WEBVTT - Apple's Happy Holiday Forecast Overshadowed by Shrinking Margin 0:00:02.540 --> 0:00:04.220 Bloomberg Audio Studios. 0:00:04.680 --> 0:00:05.380 Podcasts. 0:00:05.700 --> 0:00:06.220 Radio. 0:00:06.670 --> 0:00:07.070 News. 0:00:13.570 --> 0:00:17.110 Bloomberg Tech is live from the heart of Silicon Valley 0:00:17.640 --> 0:00:19.919 with Ed Ludlow in San Francisco. 0:00:22.950 --> 0:00:24.310 This is Bloomberg Tech coming up. 0:00:24.430 --> 0:00:28.770 Apple earnings signal strong holiday demand, but squeezed margins weigh 0:00:28.830 --> 0:00:32.290 on shares. Plus, Disney plans thousands of layoffs as it 0:00:32.350 --> 0:00:35.850 aims to cut 20% of costs company-wide. And we take 0:00:35.890 --> 0:00:38.990 a look at how today's election will impact AI policy 0:00:39.310 --> 0:00:42.260 and therefore the tech trade. I want to get to 0:00:42.270 --> 0:00:45.780 a story first that has been a multi-day thing. Biggest 0:00:45.820 --> 0:00:48.980 technology companies going to the debt markets. The AI financing 0:00:49.020 --> 0:00:52.380 boom shows no signs of slowing. Meta kicking off a 0:00:52.420 --> 0:00:56.940 five-part US dollar bond offering ranging across five to 30-year maturities. 0:00:57.280 --> 0:01:00.480 The tech giant aiming to raise $ 15 billion in the 0:01:00.660 --> 0:01:03.860 US part of this offering. And that's not all, folks. 0:01:03.900 --> 0:01:06.000 Let's go to Bloomberg's Bailey Lipschultz, who has the details. 0:01:06.060 --> 0:01:09.720 So largely US denominated, but there's also Meta looking at 0:01:09.740 --> 0:01:11.280 the euro bond market for the first time. 0:01:11.780 --> 0:01:14.860 Yeah, and we're seeing this really broadly across the entire ecosystem. 0:01:14.890 --> 0:01:17.090 So to your point, this is the start of a 0:01:17.120 --> 0:01:20.550 broader offering right now. $ 15 billion in USD could get 0:01:20.630 --> 0:01:24.390 higher out of that targeted about $ 20 billion offering. Five 0:01:24.430 --> 0:01:27.229 tranches here in the U.S. Initial price talk right now 0:01:27.830 --> 0:01:30.929 on the longest tenor yield premium about 2.5% above Treasury. 0:01:30.970 --> 0:01:33.729 So seeing some strong demand given the fact that we 0:01:33.810 --> 0:01:36.690 are still on an election day, again, with a backdrop 0:01:36.730 --> 0:01:40.290 where Oracle, Google, pretty much any company that can tap 0:01:40.630 --> 0:01:43.490 whether markets, whether it's debt or equity markets, is getting 0:01:43.530 --> 0:01:46.290 quite active in what's been an interesting past few days. 0:01:47.080 --> 0:01:50.040 Yeah, I mean, the spreads thing, Bloomberg tech audience, if 0:01:50.060 --> 0:01:51.620 you're not as familiar with the debt markets, you know, 0:01:51.640 --> 0:01:53.840 there is a bit of investor fatigue. All these tech 0:01:53.880 --> 0:01:57.620 companies are issuing debt and those investors buying, they want 0:01:57.660 --> 0:02:00.900 something in return now. You know, the level of issuance 0:02:00.960 --> 0:02:03.300 out there. The thing about this, Bailey, like this is 0:02:03.340 --> 0:02:07.070 capital markets at large, right? Anthropic IPO is around the corner. 0:02:07.550 --> 0:02:12.310 Meta is doing an equity offering deal. in different tranches 0:02:12.930 --> 0:02:16.960 on an ongoing basis investors like have options right now 0:02:17.060 --> 0:02:19.700 like everyone's trying to raise money in different ways it's. 0:02:19.600 --> 0:02:21.860 A bit like going to get some dim summit if 0:02:21.880 --> 0:02:24.940 you want a little bit of meta equity there's there's 0:02:24.980 --> 0:02:27.190 a dish for you if you want to participate in 0:02:27.210 --> 0:02:29.769 the overnight deal that we saw yesterday from oracle there 0:02:29.790 --> 0:02:32.590 was Both equity and debt, as you mentioned, Meta coming 0:02:32.630 --> 0:02:35.650 back to the debt markets today. Expectations for Anthropic to 0:02:35.690 --> 0:02:38.570 launch its IPO next week and price before the Thanksgiving 0:02:38.630 --> 0:02:40.919 holiday gives you another way to play this. And keep 0:02:40.980 --> 0:02:43.340 in mind, Ed, on the private markets, we're still chasing 0:02:43.400 --> 0:02:46.480 expectations for OpenAI to do some kind of fundraising. So 0:02:46.540 --> 0:02:49.600 pretty much any company that can tap the markets. is 0:02:49.639 --> 0:02:52.520 doing so in kind of a variety of ways. And 0:02:52.580 --> 0:02:55.760 as you mentioned, that fatigue continuing to come up in conversations, 0:02:55.800 --> 0:02:59.120 whether you're talking to debt investors or equity investors, privates 0:02:59.150 --> 0:03:01.810 or publics, it is back to the question of what's 0:03:01.850 --> 0:03:03.669 the ultimate return on capital? 0:03:03.950 --> 0:03:04.910 What's the ultimate. 0:03:04.650 --> 0:03:07.590 Expectation for where these instruments are going to be trading 0:03:07.630 --> 0:03:09.130 in the near term when you're trying to make your 0:03:09.130 --> 0:03:13.380 2026 book? And looking forward to 2027, when we expect 0:03:13.410 --> 0:03:15.839 to see a heck of a lot of issuance continuing 0:03:16.120 --> 0:03:18.340 to flood the market. So is it better to participate 0:03:18.400 --> 0:03:19.950 now or sit on your hands and wait? 0:03:20.750 --> 0:03:23.209 And for whatever reason, Meta shares on the equity story 0:03:23.250 --> 0:03:25.549 side up more than 2% in the session. We both 0:03:25.590 --> 0:03:27.750 made lip shots. Thank you very much. Let's get to 0:03:27.770 --> 0:03:30.549 our main technology story, which is Apple's earnings. Apple shares 0:03:30.590 --> 0:03:34.510 are falling after that fiscal fourth quarter report, despite the 0:03:34.560 --> 0:03:38.400 company delivering a record quarter. And then there's the outlook 0:03:38.420 --> 0:03:42.040 for the holiday quarter. So growth of 7% to 10%, 0:03:42.040 --> 0:03:44.800 even at the low end of that outlook, consensus was 0:03:44.820 --> 0:03:49.320 about 6.1%. The story is about the bottom line, margins, 0:03:49.620 --> 0:03:53.000 the impact of memory, the spending to get Siri AI. 0:03:52.720 --> 0:03:53.660 Improved and out there. 0:03:53.960 --> 0:03:56.660 Bloomberg's Mark Gurman, who leads our coverage of Apple and 0:03:56.680 --> 0:03:59.180 consumer technologies with us, I really enjoyed following you on 0:03:59.200 --> 0:04:02.410 the blog last night. That holiday quarter moment, and it 0:04:02.470 --> 0:04:04.050 was a moment on the call, right, because the stock 0:04:04.090 --> 0:04:08.070 went like that. This was the margins number that did that? 0:04:09.860 --> 0:04:11.840 Yeah, it was the gross margins because in terms of 0:04:11.860 --> 0:04:15.240 the revenue growth, it is a deceleration versus where they 0:04:15.280 --> 0:04:18.560 were a year ago, right, on an annual basis. But 0:04:18.580 --> 0:04:21.130 it's really the margins. It's really the commentary about the 0:04:21.170 --> 0:04:24.090 memory shortage. They indicated things are going to get worse 0:04:24.130 --> 0:04:26.830 in the December quarter. And then John Ternus indicated that 0:04:26.850 --> 0:04:29.630 things are going to get worse across the rest of 0:04:29.710 --> 0:04:33.180 fiscal year 2027 as well. And this is going to 0:04:33.279 --> 0:04:36.020 squeeze things. He also made it pretty clear that the 0:04:36.120 --> 0:04:39.380 price increases they did in June and September are only 0:04:39.560 --> 0:04:41.719 a partial offset. So he said it and then you 0:04:41.760 --> 0:04:45.230 can see it in the gross margin forecasts as well. 0:04:45.610 --> 0:04:48.990 And so there's indicators there potentially for price hikes. What 0:04:49.010 --> 0:04:52.510 does that mean for consumer demand? So far, we've seen 0:04:52.529 --> 0:04:55.840 the price hikes actually buoy Apple. and allow it to 0:04:55.880 --> 0:04:58.640 have growth. On an annual basis, the growth in the 0:04:58.680 --> 0:05:02.080 fourth quarter actually was an acceleration, but from a sequential. 0:05:01.680 --> 0:05:03.400 Basis, it was a deceleration. 0:05:04.500 --> 0:05:07.260 So in that quarter as well, the fiscal fourth quarter, 0:05:07.300 --> 0:05:11.589 which is the September quarter, didn't include any iPhone Duo, right? 0:05:11.610 --> 0:05:14.190 Because it shipped in or launched in late October. But 0:05:14.230 --> 0:05:16.490 it did include two weeks of 18 Pro and 18 0:05:16.490 --> 0:05:19.150 Pro Max. And overall, the numbers were really good in 0:05:19.170 --> 0:05:22.800 that quarter gone. What do we learn about demand for 0:05:22.860 --> 0:05:24.719 Apple's products overall? 0:05:24.740 --> 0:05:24.840 Yeah. 0:05:26.150 --> 0:05:28.950 It's a little difficult to tell because the price increases 0:05:29.040 --> 0:05:33.640 did give Apple some air cover. Even if demand actually shrank, 0:05:33.720 --> 0:05:37.960 even if unit sales actually shrank, that $ 100 price increase 0:05:37.980 --> 0:05:41.130 and higher price increases and the higher storage capacities makes 0:05:41.310 --> 0:05:44.370 up for some of that potential shortfall. So it is 0:05:44.410 --> 0:05:47.050 a little bit too challenging to tell. But at the 0:05:47.089 --> 0:05:49.789 same time, the iPhone came in north of 57 billion. 0:05:49.830 --> 0:05:52.170 Wall Street was looking for something around 56 and a 0:05:52.210 --> 0:05:56.130 half billion. So clearly they did stronger than anticipated, which 0:05:56.180 --> 0:06:00.420 does show that Apple's strategy to push everything out a bit, 0:06:01.100 --> 0:06:03.060 other than the 18 Pro and Pro Max for that 0:06:03.160 --> 0:06:06.520 fourth quarter, it did work. And what you're going to 0:06:06.580 --> 0:06:11.789 see now is revenue smooth out over the course of Q2, Q3, 0:06:11.820 --> 0:06:15.350 even Q4, because of a combination of a few things. One, 0:06:15.390 --> 0:06:19.270 the iPhone Duo supply shortages, meaning that that phone will 0:06:19.310 --> 0:06:22.430 go into Apple's financial results in future quarters. rather than 0:06:22.450 --> 0:06:24.460 the current quarters, given that many people aren't going to 0:06:24.480 --> 0:06:27.159 be able to get their hands on this until February, March, April, May, 0:06:27.180 --> 0:06:31.229 and then no iPhone Air or regular iPhone 18 in 0:06:31.270 --> 0:06:31.930 this year's cycle. 0:06:32.890 --> 0:06:33.770 Bloomberg's Mark Gurman. 0:06:33.790 --> 0:06:36.210 And remember, the Power On newsletter is now also the 0:06:36.230 --> 0:06:38.490 Power On podcast Thursday. So you've got to tune in 0:06:38.510 --> 0:06:40.790 for that when it drops. Lots to review. 0:06:40.810 --> 0:06:42.289 Thank you very much indeed. I want to stay on 0:06:42.310 --> 0:06:43.290 Apple earnings. 0:06:43.330 --> 0:06:47.360 Joining us now, Carolina Milanese, President, Principal Analyst at Creative Strategies. 0:06:47.640 --> 0:06:49.720 And the dynamic that I thought was so interesting, Nicole, 0:06:49.760 --> 0:06:53.300 I'd love your perspective on, is the imbalance of demand 0:06:53.339 --> 0:06:56.320 for the iPhone Duo against Apple's ability to supply. Because 0:06:56.339 --> 0:06:58.720 lots of analysts ask, for how long is that going 0:06:58.740 --> 0:07:01.610 to last? Didn't really get an answer there. 0:07:01.670 --> 0:07:02.330 What are you seeing? 0:07:03.710 --> 0:07:06.070 I do think that some of the negativity after the 0:07:06.130 --> 0:07:09.710 call was exactly to the point about not giving an answer. 0:07:09.730 --> 0:07:14.630 That uncertainty of when supply can catch up with demand 0:07:14.770 --> 0:07:19.020 is still there. I do think that you'll see an 0:07:19.100 --> 0:07:23.060 uptick in the quarter to come because people were maybe 0:07:23.220 --> 0:07:26.860 waiting to see the duo in real life, decided between 0:07:26.900 --> 0:07:27.740 the duo and the 18th. 0:07:28.740 --> 0:07:30.220 And they might make a choice there. 0:07:30.260 --> 0:07:33.490 And so I think from the mix perspective, next quarter 0:07:33.570 --> 0:07:36.230 is going to be interesting. The other part that was 0:07:36.290 --> 0:07:39.350 interesting to me is how much Apple talked about Mac 0:07:39.930 --> 0:07:42.810 and then how much Apple talked about international markets as 0:07:42.950 --> 0:07:44.500 well as the U.S. 0:07:45.820 --> 0:07:47.880 I mean, Mac is a big story for Apple. 0:07:48.900 --> 0:07:52.550 If you move beyond the financials, what is it that 0:07:52.850 --> 0:07:55.510 you thought was good about how they presented their success 0:07:55.530 --> 0:07:58.570 with Mac in that quarter gone or their outlook going forward? 0:07:58.570 --> 0:08:03.830 24% growth for the Mac is outstanding. If you still 0:08:03.870 --> 0:08:09.310 think that compute for AI will, yes, be important in 0:08:09.350 --> 0:08:12.660 your pocket, but more so at your desk, that is 0:08:12.720 --> 0:08:15.640 where you want to be. And Ternus made it very clear. 0:08:15.660 --> 0:08:19.060 He actually said, we want all AI to run on 0:08:19.140 --> 0:08:23.250 Apple devices. So it wasn't specifically talking about Siri AI, 0:08:23.590 --> 0:08:27.820 but it was talking about everybody else from ChatGPT to 0:08:27.900 --> 0:08:32.080 Cloud actually having access to AI on the Mac. And 0:08:32.120 --> 0:08:35.090 the deal that they did earlier in the quarter with 0:08:35.170 --> 0:08:37.929 Meta spoke to that on-device AI. 0:08:39.120 --> 0:08:42.000 I remember when NVIDIA came to market with DGX Spark, 0:08:42.059 --> 0:08:45.179 the supercomputer that sits on your desk. At the time, 0:08:45.240 --> 0:08:46.640 people were saying, well, hold on, I already got a 0:08:46.660 --> 0:08:49.780 little cluster of Mac minis going together. 0:08:50.620 --> 0:08:52.280 Is that kind of what you're talking about in the culture? 0:08:52.330 --> 0:08:56.750 Developers, people working in AI, having an Apple product as 0:08:56.790 --> 0:08:57.710 their workstation? 0:08:58.720 --> 0:08:59.260 Absolutely. 0:08:59.280 --> 0:09:02.280 I'm talking about developers, data scientists. 0:09:02.360 --> 0:09:05.870 I'm talking about people thinking about agents and how agents 0:09:05.929 --> 0:09:09.390 will supplement their work on the day to day, turning 0:09:09.490 --> 0:09:13.460 to the Mac, whichever form they prefer to get that 0:09:13.600 --> 0:09:14.160 work done. 0:09:15.830 --> 0:09:17.870 The last thing that we haven't spoken about yet is China. 0:09:17.890 --> 0:09:21.230 So in greater China, revenue missed expectations by about a 0:09:21.250 --> 0:09:21.790 billion dollars. 0:09:21.809 --> 0:09:22.910 But like what John Turner. 0:09:22.690 --> 0:09:25.580 Said, super positive, you know, third party data that they 0:09:25.600 --> 0:09:28.120 have the top three handsets. They're super proud of the 0:09:28.179 --> 0:09:31.840 results there. What does creative strategy see is going on 0:09:31.880 --> 0:09:33.960 in that in that Chinese smartphone market right now? 0:09:35.400 --> 0:09:41.160 I think that Apple is delivering on some of the requirements, 0:09:41.240 --> 0:09:43.099 if you like, that the market has had for a 0:09:43.140 --> 0:09:45.760 long time on the foldable side. So it'll be interesting 0:09:45.800 --> 0:09:48.920 to see as we get into Q1 for Chinese. 0:09:48.570 --> 0:09:51.090 New Year, how much maybe Apple. 0:09:50.910 --> 0:09:55.670 Is going to prioritize demand in China versus other markets. 0:09:56.010 --> 0:09:57.890 I think that is going to be critical for them, 0:09:57.910 --> 0:09:59.970 competition on the foldable side in China. 0:10:00.440 --> 0:10:02.000 Is extremely hot right now. 0:10:02.520 --> 0:10:05.050 And so coming with a product and delivering on that 0:10:05.130 --> 0:10:07.230 promise is absolutely critical for Apple. 0:10:08.090 --> 0:10:09.650 There is just so much we do not know. 0:10:09.690 --> 0:10:12.480 And Apple's down 2% now, but had been down almost 4% 0:10:12.480 --> 0:10:15.260 in the session on track for its biggest drop since July. 0:10:15.280 --> 0:10:17.479 You know, everyone's kind of eased their concern a little 0:10:17.520 --> 0:10:20.980 bit a couple hours in. Carolina Milanese, President, Principal Analyst 0:10:21.280 --> 0:10:23.240 at Creative Strategies. Great to have you back on the show. 0:10:23.300 --> 0:10:26.559 Thank you very much. Coming up, Greg Moskowitz of Mizuho 0:10:26.580 --> 0:10:29.679 is going to break down Palantir's earnings. The stock also 0:10:29.760 --> 0:10:31.970 under pressure, decelerating growth. 0:10:32.429 --> 0:10:33.270 This is Bloomberg Tech. 0:10:35.510 --> 0:10:37.329 We'll be right back. 0:10:47.179 --> 0:10:49.530 Shares of Palantir are off the session low now, still 0:10:49.570 --> 0:10:52.030 down 3%, but at one point on track for the 0:10:52.050 --> 0:10:55.910 biggest drop since February. The story, Palantir's commercial business overtook 0:10:55.950 --> 0:10:59.030 its government business in the quarter, both in the US 0:10:59.110 --> 0:11:02.090 and globally for the first time. AI is driving revenue 0:11:02.170 --> 0:11:05.429 up 96% overall, but there are signs of slowing growth 0:11:05.510 --> 0:11:08.830 and investors are basically looking at historic growth and saying 0:11:08.890 --> 0:11:11.730 this can't last. Let's bring in Greg Moskowitz, Managing Director, 0:11:11.750 --> 0:11:13.330 Senior Enterprise Software Analyst. 0:11:13.309 --> 0:11:14.350 At Mizzou, $ 245 price target on Palantir. 0:11:17.340 --> 0:11:20.660 My summary, is that kind of the psychology of investors 0:11:20.679 --> 0:11:22.320 towards Palantir this morning? 0:11:24.160 --> 0:11:27.079 Well, first off, it's great to be back here. Nice 0:11:27.120 --> 0:11:30.840 to see you again, as always. Your summary, I think, 0:11:31.040 --> 0:11:33.970 is accurate in the sense that we have another quarter 0:11:33.990 --> 0:11:38.770 of acceleration. They grew 93% in June, 96% in September. 0:11:39.390 --> 0:11:43.730 As you rightly pointed out, commercial has overtaken government in 0:11:43.790 --> 0:11:45.830 terms of the contribution to the overall business. 0:11:45.870 --> 0:11:47.710 That is no small feat. no small feed. 0:11:47.750 --> 0:11:51.640 If you go back five years ago, commercial was about 40% 0:11:51.640 --> 0:11:52.120 of the business. 0:11:52.300 --> 0:11:54.380 So now again, it's a little bit over 50. 0:11:54.380 --> 0:11:56.040 That may not sound like that big of a change, 0:11:56.100 --> 0:11:59.860 but if you look at government, that business has grown 80%. 0:11:59.160 --> 0:11:59.960 Plus this year. 0:12:00.120 --> 0:12:03.720 So to actually overtake something that's growing 80% is really 0:12:03.760 --> 0:12:05.900 difficult to do it in practice, but that's what happens 0:12:05.940 --> 0:12:11.050 when you have a U.S. commercial business growing 140 to 150%. 0:12:11.050 --> 0:12:12.090 So that's very impressive. 0:12:12.130 --> 0:12:15.830 Now, the one thing which you alluded to that is 0:12:15.929 --> 0:12:19.189 holding back the stock, you mentioned slowing growth specifically, just 0:12:19.210 --> 0:12:22.670 to drill down on that, we are talking about PCB 0:12:22.730 --> 0:12:26.600 or total contract value bookings. However, it's important to note 0:12:26.620 --> 0:12:32.239 that that there was a big shift in shorter duration contracts. 0:12:32.400 --> 0:12:36.200 Customers that were signing very big eight-figure deals over $ 10 0:12:35.980 --> 0:12:39.869 million worth, but for, say, a six-month period instead of 0:12:39.950 --> 0:12:42.030 perhaps three or four or five years. And that is 0:12:42.070 --> 0:12:44.150 going to affect that metric quite a bit. 0:12:45.650 --> 0:12:49.429 The TCB growth was 11% year-on-year, but the revenue growth... 0:12:49.730 --> 0:12:52.790 in the US commercial business is running at 148%. That 0:12:53.570 --> 0:12:57.329 Q4 sequential revenue growth is 15% quarter on quarter, but 0:12:57.490 --> 0:13:00.189 last quarter it was 20%. 0:13:00.190 --> 0:13:01.429 Who's Palantir's competitors? 0:13:01.530 --> 0:13:03.590 Is there any evidence that someone else is coming in 0:13:03.610 --> 0:13:05.670 and impacting market share for them? 0:13:08.010 --> 0:13:09.910 It's a great question. We really don't believe so. 0:13:09.990 --> 0:13:12.570 We do a lot of work around this space. We 0:13:12.610 --> 0:13:16.939 continue to hear that Palantir is viewed really in a 0:13:16.980 --> 0:13:18.940 category of one, which is the way that we see 0:13:19.020 --> 0:13:24.420 them as well. We're not hearing about competitive bake-offs, about 0:13:25.020 --> 0:13:33.810 customers in any significant way exploring alternatives. There are cheaper solutions, 0:13:33.850 --> 0:13:38.699 cheaper alternatives. certain use cases that can be acceptable for. However, 0:13:38.720 --> 0:13:41.360 if you're an enterprise that really is looking to transform 0:13:42.020 --> 0:13:45.079 the way that you are operating, we don't believe there's 0:13:45.120 --> 0:13:47.300 anyone that can do it quite like Palantir can today. 0:13:48.820 --> 0:13:52.559 The story that we've got to discuss is still America 0:13:52.620 --> 0:13:55.440 dominating this, right, on the US commercial side. And like 0:13:55.460 --> 0:13:59.080 Palantir is pretty forthright about the pace in Europe and 0:13:59.100 --> 0:14:00.760 other jurisdictions just being way off. 0:14:01.350 --> 0:14:02.650 Any evidence that changes? 0:14:05.610 --> 0:14:11.160 It does feel like that's a working process, very much so. 0:14:11.860 --> 0:14:15.660 And I would say that's true outside of the U.S., 0:14:15.800 --> 0:14:20.180 both for government as well as commercial customers. There certainly 0:14:20.240 --> 0:14:23.700 is not anywhere near the momentum, the spectacular momentum that 0:14:23.720 --> 0:14:25.680 they have here in the U.S. 0:14:25.830 --> 0:14:28.210 It's a far cry from that overseas. 0:14:29.830 --> 0:14:33.970 There are some, we've seen some issues of government agency 0:14:34.010 --> 0:14:36.850 pushback and then just a lot of commercial customers that 0:14:36.870 --> 0:14:38.960 are moving a lot more slowly. So it does feel 0:14:38.980 --> 0:14:40.800 like that's going to take some time in our view. 0:14:41.780 --> 0:14:43.860 Greg Moskowitz, Managing Director of Missouri. It's been great to 0:14:43.880 --> 0:14:45.640 have you back on the program. Thank you very much. 0:14:46.200 --> 0:14:50.340 Rideshare delivery and financial services app Grab posted a profitable 0:14:50.400 --> 0:14:54.080 quarter across all three of its core businesses and is 0:14:54.160 --> 0:14:59.350 raising its full-year outlook. US-listed shares up 11%. Joining us 0:14:59.430 --> 0:15:02.550 is Grab's CFO, Peter Uwe. And look, you just posted 0:15:02.730 --> 0:15:05.510 record EBITDA. I remember back with Uber, the days of 0:15:05.530 --> 0:15:08.810 being focused on EBITDA and raised the guidance. I guess 0:15:08.850 --> 0:15:11.670 to start with the financials, what changed? What improved in 0:15:11.710 --> 0:15:13.090 the quarter that allowed you to do that? 0:15:14.370 --> 0:15:15.770 Yeah, we had an awesome quarter. 0:15:16.070 --> 0:15:18.270 And if you look at the backdrop of Southeast Asia, 0:15:18.310 --> 0:15:21.250 it was a tough, challenging environment. Field prices were high. 0:15:21.720 --> 0:15:28.360 Weather was not favorable. But yet, 21% of year over year. 0:15:28.720 --> 0:15:31.680 We have more users on the platform, 57 million monthly 0:15:31.700 --> 0:15:35.180 transacting users. And all the products that we've been releasing, 0:15:35.280 --> 0:15:38.239 it's all working together. And that's what you see in 0:15:38.260 --> 0:15:40.000 the results, both in the top as well as in 0:15:40.020 --> 0:15:42.220 the bottom line and the free cash flow generation in 0:15:42.240 --> 0:15:42.720 the business. 0:15:43.680 --> 0:15:46.980 Let's look at the real terms AI story in the financials. 0:15:47.000 --> 0:15:49.780 Grab saying that drivers that use an AI assistant, your 0:15:49.840 --> 0:15:53.310 AI assistant, are earning more than 10% more per hour, 0:15:53.850 --> 0:15:57.840 merchants that rely on your AI assistant are earning 20% more, 0:15:58.280 --> 0:15:59.760 then how does Grab benefit from that? 0:16:01.310 --> 0:16:03.090 Definitely. It's a win-win for everyone. 0:16:03.170 --> 0:16:05.880 If you look at the driver's side, the fact that 0:16:05.960 --> 0:16:09.940 we're able to help them use, through the AI, be 0:16:10.000 --> 0:16:13.080 able to be more productive, they're earning more on the platform. 0:16:13.640 --> 0:16:15.280 And the fact they're earning more on the platform, we 0:16:15.320 --> 0:16:17.850 benefit also as we take a commission for all those 0:16:17.950 --> 0:16:20.990 rides that we do. The same on the restaurant side, 0:16:21.010 --> 0:16:24.090 plus also the drivers or the couriers that deliver those 0:16:24.150 --> 0:16:28.220 food also benefit. The more jobs, the higher basket size 0:16:28.240 --> 0:16:31.620 that the restaurants are seeing also, we're benefiting. So it's 0:16:31.660 --> 0:16:35.490 an ecosystem play and all those AI features that we've 0:16:35.510 --> 0:16:37.650 released are actually helping each other out. 0:16:38.990 --> 0:16:41.850 It's the marriage of an AI economic story with just 0:16:41.930 --> 0:16:44.670 P & L. Like, you're the CFO, right? So the 0:16:44.750 --> 0:16:49.480 cost of AI is changing. On an interaction basis, it's 0:16:49.500 --> 0:16:51.740 down 42% on quarter. 0:16:52.020 --> 0:16:52.260 How? 0:16:53.000 --> 0:16:54.380 This is a contract issue. 0:16:55.160 --> 0:16:55.320 What? 0:16:56.700 --> 0:17:00.360 We've been continuing to optimize, and we've been very, very 0:17:00.420 --> 0:17:03.110 careful in terms of which models we deploy to which 0:17:03.300 --> 0:17:03.930 use cases. 0:17:04.630 --> 0:17:06.129 And it's been a journey for us. 0:17:06.290 --> 0:17:08.810 It's taken us three, four quarters to really continue to 0:17:08.830 --> 0:17:12.409 fine-tune that. We've also been educating our employee base, our 0:17:12.490 --> 0:17:16.440 engineers also, as to which model– also they're using at 0:17:16.480 --> 0:17:20.199 the same time. And it's like when you go into 0:17:20.260 --> 0:17:22.360 a restaurant, you've got to buffer your menus. You've got 0:17:22.380 --> 0:17:24.159 to be careful what you eat as you watch your 0:17:24.180 --> 0:17:25.320 calories at the same time. 0:17:25.400 --> 0:17:27.440 So we kind of take the same approach of that. 0:17:28.580 --> 0:17:32.679 Token spend, the CFO's nightmare maybe. So you've lowered the 0:17:32.700 --> 0:17:35.920 cost base, but now you're in investment mode. Just 30 seconds, 0:17:36.020 --> 0:17:37.570 what that looks like going forward? 0:17:38.770 --> 0:17:41.320 Yeah, we're continuing to be leaning into AI. Look, I 0:17:41.340 --> 0:17:44.440 think we're seeing the productivity. If you look at what 0:17:44.480 --> 0:17:48.359 you said, 42% down on the token costs on a 0:17:48.380 --> 0:17:52.000 per transaction, but yet actually the AI interaction was up 60% 0:17:52.000 --> 0:17:54.480 for us. And yet we delivered those margins and the 0:17:54.540 --> 0:17:57.010 profitability in the business. So we've got the levers in 0:17:57.030 --> 0:17:59.050 the business. We're just going to continue to fine tune 0:17:59.410 --> 0:18:02.230 and really drill the top line, but also grow the 0:18:02.270 --> 0:18:02.750 bottom line. 0:18:04.020 --> 0:18:06.000 Peter Uwe, CFO of Grappler. It's been great to have 0:18:06.020 --> 0:18:08.920 you back on the show. Strong quarter, investment in AI 0:18:08.960 --> 0:18:11.900 going forward. Thank you very much. Coming up, voters head 0:18:11.940 --> 0:18:15.770 to the polls. What can tech expect from today's US midterms? 0:18:16.090 --> 0:18:17.930 That's next. This is Bloomberg Tech. 0:18:31.630 --> 0:18:34.690 Okay, it's the final day of voting in America's midterm elections, 0:18:34.730 --> 0:18:38.150 and polls show Democrats in a strong position. The outcome 0:18:38.190 --> 0:18:40.590 of the vote could change the environment for tech companies, 0:18:40.869 --> 0:18:44.310 particularly in Washington. Let's discuss with Bloomberg's Balance of Power host, 0:18:44.619 --> 0:18:47.760 Joe Matthew. And Joe, help me here. Set the scene politically, 0:18:47.800 --> 0:18:50.780 I think, to start. Where we stand going into midterms, 0:18:50.840 --> 0:18:52.679 what the scenarios are on the table. 0:18:52.740 --> 0:18:55.100 Well, I'll tell you, the superlatives are remarkable going into 0:18:55.119 --> 0:18:58.380 this midterm election. The most expensive midterm election campaign ever 0:18:58.420 --> 0:19:01.290 with about, my gosh, I mean, hundreds of millions of dollars. 0:19:01.330 --> 0:19:04.730 It looks like a CapEx announcement from a high-tech company. 0:19:04.750 --> 0:19:08.230 You've got 57 million Americans who have already voted. Remarkable 0:19:08.290 --> 0:19:10.710 number for a midterm election. And check this out, the 0:19:10.750 --> 0:19:14.580 highest ever national average for gasoline and diesel ever on 0:19:14.619 --> 0:19:18.000 election day. That's the recipe for a pretty explosive dish here. 0:19:18.040 --> 0:19:18.870 And You're right. 0:19:18.970 --> 0:19:21.130 Analysts seem to think this will play in the direction 0:19:21.210 --> 0:19:23.680 of Democrats. The conventional wisdom is the House will fall 0:19:23.720 --> 0:19:26.440 to Democrats tonight. Question is the Senate. And I will 0:19:26.480 --> 0:19:29.240 tell you that Democrats have multiple paths to take control. 0:19:29.760 --> 0:19:31.419 If you want to lean into the polls and the 0:19:31.440 --> 0:19:34.419 prediction markets, you can make the argument very clearly that 0:19:34.460 --> 0:19:37.570 the upper chamber will flip. And in that world, yes, 0:19:37.930 --> 0:19:40.310 Democrats will have their hands on the wheel, even though 0:19:40.609 --> 0:19:43.230 Donald Trump says he'll veto anything that comes his way. 0:19:43.609 --> 0:19:47.720 The anti-data center sentiment? And the reach for regulations for 0:19:47.820 --> 0:19:50.090 AI will become much more significant. 0:19:49.609 --> 0:19:49.970 If that happens. 0:19:50.890 --> 0:19:53.070 So on this show, people pose the question about a 0:19:53.090 --> 0:19:56.619 blue wave, how it impacts defense tech budgets, how the 0:19:56.650 --> 0:20:00.399 data center issue, AI policymaking. Are there races where that 0:20:00.420 --> 0:20:02.440 plays out at the candidate level, or there are other 0:20:02.500 --> 0:20:04.800 measures on the ballot that we're zeroed in on in 0:20:04.840 --> 0:20:05.360 the newsroom? 0:20:05.440 --> 0:20:07.480 No, I think it really depends on the candidate you're 0:20:07.500 --> 0:20:09.700 talking about here. I mean, my goodness, the governor's race 0:20:09.760 --> 0:20:12.080 in Texas, for instance, even the Republican Greg Abbott is 0:20:12.140 --> 0:20:15.840 talking about a review as opposed to a moratorium here 0:20:15.900 --> 0:20:17.740 in New York where I am, that's a big deal. 0:20:17.810 --> 0:20:20.889 Moratorium for data center and a lot of candidates on 0:20:20.910 --> 0:20:24.030 the Republican side are trying to distance themselves from this issue. 0:20:24.070 --> 0:20:27.669 John Husted, the Republican incumbent in Ohio, the man who 0:20:27.710 --> 0:20:30.030 took the seat from JD Vance when he became vice president, 0:20:30.310 --> 0:20:32.910 has become known as the face of the data center. 0:20:33.080 --> 0:20:35.920 That alone could mean a lose for him tonight against 0:20:35.940 --> 0:20:38.180 Sherrod Brown, who wants to get back to the Senate. 0:20:38.200 --> 0:20:39.940 So when you start looking at these, you're right, on 0:20:39.980 --> 0:20:42.660