Speaker 1: Bloomberg Audio Studios, podcasts, radio news. The headlines third quarter
Speaker 1: revenue x tax seventy point fifty five billion. That's a beat.
Speaker 1: Seventy two point eighty eight was the estimate. Third quarter
Speaker 1: Google Cloud revenue also beat over eleven billion dollars. The
Speaker 1: street estimate was about ten point eight ten.
Speaker 2: All right, let's I think we should bring in Man Deep.
Speaker 1: So I think we should definitely bring He's.
Speaker 2: Been watching these numbers very closely. He joins us here
Speaker 2: in the Bloomberg Interactive Brokers studio. A beat pretty much
Speaker 2: across the board, Man Deep, you cover this company and
Speaker 2: many others. We're going to get to some of the
Speaker 2: others in just a second. For Bloomberg Intelligence. What's really
Speaker 2: sticks out to you?
Speaker 3: I mean, the Google Cloud beat is quite impressive because
Speaker 3: the thirty five percent growth rate is a nice acceleration.
Speaker 3: I mean, we are talking about thirty percent being the bogie.
Speaker 3: They really hit it out of the park when it
Speaker 3: comes to the Google Cloud.
Speaker 2: So what does that tell you about their client.
Speaker 3: That the clients are deploying their AI workloads on Google Cloud. Remember,
Speaker 3: Google Cloud is the third when it comes to the
Speaker 3: cloud ranking.
Speaker 2: You've got Aws, Azure.
Speaker 3: Azure and Google Cloud has an und rate of forty
Speaker 3: four billion. Now with this print, Azure is about eighty
Speaker 3: billion and AWS is one hundred and five billion. So
Speaker 3: I think what you will see is Google Cloud growing
Speaker 3: much faster than the other two. Most likely Microsoft will
Speaker 3: be around thirty percent. AWS is more twenty percent. So
Speaker 3: clearly that thirty five percent growth rate is very impressive,
Speaker 3: and the cloud profitability actually was much better than expected,
Speaker 3: which is why you see the operating margin bead here.
Speaker 1: How low was the bar going into this report for Alphabet.
Speaker 3: It was I think low in the sense that the
Speaker 3: overall top line road of thirteen percent was quite low,
Speaker 3: and they beat on. You know, the certain numbers were
Speaker 3: in line. The YouTube ad numbers were in line. The
Speaker 3: YouTube subscriptions continues to be the standout. They keep delivering
Speaker 3: quarter after quarter, and now YouTube plus cloud is one
Speaker 3: hundred billion dollar rundread business. They guide it to that
Speaker 3: and they are showing it in the in the sprint.
Speaker 2: And YouTube alone is a fifty billion dollar business over
Speaker 2: the last four quarters, according to the release from the company.
Speaker 3: I would say if you add the subscriptions, yeah, to
Speaker 3: the ads, it's closer to sixty simply because they bundle
Speaker 3: YouTube subscriptions in the other segment and they've got some
Speaker 3: other revenue in there as well. So that's why that
Speaker 3: subscription number continues to be very impressive, the YouTube premium
Speaker 3: and the YouTube TV. Yeah, and most likely it is
Speaker 3: margin increased.
Speaker 2: A quick reminder, Google bought YouTube back in two thousand
Speaker 2: and six for one point sixty five billion dollars.
Speaker 1: Which is pretty amazing. Listen, we watch a lot of YouTube,
Speaker 1: two different programs.
Speaker 2: We're on YouTube right now.
Speaker 1: We are on YouTube.
Speaker 2: You want everybody she's not watching you tube.
Speaker 1: I'm not watching it. You know, it's interesting. We did
Speaker 1: some reporting kicked off our broadcast couple of hours ago
Speaker 1: about the overhang, the anti trust action scrutiny over where
Speaker 1: their alphabet's dominant market share and Internet search is at
Speaker 1: a risk as other players in AI come in. How
Speaker 1: do you kind of factor those overhanging elements in.
Speaker 3: Yeah, Look, there is no doubt if you're a regulator
Speaker 3: right now and looking at the search market, there's more
Speaker 3: competition this chat GPT, there are other large anguage players
Speaker 3: and Tropic even Meta is talking about getting into search.
Speaker 3: So there is definitely perplexity being another one there is
Speaker 3: more competition for sure. Now, the thing that's impressed me
Speaker 3: this quarter was they continue to execute on search. So
Speaker 3: even though the search volumes are going down, they still
Speaker 3: had an inline forty nine point one.
Speaker 1: Is very amazing.
Speaker 2: Why are search volumes going down?
Speaker 3: Because if chat GPT is taking some of your traffic
Speaker 3: for informational queries, that Google search volume, I would say,
Speaker 3: is going down. But the ROI on their ad spend
Speaker 3: is so high that they can make it up on
Speaker 3: the ad pricing site. So even involves are going down,
Speaker 3: ad pricing continues to be stronger.
Speaker 1: Why because they're the dominant player.
Speaker 3: They are the dominant player, and they have the best
Speaker 3: kind of mode when it comes to the ads stack
Speaker 3: around keyword searches. There's no better a platform for you know,
Speaker 3: navigational searches or transactional searches. If you're an e commerce player,
Speaker 3: you have to advertise YouTube. There's no way out of it.
Speaker 1: So what's the question that you would want to know
Speaker 1: from them on the earnings call? I mean, the stacks
Speaker 1: know up four point two percent in the aftermarket, so
Speaker 1: the momentum just building.
Speaker 3: They give you so little in terms of guidance that
Speaker 3: I almost want to, you know, plead the management to
Speaker 3: give us more details around their CAPEX plans like every
Speaker 3: other company gives us so much more.
Speaker 1: Well, this is the thing that going into this week
Speaker 1: right with all of these guys reporting, and what it
Speaker 1: would tell us about the AI spend. What did you
Speaker 1: what so far have you heard about or are you
Speaker 1: feeling like you're going I mean.
Speaker 3: If the cloud number was a blowout, which it looks
Speaker 3: like in this print, then clearly you know the spend
Speaker 3: on AI is translated into cloud revenue, and so to
Speaker 3: my mind, I think that AI Kapex investment is showing
Speaker 3: up in the cloud revenue. And that's why I want
Speaker 3: to know the Capex guide. Are they overspending because at
Speaker 3: this pace, you know, with the fifty billion dollar capex,
Speaker 3: they're way lower than Microsoft at around eighty billion. So
Speaker 3: that's why that Capex guide is very important.
Speaker 2: Is it apples to apples when it comes to the
Speaker 2: way these companies are investing. Can we can we really say, okay,
Speaker 2: the Microsoft AI spend or Microsoft capex we can compare
Speaker 2: it directly to Alphabet.
Speaker 3: You can, and Alphabet has got a different set of
Speaker 3: businesses along with AI and cloud. They've got weimo that's
Speaker 3: a big investment. I mean that that's a big call
Speaker 3: option on the company overall. That revenue line could be huge,
Speaker 3: and they are investing on the Vemo side. But look,
Speaker 3: when it comes to Capex, it's all about training of
Speaker 3: large angwid models. Can you maintain the lead when it
Speaker 3: comes to you know, Microsoft OpenAI partnership and where stacks
Speaker 3: up against them?
Speaker 2: Where are we in the race? You said can If
Speaker 2: they can maintain the lead, it has me where are
Speaker 2: we in the race?
Speaker 3: I mean, some would argue the open ai model is
Speaker 3: still better for some of the large angrid model.
Speaker 2: Use and open Ai is using Microsoft Azer.
Speaker 3: They are using Microsoft Azor. So from that perspective, Google
Speaker 3: is playing catch up. But they have been releasing a
Speaker 3: lot more products lately than they were before. And that's
Speaker 3: where I think owning the chips. Remember Google has their
Speaker 3: own chips when it comes to training these models. They're
Speaker 3: not even reliant on Nvidia for a large portion of training.
Speaker 3: They do that in house, and that could the reason
Speaker 3: why their Capex spend could be much lower than Microsoft.
Speaker 1: Can we ask you? We've got Reddit? While we've got you.
Speaker 1: Reddit is surging in the aftermarket. It's up about seventeen percent.
Speaker 1: Also out with their earnings, c's signal strong holiday quarter
Speaker 1: to come fourth quarter revenue three hundred and eighty five
Speaker 1: to four hundred million. The street estimate was three fifty
Speaker 1: six point two. So the outlook is upbeat. What do
Speaker 1: we need to know here?
Speaker 3: I mean, this just ipeoed at the perfect time. And
Speaker 3: look when it comes to Reddit, all that timing. They
Speaker 3: are one of the beneficiaries of llms, you know, implementing search,
Speaker 3: because where do you drive that traffic when you show
Speaker 3: a result in an LLLM. A lot of that traffic
Speaker 3: goes to Reddit. And that's why a lot of the
Speaker 3: Google traffic is now going to Reddit, A lot of
Speaker 3: the chat che.
Speaker 1: I guess say, when I search in different things, like
Speaker 1: a lot of things goes.
Speaker 2: Back go back to it. I also like, I spend
Speaker 2: more time on Reddit than any other single you know,
Speaker 2: quote unquote social media site like it's and I was
Speaker 2: such a late adopter.
Speaker 3: To Yeah, yeah, right, I mean, think of what these
Speaker 3: lllms are trained on. They're trained on. Reddit data is
Speaker 3: one of the corpus that is common across all the lllms,
Speaker 3: and that's why when you search for something, it takes
Speaker 3: you back to one of the Reddit posts, which is.
Speaker 1: Kind of what they said right when they were ipoing,
Speaker 1: right that this was going to be what was so
Speaker 1: valuable about it, And it's playing out that way.
Speaker 3: It is they ipeoed at the perfect time. I mean,
Speaker 3: that acceleration is just amazing.
Speaker 1: Can we ask you about Snap too? Snap is up
Speaker 1: about ten eleven percent here in the aftermarket, So another
Speaker 1: one that's surging. Let's go to the.
Speaker 2: Outlook, thirty six percent so far this year.
Speaker 1: Yeah, okay, so perspective. Sorry about that. I was getting
Speaker 1: a little exciting fourth quarter revenue one in one point
Speaker 1: five to one point five to one to one point
Speaker 1: five six billion. The estimate on the street is one
Speaker 1: point five six billion, so it sounds like that's a
Speaker 1: little bit of a range. So they projecting slower holiday
Speaker 1: advertising sales. Why are they up well?
Speaker 3: In the case of Snap, like Tim said, you know,
Speaker 3: they are up twenty percent one quarter, then down twenty
Speaker 3: and in this case, I think overall what you're seeing
Speaker 3: is the lower interest rates now I mean we have obviously, Yeah,
Speaker 3: it's it helps the add companies.
Speaker 1: There are buying back I should say, up to half
Speaker 1: a billion.
Speaker 3: Yeah, I don't know what to make of it, because
Speaker 3: for a company of Snap size, doing a buyback right
Speaker 3: now is not the best use of their cash. But
Speaker 3: maybe the investors like that.
Speaker 2: What should they be doing with their cash?
Speaker 3: They should be deploying generative AI. Every platform right now
Speaker 3: should be looking to add more feess that helps you
Speaker 3: know their engagement. And generative AI is what every social
Speaker 3: media platform is doing. Look at Meta, They're using it
Speaker 3: at scale.
Speaker 1: What an interesting kind of drop of earnings and we're
Speaker 1: focusing on a lot of these kind of I feel
Speaker 1: like high tech interesting. Google Alphabet up still three point
Speaker 1: four percent in the aftermarket. Does it tell you anything
Speaker 1: potentially about what's to come from Meta? From Amazon, from Microsoft?
Speaker 1: Is there anything that we can infer here or now?
Speaker 3: Yeah? I think Meta. For Meta, the bar is slightly
Speaker 3: higher twenty percent growth rates, so I think they will
Speaker 3: beat and raised, but clearly the bar is higher. And
Speaker 3: for Microsoft, the Cloud number will blow out. I mean,
Speaker 3: if Google Cloud did so well, I wouldn't be surprised
Speaker 3: if Microsoft's growth is around that thirty four to thirty
Speaker 3: five percent as well.
Speaker 2: All right, Reddit shares up seventeen and a half percent
Speaker 2: right now, I know I know, I know. I mean,
Speaker 2: look we're talking, you know, and hundreds of millions of dollars,
Speaker 2: not billions of dollars. Here, last question, what dos What
Speaker 2: does all of this mean? Man Deep? For what we
Speaker 2: get tomorrow and Thursday when we hear Amazon and Apple?
Speaker 3: I mean for Amazon and Apple, I think.
Speaker 2: They're meta platforms too.
Speaker 3: Yeah, Look, meta I think should do well. I mean,
Speaker 3: ads continue to be strong, and they should probably beat
Speaker 3: and raise and their large angrid model LAMA is a
Speaker 3: big strategic advantage. So in the case of Apple or Amazon,
Speaker 3: they're very different. I think with Amazon, the AWS business
Speaker 3: is growing slower than Microsoft and Google, so that may
Speaker 3: weigh on them. And for Apple it's about China. I mean,
Speaker 3: if they can counter that China risk, I think they
Speaker 3: are a well position.
Speaker 1: All right, We're gonna leave it on that note, Man
Speaker 1: Deep saying the best Bloomberg intelligence breaking down those alphabet earnings.
Speaker 1: Do you want to mention too a couple of others
Speaker 1: that have crossed. AMD is down more than five percent
Speaker 1: here in the aftermarket. They're forecast falling short, suggesting a
Speaker 1: slower pace of AI growth advanced micro devices, giving a
Speaker 1: lackluster revenue forecast for the current period, so there is
Speaker 1: some concerns that it's aises are growing more slowly than anticipated.
Speaker 1: And then Chippotle also at with results.
Speaker 2: All right, shares of Chipotle ticker CMG in the after
Speaker 2: hours right now, I'm just waiting for the.
Speaker 1: Turn down about seven percent liter the after market. Their
Speaker 1: sales falling short of investor expectations as well.
Speaker 2: Yeah, for sales, look at this. The measure of locations
Speaker 2: open for at least thirteen months rose six percent, was
Speaker 2: below the average analyst estimate of six point four percent.
Speaker 2: The stocks advanced so far thirty two percent this year,
Speaker 2: so it's done better than the S and P five hundred.
Speaker 2: The company did maintain its full year view that same
Speaker 2: store sales will rise in the mid to high single
Speaker 2: digit range.
Speaker 1: All right, let's go back to though alphabet obviously the
Speaker 1: big one and the one that we've been really focusing
Speaker 1: on again, up about four percent here in the after market.
Speaker 1: Caroline Hyde is here with us in studio, co host
Speaker 1: of Bloomberg Technology on Bloomberg TV eleven am Wall Street Time.
Speaker 3: Every day.
Speaker 1: You're welcome, You're welcome. You guys are going to be
Speaker 1: talking a lot about this.
Speaker 4: What do you make oh, the cloud. Cloud revenue up
Speaker 4: thirty five percent. I had you call it out when
Speaker 4: they broke after the closing bell. And really that is
Speaker 4: where the metal roots the road, really, doesn't it, Because
Speaker 4: this is where the investment, the capex of over thirteen
Speaker 4: billion dollars is vindicated. Because they're able to grow revenue
Speaker 4: to such a significant extent. Why are they winning new clients?
Speaker 4: Why are they getting the startups that are ex Google
Speaker 4: is coming to them for their compute power, for their
Speaker 4: services and their software, because they've got AI prowess that's
Speaker 4: able to win yet more customers, more money, and more revenue.
Speaker 2: Better AI prowess than Microsoft, who's in second place when
Speaker 2: it comes to the cloud, or AWS who has the
Speaker 2: crown for first place.
Speaker 4: Many would say that the need for computers so vast
Speaker 4: that you go wherever you can take it. But ultimately,
Speaker 4: I think it's about whether they've got this suppliability and
Speaker 4: whether they are able to cater to it. I think
Speaker 4: people aren't. People do feel that even though from a
Speaker 4: narrative perspective, in the consumer's mindset, maybe we suddenly thought
Speaker 4: that open AI had run away with artificial intelligence generative
Speaker 4: AI and leading the charge I'm sorry. DeepMind has been
Speaker 4: there since twenty ten with Google as an an extraordinary
Speaker 4: lab that has sophisticated AI prowess, and I think therefore
Speaker 4: they're able to start showing that even if the narrative
Speaker 4: moved on them, the actual reality is they're locking in
Speaker 4: customers and they're able to generate their own revenue from this,
Speaker 4: and that's why they're able to also drive up profitability.
Speaker 4: They're managing to be cost focused at the same time
Speaker 4: as driving up revenue.
Speaker 1: You know, we talk about you know that they're advertising business, right,
Speaker 1: it's a massive one. It's a big one, but there's
Speaker 1: a maturation aspect of it, right, and so it's important
Speaker 1: to see the cloud business continue to grow or the
Speaker 1: YouTube business continue to grow. I mean, these are important
Speaker 1: to see these aspects.
Speaker 4: It is, and actually we manage to live up to
Speaker 4: expectations when it came to the juggernaut that is the
Speaker 4: ad business YouTube considerable addition there. And look, this is
Speaker 4: where people have been worried about generative AI encroaching on
Speaker 4: that part of the business model too. Would suddenly I
Speaker 4: not go to Google, Would I instead go to chatchypt?
Speaker 4: Would I be using perplexity people aren't, and my way,
Speaker 4: I love Google AI overviews. I think it's really easy
Speaker 4: and it keeps me using what I'm used to using
Speaker 4: right exactly.
Speaker 2: This is so remarkable to me. YouTube's total ads and
Speaker 2: subscription revenues surpass fifty billion dollars over the past four
Speaker 2: quarters for the first time. I was marveling thinking back
Speaker 2: to two thousand and six when YouTube was, yeah, an
Speaker 2: independent company. Google bought it for what one point six
Speaker 2: billion dollars or something.
Speaker 4: And now they can move from freemium to premium and
Speaker 4: suddenly we're all still completely using addicted it. They've got
Speaker 4: live sports, and no wonder that we're returning to YouTube
Speaker 4: time and time again. I mean, they own market share
Speaker 4: when it comes to our eyeballs, and they can start
Speaker 4: charging us for it. So they're able to contribute more
Speaker 4: than eight billion dollars in terms of overall revenue for
Speaker 4: the business. And it's more about us paying for it
Speaker 4: as consumers than it is about advertising. At the moment.
Speaker 4: People will worry that might run a little very light,
Speaker 4: but they're able to get us to pay.
Speaker 1: Caroline, I think about you and ed and your coverage,
Speaker 1: you know, going into tomorrow, what's kind of top of
Speaker 1: mind for you when it comes to Alphabet and what
Speaker 1: it maybe says to us about some of the other
Speaker 1: big megacaps to report, which it's a massive week.
Speaker 4: What does it signal for Avatar housing resilience for the
Speaker 4: likes of Meta, for the likes of other players, But
Speaker 4: what does it mean in terms of Nvidia? We don't
Speaker 4: we have to wait until November.
Speaker 1: To get in video amazing.
Speaker 4: All of the hyperscales are going to be coming this week,
Speaker 4: and we want to know that that thirteen billion dollars
Speaker 4: is still there. What willston our pitch I'd talk about
Speaker 4: in terms of future capex spend, but also he's got
Speaker 4: to take questions on anti anti competitive, anti trust issues.
Speaker 4: That's the overhang on the stock. We can see that
Speaker 4: the numbers are there, but what about the future business
Speaker 4: model and how he has to basically pivot and change
Speaker 4: to be able to take the pressure off himself from
Speaker 4: the DOJ here in the United States, the FTC and
Speaker 4: over in Europe too.
Speaker 1: Yeah, it's kind of how we started off a couple
Speaker 1: of hours ago. Like the overhang of this one.
Speaker 2: I'm looking at chairs of Meta Platforms. They were hired
Speaker 2: today in the trade, but also hired by eight tenths
Speaker 2: of one percent in the after hours that company reporting
Speaker 2: tomorrow aftermarket.
Speaker 1: All Right, grit steffis always thank you, Thank you, Joe
Speaker 1: Day for you really appreciate it. Caroline Hyde, of course,
Speaker 1: co host of Blueberg Technology on Bloomberg TV with Ed Ludlows.
Speaker 1: So catch them at eleven am Wall Street Time everyday,
Speaker 1: Monday through Friday.