WEBVTT - Week Ahead: Microsoft, Meta, Apple

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>The Stock Movers Report, your roundup of companies making moves

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<v Speaker 2>in the stock market. Harnessing the power of Bloomberg Data.

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<v Speaker 1>Let's take a look now at some stocks making news

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<v Speaker 1>in the week ahead. I'm Nathan Hager, joined by man

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<v Speaker 1>Deep Singh, Global Head of Tech Research at Bloomberg Intelligence.

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<v Speaker 1>Because it is another big week for big tech earnings.

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<v Speaker 1>Correct me if I'm wrong, man Deep, but I think

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<v Speaker 1>we're hearing from what three more of the four major

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<v Speaker 1>hyper scalers after we heard from Alphabet this past week.

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<v Speaker 3>We are, indeed, and look, we know Microsoft hasn't done

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<v Speaker 3>well in the past quarter, and they will be for me,

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<v Speaker 3>one of the big ones. Amazon and you know Apple

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<v Speaker 3>and Meta as well, like all these companies have had

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<v Speaker 3>a decent quarter. So from that perspective, I think where

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<v Speaker 3>expectations are really low, I would say it's Microsoft and

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<v Speaker 3>for me, Google had a slight increase in their full

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<v Speaker 3>year capex for twenty twenty six. They raised it by

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<v Speaker 3>about four percent, and they said twenty twenty seven capex

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<v Speaker 3>would be significantly higher. And so from that perspective, it'll

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<v Speaker 3>be interesting to see what Microsoft and Amazon end up

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<v Speaker 3>doing as well as Meta.

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<v Speaker 1>Absolutely. Well, let's start with Microsoft, as you say, probably

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<v Speaker 1>the biggest player of the three major hyperscalers we're going

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<v Speaker 1>to hear from this week. After we heard from Alphabet

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<v Speaker 1>two hundred and five billion dollars that increase on the

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<v Speaker 1>top line in terms of their forecast for capital expenditure

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<v Speaker 1>for this year, if we see similar numbers from Microsoft,

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<v Speaker 1>what kind of a market reaction could that Sparkmandate?

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<v Speaker 3>Actually, I expect a negative reaction if they significantly raise

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<v Speaker 3>their CAPEX, and I feel the bar is now quite

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<v Speaker 3>high with Alphabet going over two hundred billion dollars for

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<v Speaker 3>this year. So with Microsoft, the challenge is they don't

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<v Speaker 3>have the vertical integration that Alphabet has with Gemini and

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<v Speaker 3>their TPU systems, which that Google has highlighted could be

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<v Speaker 3>a separate line of business. So from that perspective, you know,

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<v Speaker 3>Microsoft has to show Azure growth, and that Azure growth

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<v Speaker 3>has been more like around forty percent. Google posted cloud

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<v Speaker 3>growth of around eighty two percent in their second quarter.

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<v Speaker 3>So from that perspective, there's a lot that Microsoft has

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<v Speaker 3>to prove in terms of both the cloud growth rates

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<v Speaker 3>that I have been trailing and also how else they

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<v Speaker 3>can monetize that capex beyond their cloud segment growth, as

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<v Speaker 3>Google has shown with TPU Systems, and you know how

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<v Speaker 3>they are deploying their own Gemini model on top of it.

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<v Speaker 1>And when it comes to Meta also reporting on Wednesday,

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<v Speaker 1>if they see a major increase to their appital expenditure,

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<v Speaker 1>it's a little bit different, isn't it in terms of

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<v Speaker 1>how they deploy that kind of spending.

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<v Speaker 3>Yeah, I said it was a bigger bar for Microsoft.

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<v Speaker 3>For Meta, it's even higher because they don't even have

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<v Speaker 3>a cloud business. So in the case of Microsoft, at

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<v Speaker 3>least they have a cloud business, where azure segment would

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<v Speaker 3>probably see accelerating sequentially accelerating growth. In the case of Meta,

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<v Speaker 3>it all has to show up in their top line

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<v Speaker 3>ads business, which we have seen from Google. The search

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<v Speaker 3>business didn't accelerate. It was really their cloud business that

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<v Speaker 3>went from you know, sixty percent growth to over eighty

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<v Speaker 3>percent growth. So Meta doesn't have a cloud business. And

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<v Speaker 3>so if Meta comes out and says they are raising

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<v Speaker 3>their CAPEX for second half, I totally expect a negative

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<v Speaker 3>reaction going by how the market has reacted to the

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<v Speaker 3>Google capex increase.

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<v Speaker 1>How do you see Mark Zuckerberg's strategy when it comes

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<v Speaker 1>to AI deployment right now, particularly after all the spending

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<v Speaker 1>metas done just building a super intelligence team and all

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<v Speaker 1>the partnerships that it's gotten into.

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<v Speaker 3>Yeah, so look, they've released a new model, the new

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<v Speaker 3>Spark model. They're looking to monetize that through API use

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<v Speaker 3>and also get into cloud rentals like the Neo clouds.

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<v Speaker 3>That would be very interesting for me who the buyers

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<v Speaker 3>of Meta compute could be because we've seen SpaceX rent

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<v Speaker 3>their compute to Google and Google did say that, you know,

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<v Speaker 3>because of the third party compute rentals, the margins may

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<v Speaker 3>actually go down, So in effect we expect maybe Google

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<v Speaker 3>may end up renting compute from Meta in the near trump.

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<v Speaker 3>It would be interesting if that happens. And I think

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<v Speaker 3>there are speculations that Meta wants to get into cloud

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<v Speaker 3>rental business. That's where it could be a new line

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<v Speaker 3>of business for them to justify any cap ex increase

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<v Speaker 3>that they may have during their earnings call.

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<v Speaker 1>In the time we have left, Mandy, but I'd be

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<v Speaker 1>curious to get your view as well. On Apple they

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<v Speaker 1>report Thursday. Maybe not a hyper scale or along the

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<v Speaker 1>lines of Meta, Microsoft or Amazon, but how do you

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<v Speaker 1>see Apple's results coming out.

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<v Speaker 3>I mean they have a new CEO. They have been

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<v Speaker 3>at the receiving end of all these memory and the

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<v Speaker 3>component price increases which they have passed on to their

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<v Speaker 3>or they plan to pass it on to their customers

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<v Speaker 3>in terms of higher prices. I think, you know, even

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<v Speaker 3>though expectations are for mid teens double digit growth, it

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<v Speaker 3>will be hard for them to come up with any upside.

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<v Speaker 3>Price increases are a big part of that top line growth.

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<v Speaker 3>So given the CEO change and the price increases, I

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<v Speaker 3>think it'll be hard to see any big positive surprises

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<v Speaker 3>coming out of Apple.

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