quarter services revenue also a
Speaker 2: beat there, twenty eight point seventy five billion dollars.
Speaker 7: Try to turn around in the after market trade. Let's
Speaker 7: go back. We've got still with us.
Speaker 3: Jay Goldberg, senior analyst Semiconductors and Electronics. He's got a
Speaker 3: buy rating on Apple. He's over at Seaport Research Partners.
Speaker 3: He's there in San Francisco. Also in San Francisco at
Speaker 3: the Bloomberg News Bureau, Ed Ludlow co host a b
Speaker 3: Tech joining us. Of course, that airs on Bloomberg Television.
Speaker 3: I do want to ask you, ed, since you've had
Speaker 3: some moments to look at that Apple release. We just
Speaker 3: talked with Mark German about what the CFO has said
Speaker 3: to I guess sharing with some media outlets about Apple
Speaker 3: revenue growing ten to twelve percent per year our year
Speaker 3: over year excuse me, in the final quarter of twenty
Speaker 3: twenty five, and what he sees with iPhone revenue growing
Speaker 3: double digits. I mean, that sounds pretty optimistic.
Speaker 6: We can explain this.
Speaker 5: The orders for the iPhone seventeen started on September twelfth,
Speaker 5: The iPhone seventeen went on sales September nineteenth. They've just
Speaker 5: reported a quarter that ended on September twenty seventh, so
Speaker 5: they had eight days of data for the iPhone seventeen generation.
Speaker 5: There is another outlet that clearly has had a briefing
Speaker 5: or an interview, and the CFO has guided very clearly
Speaker 5: on the trajectory of the iPhone seventeen and its sales
Speaker 5: into the December quarter.
Speaker 6: And that's kind of what always happens.
Speaker 5: It doesn't explain necessarily or explicitly the Greater China numbers though,
Speaker 5: And you know Mark, I think he forgive me.
Speaker 6: I was covering for him. I was doing the blog
Speaker 6: and he was running on the If.
Speaker 7: You said Apples now up three percent, markets are weird.
Speaker 5: Markets are weird. But that's before I read the ft.
Speaker 5: But the on Greater China, Yes, the iPhone seventeen air
Speaker 5: did not go on sale because of the regulatory restriction
Speaker 5: on a handset that has USUM design. Does that explain
Speaker 5: the full thing really, because you know, the most bullish
Speaker 5: estimates for Greater China saw revenue from that country of
Speaker 5: seventeen billion dollars. You know, that's quite a gap to
Speaker 5: where they landed, and so maybe it's something else. But
Speaker 5: right now, I think we've discussed this with this program before.
Speaker 5: Right it applies to both Tesla and Apple. If you're
Speaker 5: a consumer and you're faced with the choice of buying
Speaker 5: a domestic product or an American product, there is a
Speaker 5: pressure and it's part of the calculus you have to make.
Speaker 5: We know that from the data.
Speaker 2: We're speaking with Ed Ludlow. He's the cost of Bloomberg
Speaker 2: Tech on Bloomberg TV eleven o'clock Wall Street Time. I
Speaker 2: want to bring in back Jay Goldberg, Senior analysts Semiconductors
Speaker 2: and Electronics with Seaport Research Partners. You's had some time
Speaker 2: to take a breath and look at some of these numbers,
Speaker 2: and I'm wondering if you've also had a time, Jay
Speaker 2: to see that shares now up close to three point
Speaker 2: three percent or three point four percent. In the after hours,
Speaker 2: apparently executives, including the company's CFO, telling the Wall Street
Speaker 2: Journal that total company revenue will increase ten to twelve
Speaker 2: percent in the holiday quarter. Was that above your estimate?
Speaker 2: Was that above your expectations?
Speaker 6: Meaningfully above my estimate? That's pretty encouraging.
Speaker 2: Why is that so encouraging to you? And why was
Speaker 2: it so far? Why is that so far? But why
Speaker 2: is that meaningfully above your estimate?
Speaker 10: I think it comes down as simple as the seventeen
Speaker 10: and the air are good phones. And as much as
Speaker 10: we want to talk about services and AI and all that,
Speaker 10: sometimes just as simple as make good phone number go up.
Speaker 2: You make it sound so easy, make it.
Speaker 6: There's a take up that we just marched that we
Speaker 6: make up estimates.
Speaker 2: So you know, I think it's that easy to tell
Speaker 2: if you said that. No, But but in all seriousness,
Speaker 2: the seventeen, so you see that you see the seventeen.
Speaker 2: You see the eighteen, or I don't want to call
Speaker 2: it the eighteen, but you see the foldable being a
Speaker 2: much much bigger opportunity. That's where the supercycle, in your view,
Speaker 2: is going to come from.
Speaker 6: I don't know. I get a little wary of using
Speaker 6: the term supercycle.
Speaker 10: I'm not sure in today's market, where everybody has a
Speaker 10: cell phone that we and they cost one thousand plus dollars,
Speaker 10: I don't know if we're going to have supercycles anymore.
Speaker 10: I do know there's a pretty substantial installed base of
Speaker 10: older phones like fifteens and fourteens.
Speaker 6: Even those people are probably going to look to upgrade.
Speaker 10: You made a point earlier that Apple's always a little
Speaker 10: bit late to the game and some of these developments.
Speaker 10: And I think one of the one of the big
Speaker 10: ones they missed a few years ago was large large screens. Right,
Speaker 10: This is a big debate. They didn't want to make
Speaker 10: it too big, and then they made them and they
Speaker 10: did really well. It took them three years to get
Speaker 10: in that market, and I think we're going to see
Speaker 10: the same thing with foldables. That's gonna be a big category,
Speaker 10: but that's going to be an expensive phone and in
Speaker 10: the interim, there's a really good alternative on the market
Speaker 10: right now for you know, and you and I know
Speaker 10: about the foldable because I talk about this stuff all day.
Speaker 10: But I think the average consumer isn't you know, isn't
Speaker 10: that forward looking, and it's pretty happy with what's in
Speaker 10: front of them now, and that's that's that's compelling a
Speaker 10: compelling buying proposition for them.
Speaker 7: So Ed loud Low, come on back in here.
Speaker 3: I mean, everybody's kind of keying in on this outlook,
Speaker 3: and obviously with good reason. Again, I kind of think
Speaker 3: to the call with investors and analysts, I mean, are
Speaker 3: people going to be asking all about that outlook?
Speaker 7: Is that what's at this point got to be the
Speaker 7: focal point?
Speaker 5: Yeah, I mean I compared and contrast with law school,
Speaker 5: so we were still asking about pool forward and the
Speaker 5: tariff effects of consumers going out buying handsets. Again, that
Speaker 5: is not the same and does and explain behavior in
Speaker 5: sales data where the quarter they just reported was just
Speaker 5: eight real days of sales for the September quarter, and
Speaker 5: they're telling us via interviews with the FTN the Wall
Speaker 5: Street Journal that they're looking at ten percent to twelve percent.
Speaker 5: I think is the range increase in sales in the
Speaker 5: holiday quarter.
Speaker 6: Where were those sales?
Speaker 5: Also, like a lot of the optimism and maybe your
Speaker 5: guests can weigh on on this, but a lot of
Speaker 5: the optimism about the third party or soft data for
Speaker 5: the iPhone seventeen generation was about asps and mix. So yes, okay,
Speaker 5: the iPhone seventeen Air wasn't on sale in China, but
Speaker 5: there was a lot of evidence that people were going
Speaker 5: for the Pro and Pro Max, the more expensive rather
Speaker 5: than the base version, which is really good for Apple's print, right,
Speaker 5: and it's financials, But we don't have anything to go
Speaker 5: on in the statement to support that, you know, generally speaking,
Speaker 5: because they didn't in real terms raise prices or they
Speaker 5: didn't put higher price points on the iPhone seventeen necessarily.
Speaker 5: One way to get around that is to say, look,
Speaker 5: how great the pro version of this is. It's really great,
Speaker 5: it's just a lot more expensive, and then encourage people
Speaker 5: to buy that. You know, that's an interesting story to
Speaker 5: dig into.
Speaker 7: Yeah, Jay, dig into it for us. Anything on that.
Speaker 10: So one of the things I'm sort of teasing through
Speaker 10: with my numbers is earnings are much higher than expected, right,
Speaker 10: And I mentioned earlier gross margins were better than expected,
Speaker 10: and I think some of that is Apple has effectively
Speaker 10: put a price increase in place.
Speaker 6: You can't necessarily see it.
Speaker 10: Obviously, the cheapest phone is still pretty expensive, but the
Speaker 10: way they segment the market and the way they put
Speaker 10: the seventeen, they price the pro the air and the seventeen,
Speaker 10: they've effectively raised prices one hundred dollars this quarter or
Speaker 10: this this cycle. And I think that that has helped
Speaker 10: a lot, right, And in terms of what I was
Speaker 10: saying about China, the consumer there, I think consumers there
Speaker 10: are actually very very trend conscious, especially the iPhone consumer there.
Speaker 10: They have a pretty good idea of what's available and
Speaker 10: may they may wait.
Speaker 2: As a result, Jay explain that the segmentation when it
Speaker 2: comes to pricing, though consumers might not see it, analysts
Speaker 2: certainly know. And how did how did Apple do it
Speaker 2: this time around? Oftentimes they do it with the memory
Speaker 2: with storage.
Speaker 10: Yeah, so the lowest, the cheapest phone there is one
Speaker 10: hundred dollars more than it used to be effected. Okay,
Speaker 10: I don't like for like basis that you know that
Speaker 10: they didn't actually raise prices of the old phones, but
Speaker 10: they didn't lower them as much as they usually do.
Speaker 10: In the price of the new one one hundred bucks
Speaker 10: higher than the old lower level.
Speaker 2: That's the segmentation.
Speaker 3: Hey, I just want you to come back in with
Speaker 3: a final thought, certainly on these Apple results.
Speaker 5: Yeah, I think all of the long term questions still linger.
Speaker 5: You know, Apple continues to get a lot of criticism
Speaker 5: for innovation. You know, this is a really basic argument,
Speaker 5: but on Bloomberg Tech every single day, and like all
Speaker 5: of the investors I speak to on the phone, they
Speaker 5: make the very simple argument that why is it that Amazon, Alphabet, Meta,
Speaker 5: Microsoft have capital expenditures nearer to one hundred billion per
Speaker 5: annum and Apple has ten? When is Apple going to
Speaker 5: take some risk and throw crazy money behind either talent
Speaker 5: or literal capital expenditures to do something like that. Apple
Speaker 5: doesn't do that necessarily, But the world is a different place,
Speaker 5: and you know, maybe it's pine the sky thinking that
Speaker 5: a cell side analyst on the call is going to
Speaker 5: ask that, But they might, and then it might get
Speaker 5: an answer, and then you know, that's kind of where
Speaker 5: we're at in this cycle.
Speaker 7: All right, gentlemen, I'm going to leave it on that note.
Speaker 3: Jay Goldberg, Senior analyst semiconductors and Electronics at Seaport Research,
Speaker 3: joining us from San Francisco. Thank you so much, Ed Ludlow.
Speaker 3: Be sure to catch all of his coverage on b
Speaker 3: Tech tomorrow at eleven am Wall Street Time. He is
Speaker 3: co host of b Tech on BTV every Monday through Friday.
Speaker 3: He's too out there in San Francisco at the Bloomberg
Speaker 3: News Bureau.
Speaker 2: Stay with us more from Bloomberg Business Week Daily coming
Speaker 2: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 2: So much happening when it comes to Big Farmer today,
Speaker 2: it's not just about the big tech shares. The clinical
Speaker 2: stage biotech company met Sarah, surging more than twenty five
Speaker 2: percent at one point today. This after Novo Nordisk made
Speaker 2: an unsolicited bid for it smarking a heated battle with
Speaker 2: Pfizer to get their hands on weight loss treatments that
Speaker 2: both drugmakers want in order to regain lost ground in
Speaker 2: the booming market. Speaking of that, Eli Lilly raised its
Speaker 2: full year guidance as revenue from its blockbuster weight loss
Speaker 2: and diabetes drugs. Merk also shaved the top end of
Speaker 2: its twenty twenty five revenue guidance, now expect sales between
Speaker 2: sixty four and a half and sixty five billion dollars.
Speaker 2: So that's just some of what's happening when it comes
Speaker 2: to big pharma. For more, we're joined by Jessica Nicks.
Speaker 2: She's a Bloomberg News health reporter. She joins us here
Speaker 2: in the Bloomberg Interactive Brokers studio. I want to start
Speaker 2: with this fight for Metsarah. Yeah, not every day we
Speaker 2: see sort of like a company being the bell of
Speaker 2: the ball like this.
Speaker 8: Oh, it has been quite the drama for a Thursday,
Speaker 8: and quite a lot of news out of big pharma today.
Speaker 8: So overnight, Nova Nordisk, the Danish GLP one drug maker,
Speaker 8: has made a bid for this biotech company, met Sarah,
Speaker 8: trying to go after its new GLP one drug. Interestingly,
Speaker 8: Pfizer made a bid for it back in September for
Speaker 8: about five billion. Things were, you know, clean cut, with
Speaker 8: that deal ready to go. We thought Nova's come in
Speaker 8: with this unsolicited bit. Pfizer's been trying to get in
Speaker 8: on this GLP one and weight loss drug action. It's
Speaker 8: a market that's expected to grow by one hundred billion
Speaker 8: by twenty thirty.
Speaker 6: It's huge.
Speaker 8: It's the thing right now is these weight loss drugs,
Speaker 8: and so Pfizer's trying to get in and now Nova's
Speaker 8: sweeping out under from them.
Speaker 7: Wait, so we're mind. So Piser doesn't have anything yet in.
Speaker 8: This Piser does not have anything in the weight life
Speaker 8: drug space. They've tried and then they failed with their
Speaker 8: first drug, and so they were looking at that. Sarah
Speaker 8: is their way in on this fight. But Novo interestingly
Speaker 8: is also kind of losing in the weight loss drug fight.
Speaker 8: Just because your first to market doesn't mean you're going.
Speaker 6: To be why.
Speaker 2: I mean, the last couple of years there were stories
Speaker 2: about how important this company was to the Danish economy.
Speaker 2: I mean, is it just because of Eli, Yes, it is.
Speaker 8: It's because Eli Lilly has come in. Guns are blazing
Speaker 8: and storming through the weight loss drug space. So Novo
Speaker 8: started with ozembic. Obviously everyone knows ozempic. Now Eli Lilly
Speaker 8: has now come in with that same class of GLP
Speaker 8: one drugs and their zepbound prescriptions are rising even today
Speaker 8: and their earnings guidance, they said that those prescriptions were increasing.
Speaker 8: So everyone's going towards Eli Lilly right now instead of
Speaker 8: Novo Nordoice. Nova has been falling behind.
Speaker 3: We've talked with our Madison Mueller Lumber News, who's covered
Speaker 3: this space kind of from the beginning here too, and
Speaker 3: you are covering it as well. I'm always like, well,
Speaker 3: what's the difference. I do know people who have taken
Speaker 3: the drug and gone from a zepic to another brand
Speaker 3: or another name drugs because they're similar, but they're not
Speaker 3: all the same. You do see patients. Is Eli Lily's
Speaker 3: offerings better, Is zepbound better, Is Munjaro better.
Speaker 8: It's just a matter of what works better for your body.
Speaker 8: So Eli Lilly works with an ingredient called trizeppetide, Novo
Speaker 8: Nordis works with semaglue tide, and so it's just a
Speaker 8: matter of what works better for the patient. But Eli
Speaker 8: Lilly has been able to really market and go to
Speaker 8: physicians with these drugs as well and move ahead. Novo
Speaker 8: interestingly also has a new CEO who's trying to shake
Speaker 8: things up to be able to bring Novo up to
Speaker 8: the forefront. Of this spike.
Speaker 7: It's own the space like it felt like right tim
Speaker 7: out of the block. What's the special sauce that matsarah has?
Speaker 10: Like?
Speaker 7: What is it? What is it that they are offering up?
Speaker 8: They are offering a new type of drug that's also
Speaker 8: an injectable, but it's targeting a different hormones. The hormone
Speaker 8: that's targeted right now with the current weight loss drugs
Speaker 8: is something called a GLP one. You hear that term
Speaker 8: a lot when we talk about way Moss drugs. With
Speaker 8: Metsarah's new drug, it's a hormone called ammelin, and it
Speaker 8: also includes less side effects when you take their drugs,
Speaker 8: You're not going to be getting those nasty like nausea,
Speaker 8: vomiting side effects that you get with a GLP one.
Speaker 8: So it sounds like a better deal.
Speaker 7: Why would I.
Speaker 2: Take anytime you can avoid vomiting?
Speaker 6: I think is right exactly.
Speaker 2: You said something that's interesting, which is still it's an injectable.
Speaker 2: And as mat sim Miller reminds us all the time,
Speaker 2: the real golden goose here is the pill.
Speaker 8: It is the pill, and so Eli Lilly has been
Speaker 8: working on its pill. It is a head in marketing
Speaker 8: and in development for its pill, and they're saying, you know,
Speaker 8: by the end of the year they're going to go
Speaker 8: to the FDA for approval.
Speaker 2: And this would be a GLP one pill.
Speaker 8: This would be a GLP one pill.
Speaker 2: Correct, Well, how do you make a pill? I mean,
Speaker 2: we're getting into the nitty gritty a little bit here,
Speaker 2: but how can you do something that is traditionally an
Speaker 2: injectable and make it pill form and have it still
Speaker 2: be effective.
Speaker 8: That is a really great question, and people much smarter
Speaker 8: than me.
Speaker 2: Are well, but it's got to be really tough because
Speaker 2: if it were easy, then Nova would have this. They
Speaker 2: would just put this in pill form. And I think
Speaker 2: that and when I heard you talk about Metsara and
Speaker 2: this idea of it it going after something different than
Speaker 2: a GLP one, I was surprised that it was still
Speaker 2: in injectable because I think that would hold a lot
Speaker 2: of people back from actually using a drug.
Speaker 8: And it does. And that's part of the reason why
Speaker 8: these companies want to go into the pill space, because
Speaker 8: a lot of people who are interested in taking a
Speaker 8: weight loss drug for whatever reason. As we're saying, it's
Speaker 8: it's tackling a lot of different problems that people are
Speaker 8: having sleep at in me a heart disease.
Speaker 6: What have you?
Speaker 8: Pills now are a new way that people would be
Speaker 8: wanting to get into on this space.
Speaker 7: So let's just talk.
Speaker 3: Novo shares are down about two point three percent. Pfizer's
Speaker 3: up about one third of one percent. It was up
Speaker 3: as much as one point seven percent earlier in this session.
Speaker 3: And then of course you've got Mitsarah, which is just
Speaker 3: off and running like crazy, that stock which is the
Speaker 3: target twenty two percent, yeah.
Speaker 7: And continuing to hold on to that. Who has more
Speaker 7: to lose?
Speaker 3: It sounds like Pfizer because they just they're not in
Speaker 3: this game yet.
Speaker 8: Pfizer definitely has a little more to lose here. Pfiser
Speaker 8: is not in on the game right now. They've been
Speaker 8: losing since you know, COVID. They were big during COVID,
Speaker 8: they made the shots, they really turned things around for
Speaker 8: the company there. They've been looking for their next big
Speaker 8: thing and they thought this was it. So they do
Speaker 8: have a little bit more to lose. But interestingly, the
Speaker 8: shares are mostly unchanged today. Pfizer does have four days
Speaker 8: to respond to this bid to see if they can
Speaker 8: come in a little bit higher and start this this
Speaker 8: bidding war, and who knows. Pfizer also made a deal
Speaker 8: with the Trump administration earlier this year, so they might
Speaker 8: be trying to use some of their their White House
Speaker 8: connects because they claimed that this bid is against antitrust
Speaker 8: law in the US.
Speaker 7: I guess what I would say.
Speaker 3: Right now, the market cap is about six point seven billion,
Speaker 3: So I don't know if that's a great gauge of
Speaker 3: kind of where investors think this.
Speaker 7: Cuah, yeah, So in other words.
Speaker 2: Which is up now twenty three percent? As Yeah?
Speaker 3: I mean, if Novo's offered to you know, Sis a
Speaker 3: half billion dollars deal.
Speaker 2: And they think it's then they think there's going to
Speaker 2: be in someone else coming in. I'll bring potentially more.
Speaker 3: It's just a little bit higher, right, Like, it doesn't
Speaker 3: feel like it's off and running that they think there
Speaker 3: could be even somebody else coming in.
Speaker 7: It is kind of fascinating.
Speaker 3: The market for GLP ones or this class of drugs,
Speaker 3: even if the underlying agent is changing, it just continues
Speaker 3: to grow and grow.
Speaker 8: It completely continues to grow and grow. We expect by
Speaker 8: twenty thirty that the market's going to reach one hundred billion.
Speaker 7: Where are we today?
Speaker 10: Oh?
Speaker 8: That is a great question. I don't know where we
Speaker 8: are at today, but I mean it's only going to
Speaker 8: grow from here. It is the drug to watch.
Speaker 2: So you said we're well. I said that we had
Speaker 2: a big news, a lot of big news in big
Speaker 2: pharma today. I mentioned Mark shaving the top end of
Speaker 2: its twenty twenty five revenue guidance, literally raising its full
Speaker 2: year guidance. We talked about that. What else does our
Speaker 2: investing audience need to know about what we've heard thus far?
Speaker 8: I think this deal is probably driving the news today.
Speaker 8: Everyone's talking about it. We've got, you know, clocks on
Speaker 8: for the four days. Interestingly, Albert Borla, the Pfizer CEO,
Speaker 8: was supposed to have here at a conference here in
Speaker 8: Manhattan with some other pharma executives, including a MERC CEO
Speaker 8: as well, ended up pulling out of the conference, and
Speaker 8: the chief scientific officer went on instead, and even said
Speaker 8: at the conference that he only had an hour to
Speaker 8: prepare before going on.
Speaker 7: So we're still figuring out.
Speaker 8: Yeah, he might have a little bit happening, but we
Speaker 8: don't know for sure. So it is this deal that
Speaker 8: is definitely going on today, not necessarily investor related, but
Speaker 8: down in DC, the Surgeon General nominees. Hearing was supposed
Speaker 8: to happen today with Casey Means, she ended up going
Speaker 8: into labor and so they're having to delay the hearing.
Speaker 3: Yeah, there's a lot going on in this space. It's
Speaker 3: kind of wild, fascinating space. I really just it just
Speaker 3: blows my mind. Jess Thank you so much. Jessica Nick's
Speaker 3: health reporter at Bloomberg, and he's joining us in our
Speaker 3: Bloomberg Interactive Broker Studio.
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 2: up after this.
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Speaker 3: So let's get to that US China meeting earlier today
Speaker 3: in South Korea between President Trump and President g deal.
Speaker 3: No deal, how about that one year truce, that's what
Speaker 3: they're calling it. The two did meet on the sidelines
Speaker 3: of the Apex summit, US cutting the fetanyl tariff, extending
Speaker 3: the existing truth and reciprocal tariffs, China resuming soybean sales
Speaker 3: and rare earth flows. But maybe just a stabilization of relationships.
Speaker 3: Nothing more dramatic here, Tim, I don't know.
Speaker 2: Let's ask Caroline Freud. She's dean of the UC San
Speaker 2: Diego School of Global Policy and Strategies, former Senior Fellow
Speaker 2: at the Peterson Institute for International Economics. She's Global Director
Speaker 2: of Trade, Investment and Competitiveness, formerly at the World Bank,
Speaker 2: and earlier did time at the FED and the IMF.
Speaker 2: She's out there in beautiful La Joya, California. So the
Speaker 2: news today the year one year truce. Where does that
Speaker 2: bring us in the context of the real relationship in
Speaker 2: the between the US and China from a trading perspective
Speaker 2: before President Trump took office for the second time. Is
Speaker 2: it back to what it was then or is there
Speaker 2: still tension from when he from from his policies early on.
Speaker 12: Look, we have the world's top producer in the world's
Speaker 12: top consumer meeting, and they both have market power in
Speaker 12: their own way, and they need each other.
Speaker 7: And that's what we saw.
Speaker 12: It was effectively a game of chicken. Trump started it
Speaker 12: and she stayed in the battle, and both just put
Speaker 12: on the brakes. I think we're close to pre Liberation
Speaker 12: day tariffs, not necessarily close to where Trump came in.
Speaker 12: There are a few tweaks because we still have some
Speaker 12: of the fentanyl tariffs. US firms are still facing this
Speaker 12: licensing regime on magnets, so there's still some things that
Speaker 12: are in place, but we're pretty close to the pre
Speaker 12: Liberation Day tariffs, Caroline.
Speaker 7: What is more significant what they did talk about?
Speaker 3: What they didn't talk about, meaning Taiwan TikTok and videos,
Speaker 3: high tech chips, those Blackwell chips, China Boying, buying oil
Speaker 3: perhaps from Russia. Like, there's some really important issues out
Speaker 3: there that felt like they were missing.
Speaker 12: Yeah, and I think we're going to see that going forward.
Speaker 12: There's going to be ambiguity on all of those difficult issues.
Speaker 12: But I also think there's market discipline on the worst
Speaker 12: case scenario of an escalating trade war. So they both
Speaker 12: realized how much they need each other. The US market
Speaker 12: is just impossible to replace. We account for fifteen percent
Speaker 12: of total global imports. There just is no one else
Speaker 12: who's going to take that. China counts for the same
Speaker 12: fifteen percent of global exports of goods. Who's gonna who?
Speaker 12: We can't completely replace China, So the countries have settled
Speaker 12: the deals that are in areas that really matter for
Speaker 12: them right now, for their economies. But we're going to
Speaker 12: see a lot of ambiguity on those much more complex issues.
Speaker 3: So we're we played, we're citizens of both countries played,
Speaker 3: we're investors, played like it did we kind of start
Speaker 3: at point A and go through the whole alphabet and
Speaker 3: then come back to point A.
Speaker 12: Yes, I think Trump has tried the kind of bullying
Speaker 12: technique and it's worked with everyone else. Early on it
Speaker 12: looked like EU would also retaliate, but they're just too
Speaker 12: dependent on the US for security and that's very important
Speaker 12: right now, so they didn't. China is equivalent to the US,
Speaker 12: and China said, no, we're not going to be bullied.
Speaker 12: We also have things you absolutely need. And now there's
Speaker 12: kind of a truce, and I think we'll see this
Speaker 12: muddling along with market discipline on both sides. It'll hurt
Speaker 12: the US too much to really do a lot more
Speaker 12: on China. It'll hurt China too much to do a
Speaker 12: lot more on the US.
Speaker 7: But in this.
Speaker 12: Period, in this period of truth, the most important thing
Speaker 12: is that we work with our allies to develop secure
Speaker 12: supply chains.
Speaker 7: So we are not dependent on China.
Speaker 12: For rare earth in the way we are now.
Speaker 2: So those allies, including Australia, Canada, where else.
Speaker 6: Yeah, exactly.
Speaker 12: So the agreement with Australia is fantastic, and we should
Speaker 12: be looking for more agreements like that. Latin America has
Speaker 12: a lot of rare earth that could be explored that
Speaker 12: we were part of the Western Hemisphere.
Speaker 2: We have a complicated relationship with some Latin American countries currently.
Speaker 7: Yeah, that's absolutely right.
Speaker 12: And so the strategy we can't take on everyone at once,
Speaker 12: and China is the biggest competitor, the biggest strategic threat
Speaker 12: to the US, and we should be working to have
Speaker 12: agreements with countries where we can both pull them out
Speaker 12: of the China sphere and where they have things we
Speaker 12: might need.
Speaker 3: It couldn't possibly be thinking about the US shooting on
Speaker 3: Venezuela and ships.
Speaker 2: Can you make that I'm thinking about Yeah, yeah, I'm
Speaker 2: absolutely thinking about it.
Speaker 7: It's funny, not funny, right.
Speaker 2: I'm also thinking about Argentina. Yeah, yeah, exactuated in a
Speaker 2: different way, well.
Speaker 3: Carolyn, And you know, I do think about the US's
Speaker 3: position in the world at large, like we still have
Speaker 3: trade agreements to be worked out with what used to
Speaker 3: be a big friend of ours called Canada, and yet
Speaker 3: that is still up in the air. What is how
Speaker 3: does the rest of the world feel about the United
Speaker 3: States right now against China? Because I do feel like
Speaker 3: there is this thinking about China domination and so people
Speaker 3: trying to do alliances to combat that.
Speaker 7: So is the.
Speaker 3: US as we see it, do that deal with Australia
Speaker 3: and maybe reaching out realizing it can't do things alone.
Speaker 7: Are things changing a little bit in terms of the
Speaker 7: US perception by the rest of the world, You know,
Speaker 7: I hope so.
Speaker 12: And I think if Trump leans into these agreements where
Speaker 12: countries haven't retaliated and goes forward in a respectful way,
Speaker 12: we could see that and we could see a lot
Speaker 12: more cooperation. But the problem is that so far the
Speaker 12: US has proven to be a kind of unreliable trade partner.
Speaker 12: Deals are made and then we back off from them,
Speaker 12: and then new threats come up, and that's really problematic.
Speaker 12: So I think there's a lot of distrust, a lot
Speaker 12: of dislike with the US, and that's going to be
Speaker 12: a hurdle to overcome. At the same time, other countries
Speaker 12: need the US market again or the world's top consumer
Speaker 12: and they need the defense from the US, so.
Speaker 7: They will play.
Speaker 12: But it will work a lot better if we work
Speaker 12: on cooperative agreements than purely in this kind of bullying mentality.
Speaker 2: We're gonna hopefully talk to you a lot more between
Speaker 2: now and one year from now, but just make a
Speaker 2: prediction for us for one year from now. Will this
Speaker 2: truce hold?
Speaker 12: Yeah?
Speaker 7: I think it will.
Speaker 12: There might be little glitches along the way, but again
Speaker 12: the market will discipline Trump, whether it's the stock market,
Speaker 12: bond yields, companies complaining. And similarly the China. Chinese economy
Speaker 12: isn't that strong we saw, you know, BYD Tank today
Speaker 12: or recently, because there's just not enough demand for Chinese goods.
Speaker 12: So I absolutely think it will hold, but we won't
Speaker 12: get a lot more.
Speaker 7: It'll hold.
Speaker 3: The muddle along and kinda continues to try and get
Speaker 3: that domestic economy going.
Speaker 7: But it's really been a strike.
Speaker 3: Caroline Frauinch's Dan of the see San Diego School of
Speaker 3: Global Policy and Strategy.
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