WEBVTT - Magnificent Seven Earnings in the Spotlight 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.000 --> 0:00:30.320 Cheers with Alphabet and Justice soaring in the after hours 0:00:30.440 --> 0:00:34.280 right now, Carol Hire after the company reported earnings up 0:00:34.400 --> 0:00:38.360 as we speak, another thirteen point six percent in the 0:00:38.400 --> 0:00:41.360 after hours right now. This after declaring a dividend, boosting 0:00:41.360 --> 0:00:44.519 a buyback, authorizing repurchase of up to an additional seventy 0:00:44.560 --> 0:00:47.960 billion dollars it shares first quarter ad revenue coming out 0:00:48.360 --> 0:00:51.800 above expectations first quarter. I also declared it cash dividend 0:00:51.800 --> 0:00:53.120 of twenty cents per share. 0:00:53.120 --> 0:00:54.960 All right, so let's get to it. James chalk Mak 0:00:55.080 --> 0:00:58.280 so much to talk about. He's partnering technology analyst at 0:00:58.320 --> 0:01:01.520 Clockwise KAPITALI joins us from my a me. First of all, 0:01:01.560 --> 0:01:05.199 Alphabet feels like I can't find anything wrong here, walk 0:01:05.280 --> 0:01:07.399 us through. Is this just kind of firing and all 0:01:07.720 --> 0:01:09.560 cylinders and if you will, and then just throwing on 0:01:09.640 --> 0:01:12.560 a dividend and then throwing on in an additional buyback. 0:01:14.240 --> 0:01:17.520 Yeah, first, thanks for having me. You know, for Alphabet, 0:01:17.640 --> 0:01:20.240 this was a tough one, you know, because we had 0:01:20.280 --> 0:01:23.520 the meta earnings last night. You know, uncertainty as it 0:01:23.560 --> 0:01:26.440 relates to the sustainability of the top line growth metrics, 0:01:26.440 --> 0:01:31.479 and obviously Alphabet via Google had you know, uncertainties around 0:01:31.480 --> 0:01:33.600 their search business. And at the same time, you know 0:01:33.680 --> 0:01:35.600 this growth and capex spend, you know, is that going 0:01:35.640 --> 0:01:37.920 to translate over So you know, we were kind of 0:01:37.920 --> 0:01:41.080 debating what to do and and going into the quarter. 0:01:41.760 --> 0:01:46.080 We actually rotated a portion of our Microsoft position to 0:01:46.760 --> 0:01:50.400 triple up our Alphabet position. But thankfully that worked out. 0:01:50.400 --> 0:01:54.600 But for Google, yeah, well yeah, they're both so yeah, 0:01:54.640 --> 0:01:55.440 I mean it worked out. 0:01:55.880 --> 0:01:56.760 So why did you do it? 0:01:56.840 --> 0:01:59.800 What was it that you saw, James in the in 0:01:59.840 --> 0:02:02.240 the Alphabet story that you said you wanted to do that. 0:02:03.920 --> 0:02:06.480 Well, the main thing was the relative valuations. I mean, 0:02:06.880 --> 0:02:11.680 the expectations for Microsoft were exceedingly hot and the expectations 0:02:11.720 --> 0:02:15.840 for Alphabet were exceedingly low. And you look at one 0:02:15.880 --> 0:02:17.919 trading at twenty two times earnings and the other ones 0:02:17.960 --> 0:02:20.560 at thirty five times earnings. So you know what kind 0:02:20.600 --> 0:02:22.600 of the risk reward is, and especially we had some 0:02:22.720 --> 0:02:26.040 sense of how things might trade if they came in 0:02:26.080 --> 0:02:31.080 on a bear kind of narrative, given how Meta traded. 0:02:31.160 --> 0:02:34.440 So it really just boils down to that. But the 0:02:34.480 --> 0:02:38.040 fact that Microsoft was able to exceed those nose bleed 0:02:38.120 --> 0:02:41.720 expectations and the testament to the trends and the force 0:02:41.800 --> 0:02:44.520 of trends that we're seeing in the shift of the 0:02:44.520 --> 0:02:46.280 cloud and aai more broadin. 0:02:46.960 --> 0:02:48.560 Hey, I just want to get your thoughts on Snap 0:02:48.680 --> 0:02:51.320 because it's the company you've been covering for years. 0:02:51.680 --> 0:02:54.200 You'd love to ask about that, Eric, through the. 0:02:54.120 --> 0:02:56.680 Good and the bad. Well, And the reason I'm asking 0:02:56.720 --> 0:02:59.800 is because shares are up, wow, surging as we speak, 0:02:59.840 --> 0:03:04.960 by more than twenty percent twenty five percent at this point. 0:03:05.600 --> 0:03:07.880 This is after the company reported. 0:03:07.560 --> 0:03:09.680 They are down thirty two here today they are. 0:03:09.760 --> 0:03:13.959 That's important context, Chris. The company is seeing second quarter 0:03:14.040 --> 0:03:16.320 revenue from one one point two to three billion to 0:03:16.320 --> 0:03:18.639 one point twenty six billion versus estimates of one point 0:03:18.680 --> 0:03:21.000 two one billion dollars. As Carol mentioned, it's been a 0:03:21.040 --> 0:03:23.280 brutal year so far for Snap. How are you reading 0:03:23.320 --> 0:03:24.920 into these results and do you still you don't own 0:03:24.960 --> 0:03:25.560 Snap anymore? 0:03:25.560 --> 0:03:29.079 Do you No, No, not for a long time. 0:03:29.919 --> 0:03:30.120 You know. 0:03:30.400 --> 0:03:32.640 With Snap, you know, they were supposed to be the 0:03:32.680 --> 0:03:38.760 camera company and transformed into you know e exactly what 0:03:38.800 --> 0:03:42.840 they were initially, you know, just messaging in some content initiatives. 0:03:42.880 --> 0:03:44.600 But at the end of the day, you know, I 0:03:44.600 --> 0:03:47.280 think it's really really hard for these niche platforms to 0:03:47.400 --> 0:03:50.480 scale in the manner in which is necessary to provide 0:03:50.600 --> 0:03:55.800 differentiation to advertisers and the return objectives in return enhancements 0:03:55.840 --> 0:03:58.560 on the on that ad spend. So I think that 0:03:58.680 --> 0:04:03.760 the disparity between these niche platforms like a Snap versus 0:04:03.760 --> 0:04:06.760 the likes of Alphabet and Meta will only increase from here. 0:04:06.920 --> 0:04:10.040 The caveat being that you have companies like Pinterest, which 0:04:10.080 --> 0:04:13.480 we used to own but sold, you know, just given 0:04:13.520 --> 0:04:16.279 the fact that they hit our target. You know, I 0:04:16.320 --> 0:04:19.640 have more opportunities because of the engagement that they bring 0:04:19.960 --> 0:04:22.760 that is likely to grow over time versus you know, 0:04:22.839 --> 0:04:27.120 stick to more static rates, which is from the likes 0:04:27.120 --> 0:04:27.520 of Snap. 0:04:27.560 --> 0:04:29.440 All right, we've got to go back to Google. Forgive 0:04:29.480 --> 0:04:31.560 me alphabet. I keep calling it Google, but I mean 0:04:31.680 --> 0:04:34.760 firs Alphabet. I know, I know, up twelve and a 0:04:34.760 --> 0:04:37.559 half percent here, folks in the aftermarket. This stock heading 0:04:37.560 --> 0:04:40.039 into it had about a twelve percent gain on the 0:04:40.120 --> 0:04:42.719 year here in twenty twenty four. The stock was up 0:04:42.720 --> 0:04:46.880 almost sixty percent last year. But you know, when when 0:04:46.920 --> 0:04:50.720 you look at Alphabet James, and you look at its 0:04:50.760 --> 0:04:54.440 business lines and its roles, and it's play, whether it's AI, 0:04:54.560 --> 0:04:57.280 whether it's still advertising in a big way. You know, 0:04:57.400 --> 0:04:59.479 our own man Deep Singh saying, you know, this company 0:04:59.560 --> 0:05:03.600 is all about that engagement that's kind of so valuable, 0:05:04.000 --> 0:05:06.279 and that's going to be valuable certainly in terms of 0:05:06.360 --> 0:05:09.839 machine learning and gen AI. This is really important stuff. 0:05:10.240 --> 0:05:13.320 I mean, how do you think about you know, Alphabet 0:05:13.480 --> 0:05:16.640 in kind of its future growth trajectory and kind of 0:05:16.640 --> 0:05:18.400 where it goes from here. I mean, these are this 0:05:18.440 --> 0:05:21.320 is a pretty impressive report, but it's also right appeasing 0:05:21.360 --> 0:05:23.760 investors of saying we're going to throw some cash back 0:05:23.800 --> 0:05:24.040 to you. 0:05:25.720 --> 0:05:29.760 Absolutely, I mean any anything with respect to returning capital 0:05:29.800 --> 0:05:33.320 to shareholders or you know, getting religion on the cost 0:05:33.360 --> 0:05:36.800 side of their business and utilizing their cash flow for 0:05:37.080 --> 0:05:41.080 more constructive purposes rather than throwing it into black holes, 0:05:41.120 --> 0:05:43.120 which is the way that they have been operating for 0:05:43.640 --> 0:05:46.039 as long as I can remember. That being said I 0:05:46.040 --> 0:05:48.719 think that the future for Alphabet and Google, you know, 0:05:48.880 --> 0:05:52.240 is still remains a question mark. We don't know, and 0:05:52.279 --> 0:05:55.479 I don't think anyone can definitively say what that search 0:05:55.600 --> 0:05:58.200 environment experience is going to look like in the in 0:05:58.240 --> 0:06:00.440 the future, you know, when if you look out five 0:06:00.520 --> 0:06:02.800 years down the road. Now, the good news is, all 0:06:02.839 --> 0:06:04.839 of this stuff seems to be like coming at you 0:06:05.000 --> 0:06:08.760 fast right all the AI over the since January of 0:06:08.800 --> 0:06:12.200 twenty twenty three, it's been coming hard and fast. But 0:06:12.320 --> 0:06:15.120 the good news is on the on the behavioral aspect 0:06:15.200 --> 0:06:19.520 and the consumer experience. You know, things have changed with chat, 0:06:19.560 --> 0:06:22.560 GPT and whatnot, but things aren't changing that fast overnight, 0:06:22.800 --> 0:06:27.080 which affords Alphabet time to really figure things out, whether 0:06:27.120 --> 0:06:30.880 it's cannibalistic to their existing search business or not. You know, 0:06:31.120 --> 0:06:33.640 I think we have time, So I think extrapolating too 0:06:33.720 --> 0:06:37.880 much too soon is a risk, you know, so as 0:06:37.920 --> 0:06:39.880 long as they can they have the time, you know, 0:06:40.000 --> 0:06:42.479 they might figure it out. They may not, but they might, 0:06:42.680 --> 0:06:45.360 But I look into twenty twenty four and twenty twenty five, 0:06:45.720 --> 0:06:46.120 that's it. 0:06:46.360 --> 0:06:51.359 Could Critics argue about Alphabet that declaring a dividend and 0:06:51.360 --> 0:06:55.080 boosting a share buyback potentially isn't the best use of 0:06:55.080 --> 0:06:59.159 money right now? Perhaps they should be investing more in AI. 0:06:59.279 --> 0:07:02.680 Perhaps they should be investing more and making sure this 0:07:02.760 --> 0:07:04.160 search product is bulletproof. 0:07:06.720 --> 0:07:09.440 Yeah. I mean they're throwing off tremendous amounts of cash 0:07:09.680 --> 0:07:12.440 as it is, and and they're investing a lot, and 0:07:13.120 --> 0:07:16.520 and you look at the margin disparity versus a meta. 0:07:16.720 --> 0:07:20.840 You know, they have a lot of cushion there, so 0:07:21.360 --> 0:07:26.360 and they're investing, you know, strongly as well. So I 0:07:26.400 --> 0:07:31.679 don't think it's mutually exclusive. So long as the ball 0:07:32.120 --> 0:07:34.760 continues to move forward, which is what we need to see, 0:07:34.760 --> 0:07:36.800 and we'll see what the color commentary is on the call. 0:07:37.080 --> 0:07:39.080 I think it'll be okay. I think the longer term 0:07:39.160 --> 0:07:41.960 is where the questions linger. Shorter term, it'll be fine, 0:07:42.000 --> 0:07:42.320 all right. 0:07:42.360 --> 0:07:44.640 So let's go to Microsoft, because it's also the other 0:07:44.680 --> 0:07:47.000 big one that are one of the big ones. After 0:07:47.040 --> 0:07:50.360 the close, it's up about five percent here in the aftermarket. 0:07:50.840 --> 0:07:54.680 This one. Sales and profit beat expectations on robust AI demand. 0:07:54.680 --> 0:07:56.640 That's the headline on our story. So quarterly sales and 0:07:56.640 --> 0:07:59.880 profit climbing more than rejected, lifted by corporate demand for 0:08:00.440 --> 0:08:04.480 Microsoft's cloud and AI offerings. Revenue, as we said, up 0:08:04.600 --> 0:08:07.880 seventeen percent in the third quarter, sixty one point nine 0:08:07.920 --> 0:08:11.240 billion profit two ninety four a share. Analyst on average 0:08:11.360 --> 0:08:15.160 estimated per share earnings of two point eighty three two 0:08:15.200 --> 0:08:17.360 dollars and eighty three cents excuse me, on sales of 0:08:17.360 --> 0:08:21.240 sixty point nine billion. So again outperformance here, and we 0:08:21.360 --> 0:08:25.320 know that such an Adella has been really infusing all 0:08:25.320 --> 0:08:29.800 of Microsoft's entire product line with AI technology thanks to 0:08:29.840 --> 0:08:33.560 its partner open Ai. So thoughts on Microsoft, what we 0:08:33.640 --> 0:08:36.160 got here in the quarter, what it tells you about 0:08:36.240 --> 0:08:38.199 their business today and going forward. 0:08:39.800 --> 0:08:42.559 Yeah, what's most amazing to me is the fact that 0:08:42.600 --> 0:08:46.600 they're able to maintain the growth rates no matter how 0:08:46.640 --> 0:08:51.000 big their revenue base gets, and the fact that they're 0:08:51.040 --> 0:08:53.679 able to deliver the numbers that you just cited and 0:08:53.800 --> 0:08:57.199 do so in an efficient way where earnings are continuing 0:08:57.240 --> 0:08:59.680 to grow at the same rate, So it's not a 0:09:00.679 --> 0:09:06.120 there's no contra indicators on and you know, sales versus spending. 0:09:07.400 --> 0:09:10.679 So I think that to me, the sustainability is the 0:09:11.360 --> 0:09:16.200 biggest and most impressive component of their operations. And and 0:09:16.280 --> 0:09:19.280 most importantly, you know, broadly, I think you can extrapolate 0:09:19.360 --> 0:09:24.520 that the themes on the data center spend and the semiconductors, 0:09:24.520 --> 0:09:26.880 like the nvideos of the world, and the direction of 0:09:26.920 --> 0:09:32.480 corporate enterprise and their appetite for shifting from analog to 0:09:32.559 --> 0:09:35.920 digital is as strong as ever. So I think it's 0:09:35.960 --> 0:09:38.000 a very very good omen for a lot of these 0:09:38.040 --> 0:09:41.560 companies and being at the center of it, because you 0:09:41.600 --> 0:09:44.600 can make an analogy that you want in the first inning, 0:09:44.760 --> 0:09:47.720 third inning, or whatever. But I think the main thing 0:09:48.440 --> 0:09:51.679 is that the world is going to I think Sam 0:09:51.720 --> 0:09:57.319 Altman has this quote that he said, the technological changes 0:09:57.360 --> 0:10:03.080 that we've seen over the last five hundred years, No, 0:10:03.400 --> 0:10:06.280 the changes over the next fifty years will be greater 0:10:06.400 --> 0:10:10.280 than the technological changes over the next last five hundred, right, 0:10:10.360 --> 0:10:13.199 you know. So that's the pace of change that we're 0:10:13.240 --> 0:10:15.160 talking and a lot of that's going to come in 0:10:15.200 --> 0:10:17.920 the first decade, and these companies aren't all at the 0:10:17.960 --> 0:10:18.880 epicenter of it. 0:10:19.080 --> 0:10:23.080 Just want to point out Azure Microsoft's cloud computing unit 0:10:23.800 --> 0:10:25.840 revenue gaining thirty one percent in the quarter, above an 0:10:25.880 --> 0:10:28.400 average prediction of twenty nine percent, so picking up slightly 0:10:28.440 --> 0:10:30.560 from the thirty percent growth in the previous period. So 0:10:30.840 --> 0:10:32.719 you know, that's a trend line. If you're following it right, 0:10:32.760 --> 0:10:33.520 you want to see I. 0:10:33.480 --> 0:10:35.080 Mean, there's a chance we see both of the depending 0:10:35.080 --> 0:10:37.120 on what happens. There's a chance we see both Alphabet 0:10:37.120 --> 0:10:40.400 and Microsoft hit new records tomorrow in today's trade, depending 0:10:40.480 --> 0:10:43.640 on what happens. Okay, I want to talk James just 0:10:43.679 --> 0:10:47.000 a little bit about Microsoft's legacy here and the way 0:10:47.000 --> 0:10:51.199 that it's been able to shift and embrace AI. Where's 0:10:51.200 --> 0:10:55.199 the most important part of looking at Microsoft's growth moving forward. 0:10:55.320 --> 0:10:57.920 I mean, I know, we obviously know Azure is incredibly important, 0:10:57.920 --> 0:11:00.560 but the company has made a huge, huge bet on 0:11:00.679 --> 0:11:03.360 AI with open Ai. Where do you start to see 0:11:03.960 --> 0:11:08.880 that investment and its relationship with open Ai manifest in earnings. 0:11:10.960 --> 0:11:13.280 I think it's going to be, you know exactly, You'll 0:11:13.280 --> 0:11:15.560 see it in the Azure business, but more broadly in 0:11:15.559 --> 0:11:19.040 the intelligent cloud segment. I mean, it just continued to 0:11:19.040 --> 0:11:21.800 translate on that front. But it's not just that segment. 0:11:21.840 --> 0:11:24.160 It's going to have It's going to feed into other 0:11:24.200 --> 0:11:27.439 parts of their business too, you know, on the subscription 0:11:27.640 --> 0:11:33.400 side of their software services and potentially even gaming and 0:11:34.720 --> 0:11:37.160 uh you know, so there's there's a lot of levers 0:11:37.480 --> 0:11:40.160 I think that will be pulled from that relationship. And 0:11:40.200 --> 0:11:42.839 as the world and the corporate enterprise continues to move 0:11:42.840 --> 0:11:44.920 in that direction, more data is going to feed into it, 0:11:44.960 --> 0:11:48.880 which is going to fuel even more efficiency with respect 0:11:48.960 --> 0:11:52.560 to the capabilities that they do. And you know, Copilot, 0:11:52.640 --> 0:11:55.760 you know, for instance, is just on the I don't 0:11:55.800 --> 0:11:57.920 want to use saying first ending of that day day 0:11:57.960 --> 0:12:01.280 two of its POTENTI so, and there's a lot of 0:12:01.320 --> 0:12:04.280 money to be paid there that you'll see that I 0:12:04.280 --> 0:12:07.600 don't think is being appreciated at all, virtually at all. 0:12:07.679 --> 0:12:10.240 Right now, these are all different companies, but they're all 0:12:10.240 --> 0:12:13.480 working on AI, and to a certain extent, they're competing 0:12:13.520 --> 0:12:15.960 with each other when it comes to that technology. No question. 0:12:16.880 --> 0:12:19.520 Given what we're seeing from shareholders in reaction to Microsoft 0:12:19.600 --> 0:12:22.400 and Alphabet today, and given what we saw today in 0:12:22.440 --> 0:12:26.760 the session from reaction from investors to meta platforms sending 0:12:26.760 --> 0:12:30.120 shares for their worst ten months, what did the two 0:12:30.120 --> 0:12:33.000 companies that reported today get right? Or maybe a better 0:12:33.040 --> 0:12:35.480 way to ask is what did meta platforms get wrong? 0:12:38.840 --> 0:12:41.960 What did meta platforms get wrong? I think what they 0:12:42.080 --> 0:12:48.040 got wrong was largely related to the management of the expectations. 0:12:48.320 --> 0:12:53.360 You know, there was no indication around the pace of 0:12:53.760 --> 0:12:57.440 investment that's necessary to sustain the kind of growth. I mean, 0:12:57.679 --> 0:13:02.000 they talk very qualitatively about this is a big opportunity ahead, 0:13:02.160 --> 0:13:06.400 you know, all the metaverse and YadA YadA, But you know, 0:13:06.920 --> 0:13:10.480 there was no pushback whatsoever on the questions and commentary 0:13:11.200 --> 0:13:15.480 with respect to you know, how we should expect the 0:13:15.520 --> 0:13:20.160 pace of investment to ramp to justify and capitalize on 0:13:20.200 --> 0:13:22.840 the trends that Zuckerberg talks about. So I think it 0:13:22.880 --> 0:13:27.200 was more of an expectation versus reality and mismatch that 0:13:27.600 --> 0:13:29.400 probably could have been better managed. 0:13:29.480 --> 0:13:32.680 All right, let's just remind everybody the big earnings after 0:13:32.720 --> 0:13:35.559 the close and those that have really outperformed here and 0:13:35.640 --> 0:13:39.800 showing some studying moves to the upside. Microsoft among them. 0:13:40.000 --> 0:13:43.640 That stock, as we mentioned, it is moving up just 0:13:43.800 --> 0:13:47.880 about four point four percent here in the aftermarket, and 0:13:47.920 --> 0:13:52.120 the company coming out sales and profit beating expectations, lifted 0:13:52.120 --> 0:13:55.080 by corporate demand for the software maker's cloud and AI offerings. 0:13:55.120 --> 0:13:58.640 We talked about Azure gaining revenue alone, gaining thirty one 0:13:58.679 --> 0:14:01.720 percent in the quarter that was above of analyst expectations. 0:14:01.960 --> 0:14:06.200 Revenue in the third quarter overall up seventeen percent to 0:14:06.400 --> 0:14:09.160 sixty one point nine billion dollars. Profit was two dollars 0:14:09.280 --> 0:14:13.000 ninety four cents a share. Analysts on average estimated per 0:14:13.040 --> 0:14:15.440 share earnings of two eighty three, so below what they 0:14:15.480 --> 0:14:18.920 actually came in with, and the estimate for sales was 0:14:18.960 --> 0:14:21.360 sixty point nine so again really hitting out of the 0:14:21.360 --> 0:14:23.880 park when it comes to those estimates. And that is 0:14:23.880 --> 0:14:26.560 certainly one reason why you're seeing the stock or a 0:14:26.560 --> 0:14:29.560 big reason why you're seeing the stocks up. The stock 0:14:29.560 --> 0:14:31.640 of Microsoft, I should say, up at the aftermarket. 0:14:31.720 --> 0:14:33.680 Okay, let's worth let's repeat a little bit of what 0:14:33.720 --> 0:14:37.000 we saw from Alphabet the company's first quarter Google AD 0:14:37.040 --> 0:14:39.320 revenue coming in at sixty one point sixty six billion 0:14:39.400 --> 0:14:41.560 versus estimates of sixty point one eight billion, and in 0:14:41.640 --> 0:14:44.320 the company author authorizing a repurchase of up to an 0:14:44.320 --> 0:14:48.360 additional seventy billion dollars worth of shares, also declaring a dividend, 0:14:48.400 --> 0:14:50.600 a cash dividend of twenty cents per share. First quarter 0:14:50.640 --> 0:14:55.760 revenue excluding traffic acquisition costs sixty seven point five to 0:14:55.880 --> 0:14:58.680 nine billion, beating estimates of sixty six point oh seven billion. 0:14:58.920 --> 0:15:01.600 To the downside, int Hell shares are down more than 0:15:01.640 --> 0:15:05.920 eight percent here, biggest maker of PC processors. Lack luster 0:15:06.040 --> 0:15:09.000 forecast from the company for the current quarter, indicating it's 0:15:09.000 --> 0:15:11.840 really still struggling to kind of find its way back 0:15:12.200 --> 0:15:13.840 to the top, if you will. Sales in the second 0:15:13.920 --> 0:15:16.600 quarter will be about thirteen billion. That compares with an 0:15:16.600 --> 0:15:19.520 average analyst estimate of thirteen point six billion according to 0:15:19.560 --> 0:15:22.520 our data here at Bloomberg. Profit again, the outlook will 0:15:22.560 --> 0:15:25.480 be ten cents a share of minus certain items versus 0:15:25.480 --> 0:15:28.760 a projection of twenty four cents, So that's a pretty 0:15:28.760 --> 0:15:31.560 big miss. We're talking with James Chockmock partner and tech 0:15:31.600 --> 0:15:35.960 analyst over at Clockwise Capital. James, is there's some underlying theme. 0:15:36.000 --> 0:15:38.680 We're not through all the MAGS seven companies. We've got 0:15:38.680 --> 0:15:39.960 what Amazon next week? 0:15:40.120 --> 0:15:42.240 Yeah, we've gotten video in a while, right. 0:15:42.080 --> 0:15:44.360 So we've got some other plays to get through. But 0:15:45.080 --> 0:15:47.120 is there any themes that you're finding, certainly for the 0:15:47.160 --> 0:15:51.280 investment community when it comes to especially these big tech names, 0:15:51.840 --> 0:15:55.160 the mag seven often who haven't always been so magnificent 0:15:55.240 --> 0:15:58.760 as of late, what they're saying and kind of their 0:15:58.760 --> 0:16:01.400 impact on the overall market, there's some big takeaway here 0:16:01.440 --> 0:16:01.760 for you. 0:16:03.480 --> 0:16:06.640 I think the biggest takeaway is that the sellers of 0:16:06.760 --> 0:16:10.720 these data center services are the best place to be, 0:16:10.920 --> 0:16:15.640 you know, from Navidia to Dell and the server side, 0:16:15.680 --> 0:16:19.480 like we own VRT which helps with the cooling systems, 0:16:20.360 --> 0:16:23.760 comfort systems, you know. So there's a lot of these 0:16:23.800 --> 0:16:27.800 companies that play into building out the companies that are 0:16:27.840 --> 0:16:30.800 selling to the hyperscalers. I think will continue to be 0:16:31.640 --> 0:16:34.040 in a great position now that as far as the 0:16:34.080 --> 0:16:37.040 Max seven is concerned, I do think, you know, the 0:16:37.080 --> 0:16:42.760 market is still in a state of shoppiness and volatility, 0:16:42.800 --> 0:16:44.800 and I think that's going to last until we have 0:16:44.880 --> 0:16:47.000 better clarity on what the FED is going to do. 0:16:47.040 --> 0:16:49.720 And you saw the GDP numbers today, So there's there's 0:16:49.840 --> 0:16:53.280 mixed messages as to which direction macro is going versus 0:16:53.280 --> 0:16:56.359 tech and which one to prioritize, because if you prioritize 0:16:56.400 --> 0:16:59.360 the economic cycle, then that means valuations are at risk. 0:16:59.400 --> 0:17:02.480 If you prioritiz is the text cycle, that means that 0:17:02.720 --> 0:17:05.360 earnings are the focus. And right now we're in this 0:17:05.480 --> 0:17:09.840 world where someday's valuations are in focus and other days 0:17:09.880 --> 0:17:12.760 earnings like today, Hey, so I think you just got 0:17:12.760 --> 0:17:15.000 to stay nimble at the end of the day. 0:17:14.880 --> 0:17:17.360 Hey, James, last question. Thirty seconds. Here, I'm looking at 0:17:17.359 --> 0:17:20.320 time US Equity on the Bloomberg terminal. This is the 0:17:20.480 --> 0:17:24.000 clockwise Core Equity and Innovation ETF. It is up this 0:17:24.119 --> 0:17:28.199 year a whopping eighteen point three percent, out performing all 0:17:28.240 --> 0:17:31.920 the benchmarks. Amazon is your second biggest holding after t 0:17:32.119 --> 0:17:36.399 bills make accounting for five percent of the portfolio. We 0:17:36.480 --> 0:17:39.760 got Amazon coming up. Thirty second preview of Amazon. 0:17:41.400 --> 0:17:41.600 Yeah. 0:17:41.600 --> 0:17:45.480 Amazon, it's the only of the mag seven that we 0:17:45.640 --> 0:17:48.480 feel that we haven't cut exposure to. You know, it's 0:17:48.520 --> 0:17:51.160 a five percent or give or take weight, and we're 0:17:51.160 --> 0:17:54.560 maintaining that. I think the data that you saw from 0:17:54.560 --> 0:17:57.480 Microsoft and today is really to the cloud is a 0:17:57.600 --> 0:18:01.440 very good omen. They're firing across all three other businesses, 0:18:01.440 --> 0:18:05.240 you know, on the on the grocery side, the retail side, 0:18:05.000 --> 0:18:07.879 the cloud side, and this is the first time in 0:18:07.920 --> 0:18:10.639 a while that you've seen everything going in the right direction, 0:18:10.720 --> 0:18:13.800 and most especially on the margin. So you know, we 0:18:13.960 --> 0:18:16.359 like the risk award here. You know, I think next 0:18:16.440 --> 0:18:19.160 year you could get the two twenty five. This year 0:18:19.200 --> 0:18:22.600 probably upwards of two hundred, So you know it's one 0:18:22.640 --> 0:18:24.840 that definitely keeping the portfolio for sure. 0:18:25.320 --> 0:18:27.120 All Right, we're going to leave it. On that note, Hey, James, 0:18:27.160 --> 0:18:29.720 thank you so much. James. Chuck mack partner and tech 0:18:29.760 --> 0:18:32.720 analyst at Clockwise Capital, joining us on Zoom from Miami. 0:18:32.800 --> 0:18:34.840 A lot of names moving here in the aftermarket. 0:18:36.680 --> 0:18:40.199 You're listening to the Bloomberg Business Week podcast. Catch US 0:18:40.240 --> 0:18:43.440 Live weekday afternoons from two to five pm Eastern Listen 0:18:43.520 --> 0:18:45.680 on Apple card Play and then brought auto with a 0:18:45.720 --> 0:18:50.840 Bloomberg Business app or watch US Live on YouTube. 0:18:52.160 --> 0:18:54.320 All right, we're going to call this an unwelcome combination. 0:18:54.480 --> 0:18:56.360 You have Second AMIC gross sliding to an almost two 0:18:56.440 --> 0:19:00.240 year low last quarter, while inflation jumped to uncomfortable vels. 0:19:00.280 --> 0:19:02.360 John just talking about all of this interrupting a run 0:19:02.400 --> 0:19:05.159 of strong demand and muted price pressures that had fueled 0:19:05.200 --> 0:19:09.240 optimism for that soft landing side, that soft landing tim 0:19:09.320 --> 0:19:12.280 it feels like maybe not going to happen, at least 0:19:12.320 --> 0:19:13.160 not for today. 0:19:12.960 --> 0:19:14.760 At least not today. With more on today's data and 0:19:14.800 --> 0:19:17.040 the reaction in the US treasury market. Back with us, 0:19:17.040 --> 0:19:20.560 it's Bloomberg News International Economics and Policy correspondent Michael McKee, 0:19:20.600 --> 0:19:23.520 also Bloomberg News Rates reporter Michael mackenzie. Both here in 0:19:23.560 --> 0:19:26.040 the studio. Michael McKee. I want to start with the 0:19:26.160 --> 0:19:28.720 data on growth and inflation. Just just break it down 0:19:28.760 --> 0:19:31.760 for us and what exactly has folks so concerned. 0:19:32.359 --> 0:19:36.639 Well, the number came in worse than forecast and certainly 0:19:36.680 --> 0:19:39.240 down from the fourth quarters three point four We had 0:19:39.240 --> 0:19:42.240 one point six percent growth in the first quarter, But 0:19:42.400 --> 0:19:46.760 it really wasn't as slow as it appears, because at 0:19:46.840 --> 0:19:49.240 least as far as people like the FED would be concerned, 0:19:49.240 --> 0:19:52.000 because a lot of it was trade. We imported a 0:19:52.000 --> 0:19:56.760 lot more than we exported, partly because of the strong dollar, 0:19:56.840 --> 0:19:59.400 and it's cheaper to bring in imports, and if imports 0:19:59.400 --> 0:20:03.000 are coming in, it does suggest that retailers and others 0:20:03.119 --> 0:20:08.600 are anticipating this can sell the stuff. Consumer spending two 0:20:08.640 --> 0:20:11.400 point five percent, not as bad as it could have been, 0:20:11.800 --> 0:20:15.520 down from last quarter, but still reasonably good. Business investments 0:20:15.600 --> 0:20:18.960 still strong two point nine percent. Inventory is another problem. 0:20:19.040 --> 0:20:23.520 Inventories weren't as high, but inventories and trade are very volatile, 0:20:23.760 --> 0:20:27.320 so overall, it's not that bad a report. When you 0:20:27.359 --> 0:20:31.040 take out inventories and trade, you get a three point 0:20:31.080 --> 0:20:35.200 one percent growth rate, so not too bad. What worried everybody, 0:20:36.040 --> 0:20:40.200 and this is mikes people over there is the PCE 0:20:40.600 --> 0:20:46.840 inflation numbers. Now, the government calculates this number quarterly with 0:20:47.080 --> 0:20:49.679 average of the three months, and it also does a 0:20:49.720 --> 0:20:53.720 month by month, And what ended up happening is a 0:20:53.760 --> 0:20:55.920 big jump of three tenths of eight percent in the 0:20:55.960 --> 0:20:59.040 year over year numbers for both headline and core core, 0:20:59.200 --> 0:21:03.640 particularly concerning people. And so that's what the market's focused 0:21:03.680 --> 0:21:07.800 on and started falling out of bed because of now 0:21:08.359 --> 0:21:10.919 we get the monthly We've gotten the monthly figures for 0:21:12.680 --> 0:21:16.480 January and February. We get the monthly figure from March tomorrow, 0:21:16.840 --> 0:21:19.760 and the question is was this a problem all across 0:21:19.800 --> 0:21:23.400 the quarter, Was this a problem in January and February 0:21:23.400 --> 0:21:26.800 and they had to revise those numbers, or are we 0:21:26.840 --> 0:21:29.280 going to have a big negative surprise tomorrow. 0:21:29.480 --> 0:21:32.000 So if March comes down, we wouldn't be so worried. 0:21:32.119 --> 0:21:35.040 We wouldn't be so worried. If March comes in as 0:21:35.160 --> 0:21:40.040 forecast or goes a little bit lower, then you'll watch 0:21:40.280 --> 0:21:41.760 the market's melt up tomorrow. 0:21:41.800 --> 0:21:44.000 Probably well, I don't know if I want to say 0:21:44.000 --> 0:21:46.480 a melt up, but we definitely have seen a move 0:21:46.560 --> 0:21:50.760 up once again in terms of the treasury curve and yields. 0:21:50.920 --> 0:21:52.920 So Michael McKenzie come on in on this talked about 0:21:53.080 --> 0:21:55.280