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Speaker 1: with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2: Let's head out to our Chicago News bureau.
Speaker 3: That's where we find Bloomberg Intelligence Senior Technology analyst Ana
Speaker 3: agr anaag. We want to give you a little time
Speaker 3: to stew over this, walk us through what we've got
Speaker 3: so far from Microsoft, because investors seem a little disappointed.
Speaker 4: Yeah, I mean I don't I don't really find a
Speaker 4: whole lot of mistakes. And there's these numbers and you
Speaker 4: look at as your growth of thirty nine percent, I
Speaker 4: mean given that size, that's pretty good. The margins actually
Speaker 4: stood out way, you know, way higher than what we
Speaker 4: were anticipating. We thought there was going to be pressure
Speaker 4: on margins because of all the spending, and then the
Speaker 4: last league when you look at the capex number substantially
Speaker 4: higher than the thirty billion that they talked about now in.
Speaker 4: You know, to some people, maybe that's a disappointment, but
Speaker 4: for us, that's a good thing because I think they
Speaker 4: have so much demand coming in. They're going to add
Speaker 4: more capacity this year and that's something that you know,
Speaker 4: we have been saying for a while.
Speaker 5: Well, you know, I'll ask you the same question that
Speaker 5: I asked Angelo Zino a little earlier. Maybe it's too
Speaker 5: early to tell me if we won't hear anything about
Speaker 5: on the call, but the cloud race between the three
Speaker 5: biggest providers out there, Aws, Azure, Google Cloud, is there
Speaker 5: an opportunity for Azure to get market share from companies
Speaker 5: that might have been affected by last week's AWS outage.
Speaker 5: Is that an opportunity?
Speaker 4: Well, I typically I would say no, because they are
Speaker 4: facing the same problem today. Frankly, so when you look
Speaker 4: at some of these large install bases, it's very difficult
Speaker 4: to change your applications. But what is the big opportunity,
Speaker 4: not just for Amazon or not just for Microsoft, but
Speaker 4: for all of them, including Oracle, is most companies eventually
Speaker 4: will have a backup cloud provider. They don't have it
Speaker 4: right now, but that is going to be one of
Speaker 4: the bigger growth drivers down the road. After the AI
Speaker 4: boom is done, you know. So, I mean, from our side,
Speaker 4: the market is big enough for all of them to
Speaker 4: prosper very very well in the coming years.
Speaker 3: I mean, honor as you said that the Azure cloud
Speaker 3: computing unit posted a thirty nine percent revenue can in
Speaker 3: the quarter when adjusting for currency fluctuations. That did beat
Speaker 3: the street estimate of thirty seven percent. I'm reading some
Speaker 3: you know analysis that says, well, that was a disappointed
Speaker 3: the expectations were high. What what was there a whisper
Speaker 3: number in terms of growth on the street.
Speaker 4: No, the consensus was thirty seven. This is what the
Speaker 4: company said. Now there is if you really want to
Speaker 4: dissect it, you know badly, then you could say, well,
Speaker 4: Google Cloud growth accelerated in the quarter compared to the
Speaker 4: previous quarter, but Microsoft it was thirty nine. It's it's
Speaker 4: still at thirty nine. But you know, there are different basis.
Speaker 4: That one's you know, Microsoft is running at about seventy five percent,
Speaker 4: you know, eighty billion dollars in annual run rate. You know,
Speaker 4: Google Cloud is still at thirty percent, and yet Azure
Speaker 4: growth is higher than Google's cloud growth. So, you know,
Speaker 4: I think people are probably just splitting hairs at this point.
Speaker 5: Yeah, and you reference that when you were answering my question.
Speaker 5: You reference the outage that Microsoft has having right now,
Speaker 5: this global Microsoft outage, So we should note that, Yeah,
Speaker 5: just cloud cloud companies are cloud companies, and sometimes it's
Speaker 5: AWS that has the outage. Sometimes it's Microsoft that that
Speaker 5: has the that has the outage. Hey, the open Ai question,
Speaker 5: we talked a lot about this with you yesterday, and
Speaker 5: I imagine that on the call, investors will have a
Speaker 5: lot of questions about, Okay, this close to thirty percent
Speaker 5: ownership of open ai, the parent company of chat GPT,
Speaker 5: what is that going to do for Microsoft?
Speaker 6: See?
Speaker 4: I think from our site, the equity part is not
Speaker 4: what you know, for concerned, it's really the technology that
Speaker 4: Microsoft is holding on to that's really the critical piece
Speaker 4: because you know, one of the ways we think about
Speaker 4: is they will sell more products, they will sell more
Speaker 4: cloud services using that technology than they would just on
Speaker 4: the you know, share side of it. And that's a
Speaker 4: bigger thing for us because they have, you know, a
Speaker 4: hold of that for the next seven years.
Speaker 3: Hey, one of the things I want to ask you,
Speaker 3: and I know this isn't typically your coverage, but you know,
Speaker 3: you're smart to cover all things technology, but Meta Meta
Speaker 3: down almost eight percent here in the aftermarket as you
Speaker 3: see this, Uh, what's what's the problem. There's one tax
Speaker 3: one time tax charge. I guess we're still trying to
Speaker 3: figure this out. But is it all about that or
Speaker 3: is it just that we were caught off guard?
Speaker 4: See I think that could be a lot of the
Speaker 4: noise then the number, and you know, I'm very sure
Speaker 4: they're going to give clarity on that. But the big
Speaker 4: question of the overhand of Mega Meta always is, you know,
Speaker 4: how are you monetizing AI. You're spending all this money,
Speaker 4: where's the revenue you show for it? I think that's
Speaker 4: where management really needs to give and address that in
Speaker 4: a much more succinct way than they have. The other
Speaker 4: side is they don't have a cloud platform just like
Speaker 4: Google does or Amazon does or Microsoft does. So Meta
Speaker 4: is the one that needs to explain these things far
Speaker 4: better than, frankly, the other three.
Speaker 5: I want to bring in Ivan find Seth, a research
Speaker 5: director and chief investment officer with Tiger's Financial Partners, got
Speaker 5: over five hundred million dollars in assets under management, and
Speaker 5: pose that same question to him about meta platforms the company,
Speaker 5: saying that the implementation of the One Big Beautiful Bill
Speaker 5: Act led to the recognition of a valuation allowance against
Speaker 5: our US federal deferred tax assets reflecting the impact of
Speaker 5: the US Corporate Alternative Minimum Tax. The result of one
Speaker 5: time non cash income tax charge of fifteen point nine
Speaker 5: three billion dollars, shares Caroll down seven point eight percent. Ivan,
Speaker 5: You've had some time to dig into this a little
Speaker 5: bit on the meta platform side. What's going on here?
Speaker 7: Well?
Speaker 6: All right, so the Big Beautiful Bill caused the recognition
Speaker 6: of a deferred access set. It's actually a non cast charge.
Speaker 6: And there while it caused a spike in their tax
Speaker 6: rates eighty seven percent for the quarter, it actually goes
Speaker 6: down significantly going forward. I think this is really a
Speaker 6: non event. It's an accounting issue, and I think any
Speaker 6: weakness is a buying opportunity in the STOP because there's
Speaker 6: so many positive long term trends that will continue to
Speaker 6: drive the STOP higher.
Speaker 5: But is that why the stock is down right now
Speaker 5: because of this one time charge affecting the bottom line?
Speaker 5: Is that is that the concern? Or is it what
Speaker 5: Carol brought up? The idea of cap X going up
Speaker 5: next year and to spend.
Speaker 6: Well now we have seen investors make a mistake consistently
Speaker 6: in selling Meta Meta platforms. On capital investment increases, they
Speaker 6: continue to invest in driving their AI capabilities, which drives
Speaker 6: increased user engagement, it drives increase return on AD spend investment.
Speaker 6: So I like when they continue to invest, and we've
Speaker 6: seen this multiple times. If you listen to what Mark
Speaker 6: brig does every time he invests, from the beginning from
Speaker 6: changing the company from Facebook to Meta, and when he
Speaker 6: was investing in mobile, the stock sold off. Now most
Speaker 6: of the people engaging in Facebook and Instagram do it
Speaker 6: on their phone, so you have to listen to him,
Speaker 6: and he says what he does, and he does what
Speaker 6: he says, and he continues to create value. So on
Speaker 6: any weakness over the increasing capex. And again this is
Speaker 6: positive because there's been a fear that we're going to
Speaker 6: see this AI bubble burst, that companies are not going
Speaker 6: to continue to invest. We've seen all three companies reporting today, Alphabet,
Speaker 6: Microsoft and Meta all increasing capital investment in AI development.
Speaker 6: And that's positive for the companies, those three companies, and
Speaker 6: it's positive for the bullish AI investment theme.
Speaker 3: You know this fifteen percent corporate alternative minimum tax. Yeah,
Speaker 3: I'm googling some stuff here, folks, because I want to
Speaker 3: understand stand it.
Speaker 2: It came out of the.
Speaker 3: Inflyflation Reduction Act of twenty twenty two, and it generally applies,
Speaker 3: I think to corporations with our regenually just financial statement
Speaker 3: income exceeding a billion dollars every three consecutive years.
Speaker 2: Yeah, we're all going to be learning a little bit
Speaker 2: more about this. But tim you keep bringing up like
Speaker 2: why why aren't we seeing this with maybe some of
Speaker 2: the other ones?
Speaker 5: Yeah, why is metaplat? Why are we only talking about
Speaker 5: this with regard to meta platforms?
Speaker 6: They may be one of the ones that has the
Speaker 6: largest deferred tax asset and that has really to do
Speaker 6: with timing and expensing of things like R and D
Speaker 6: as an example.
Speaker 3: So, you know, we're talking about a lot of things,
Speaker 3: and I mean we want to get you know, your
Speaker 3: view on some of the other companies that have reported
Speaker 3: Anna Rag. We do want to ask you, though, what
Speaker 3: are you thinking that you want to You're going to
Speaker 3: be looking for on a call going back to Microsoft,
Speaker 3: if you will, As we continue to see that one
Speaker 3: trading lower here in the aftermarket. Let me just pull
Speaker 3: it up on my Bloomberg because we have seen some
Speaker 3: pressure here the stock continuing. It's down still about three
Speaker 3: point four percent, is it? What do you want to hear.
Speaker 2: From this company?
Speaker 4: I think.
Speaker 2: Let me let me get Anaog first, forgive me Ivan, okay.
Speaker 4: All right, So the biggest thing for us, who's going
Speaker 4: to be you know, what's the back half the capic spending?
Speaker 4: The CAPEX and the first sport was very high, thirty
Speaker 4: five billion compared to thirty which they guided to. We
Speaker 4: want to know what is it going to be in
Speaker 4: the back half of the year. Are they going to
Speaker 4: slow down dramatically or is it going to keep pace?
Speaker 4: It where we are right now?
Speaker 3: All right, Anaag, we know you've got research to right
Speaker 3: We're going to let you go and look forward to
Speaker 3: reading that.
Speaker 2: Ivan, we want to stay with you for a little bit.
Speaker 3: We are talking with Ivan find Seth, research director and
Speaker 3: chief investment officer with Tiger's financial Partners on a ug
Speaker 3: run of course, our senior tech analyst here at Bloomberg Intelligence.
Speaker 3: I'ven other companies that reported Meta obviously caught our attention.
Speaker 3: We just talked with Microsoft, are talked about Microsoft at
Speaker 3: the anarog. What's your take on what we got from them,
Speaker 3: because that stucks down about three percent here in the aftermarket.
Speaker 6: Well, right now we're in an environment of you know,
Speaker 6: people who have been buying these stocks have headed results.
Speaker 6: They sell into the results. But I say, I'll say
Speaker 6: that this AI investment theme is powerful and the companies
Speaker 6: leading it are Meta uh, Google and Microsoft, and you
Speaker 6: got to buy on any weakness. I want to hear
Speaker 6: from Microsoft about increase AI driven uh application and engagement
Speaker 6: and subscription increases, how users are buying and implementing and
Speaker 6: using copilot. Of course, you want to see growth in
Speaker 6: all key categories like cloud Azure.
Speaker 2: I mean Azure was up thirty nine. That's pretty good, right.
Speaker 6: Phenomenal, and that's their big growth engine and they have
Speaker 6: been announcing huge contracts so as Google. Unfortunately Amazon had
Speaker 6: that outage was it was uh disappointing, but didn't really
Speaker 6: set back the stock. But these are the growth drivers
Speaker 6: that the cloud hosted AI platforms.
Speaker 5: Yeah, I was, I was uh surprised to see hmas
Speaker 5: on stock actually higher that day, I know, but I
Speaker 5: think also speaks to the power of Amazon and like
Speaker 5: you got in a good understanding of how much it has.
Speaker 5: Remember the company is investigating outages. This is Microsoft is
Speaker 5: investigating out of office and game applications today also, so
Speaker 5: this kind of goes both ways. I've ben on Microsoft
Speaker 5: one more and then we're going to get back to
Speaker 5: some more meta platforms I think. But a small one
Speaker 5: point two percent beat on adjusted diluted EPs on Microsoft
Speaker 5: for my You know, everybody the company does not give
Speaker 5: guidance in this statement. It does that on the conference call.
Speaker 5: It's doing that on the conference call. Is it like
Speaker 5: worth even talking about it without even having it? Oftentimes
Speaker 5: we wait for the call to get more information, but
Speaker 5: in this case, like forward guidance coming from the call,
Speaker 5: it's kind of a moot point.
Speaker 6: Well, the disconnect and the dichotomy that exists between companies
Speaker 6: and Wall Street is that companies planned for one, three
Speaker 6: and five years and Wall Street wants to measure everything
Speaker 6: on a quarterly basis. I mean, the guidance it's somewhat important,
Speaker 6: but you wanted to see consistent growth driven by their
Speaker 6: investments in technology, the adoption and use of their technology
Speaker 6: that creates their competitive advantage, and those are the key
Speaker 6: things to look at. And we are in the first
Speaker 6: inning of the World Series of AI driven economic global
Speaker 6: economic growth, and this trend is going to continue, and
Speaker 6: it's going to be powerful, and it's going to be
Speaker 6: game changing. And I think that AI is going to
Speaker 6: enhance and create many more jobs than it will eliminate.
Speaker 3: Going back to the costing though, for Meta, you know,
Speaker 3: I'm just that operating margin for the third quarter down
Speaker 3: from forty three percent last year. Is that worrisome or
Speaker 3: you think manageable?
Speaker 2: Not really, okay.
Speaker 6: We've looked at companies that have had huge growth to
Speaker 6: directories while their margins we're contracting. In fact, Amazon doesn't
Speaker 6: focus on margin. They focus on revenue growth. They don't
Speaker 6: focus on return on capital actually, which is one of
Speaker 6: the key things we focus on. But they do drive
Speaker 6: a huge return. So you know, there are times where
Speaker 6: your growth margin can contract, but your economic margin can increase.
Speaker 6: And that is the economic margin is the difference between
Speaker 6: return on capital and cost of capital. That is the
Speaker 6: most powerful driver of shareholder value creation. So it's not
Speaker 6: so much important by what happens with gross margin. It's
Speaker 6: in fact, I've seen many companies drive huge growth by
Speaker 6: lowering their growth margin because you're just becoming more competitive
Speaker 6: and they're actually making it up on return on capital.
Speaker 5: Okay, we're going to talk about alphabet with you in
Speaker 5: just a minute, Carol, reminding me that shares are surging
Speaker 5: higher in the after hours six percent. Okay, one more
Speaker 5: on meta platforms down eight point four percent in the
Speaker 5: after hours. Reality Labs losses for the third quarter four
Speaker 5: point four billion. It's about the same as one year prior. Obviously,
Speaker 5: it's a huge investment area for meta platforms. In the
Speaker 5: press release, Mark Zuckerberg specifically calling out the success of
Speaker 5: the eyewear and saying, essentially, I don't have it in
Speaker 5: front of me. To be essentially said, if we think
Speaker 5: the future is going to be what it is, this
Speaker 5: is going to be the most exciting moment for meta
Speaker 5: platforms ahead of us. These will be the most exciting
Speaker 5: years for meta platforms. What is the opportunity that meta
Speaker 5: platforms has when it comes to eyewear.
Speaker 6: This is going to be a tremendous communication and interactive
Speaker 6: platform and it's only going to get better in a
Speaker 6: few years. We're going to look back on these original glasses,
Speaker 6: the ones that they've launched from ray Band, the recent
Speaker 6: ones from Oakleigh, and the functionality in a few years
Speaker 6: from now is just going to be more and more incredible.
Speaker 6: But this ability to engage with real time information, to
Speaker 6: share pictures and images and videos in real time with
Speaker 6: other people that you're talking to. And while I'm up,
Speaker 6: Mark believes that the glasses are going to replace your smartphone.
Speaker 6: You're just going to keep your smartphone in your pocket
Speaker 6: and you're going to interact with data and information and
Speaker 6: people who you're communicating with these glasses. And eventually we're
Speaker 6: going to see ones. Meta just launched ones with displays.
Speaker 6: It's going to be all about having displays embedded in
Speaker 6: the lens so you don't even have to touch your phone.
Speaker 6: So this is going to be a huge growth oup
Speaker 6: and this is going to be what the cell phone
Speaker 6: was in the mid nineties.
Speaker 2: No rose colored glasses.
Speaker 3: Though right now, because Medicinae is now down near their
Speaker 3: loads in the aftermarket, down about nine percent, I'm going
Speaker 3: to remember that.
Speaker 5: Ivan said this is going to be what cell phones
Speaker 5: were in the nineties. And by the way, he's not
Speaker 5: wearing any metaglasses right now.
Speaker 3: Well, and I will say our markerment really really likes
Speaker 3: him as well. Hey, we do have to ask you
Speaker 3: about alphabet because we are seeing this one actually up
Speaker 3: about six percent here in the aftermarket.
Speaker 2: What do you like? What's of note do you think
Speaker 2: in their release.
Speaker 6: Cloud growth, big cloud contract wins that they've had over
Speaker 6: the past few months with with Meta, with Open Ai,
Speaker 6: with other companies this you know that Meta, Amazon and Microsoft.
Speaker 6: I'm sorry, Alphabet, Amazon and Microsoft are building the AI
Speaker 6: and cloud infrastructure that everybody is connecting to and going
Speaker 6: to continue and increasingly coming are going to be connected
Speaker 6: cars as we move through to full autonomy, so we
Speaker 6: are going to need high speed, real time, constant connectivity
Speaker 6: to the cloud, and those are huge opportunities for the
Speaker 6: three major public cloud service providers Alphabet, Google and Microsoft.
Speaker 2: Well, and they're spending big.
Speaker 3: They're now seeing fiscally your capax ninety one and ninety
Speaker 3: three billion. They had seen about eighty five billion dollars.
Speaker 5: So, hey, you got to spend money to make money, Carol,
Speaker 5: You got to spend money to make money.
Speaker 3: They say, it's wild, right, like the number they also
Speaker 3: Gemini their app now has over six hundred and fifty
Speaker 3: monthly active users.
Speaker 5: Siry fifty million, six.
Speaker 2: Hundred and fifty million. Yeah, didn't I say that? It's
Speaker 2: a lot.
Speaker 3: How do we how do we know that this AI thing,
Speaker 3: How do we know that all this spend is going
Speaker 3: to pay off?
Speaker 2: Ivan, are we still a little exuberant?
Speaker 6: Well, because the functionality we see today is going to
Speaker 6: be blown away by the functionality in the future. More
Speaker 6: and more people are going to rely on this technology
Speaker 6: for all different aspects. And I do give credit to
Speaker 6: Tom Siebel, the founder of Seble Systems and C three AI,
Speaker 6: that I believe he said it that every company is
Speaker 6: going to be an AI company. Every company is to
Speaker 6: use AI on all aspects of their business, whether it's
Speaker 6: to manage supply chain, manage pricing, target marketing. That the
Speaker 6: functionality is going to increase and people are going to,
Speaker 6: like you said when Carol, when you wanted to understand
Speaker 6: more about metas a tax charge, you googled it and
Speaker 6: we're going to get more information. I did also, I
Speaker 6: like perplexity. I looked up it, looked it up in
Speaker 6: Perplexity and kind of and I did understand what they said,
Speaker 6: but it gave me a little more detail.
Speaker 2: And uh right, it's right, yeah, is it right?
Speaker 6: Do I know what.
Speaker 8: Is right?
Speaker 6: Yes? Well, because I do understand that the tax that
Speaker 6: it's really the timing and charge, and of managing your
Speaker 6: tax payment and your tax liability that you tend to
Speaker 6: offset through capital investment, through R and D and other
Speaker 6: types of things that happen. So it's really timing issues
Speaker 6: on how you're a crude tax liability or your crude
Speaker 6: tax asset falls versus the taxes you will eventually have
Speaker 6: do or the tax credit you will eventually aren't.
Speaker 2: I just want to know is this soa?
Speaker 3: Is this really Ivan? Finds it, Seth? I just want
Speaker 3: to make sure it is really me Listen, perfect guest
Speaker 3: to talk about all of this so much coming at us, Ivan,
Speaker 3: Thank you so much, really appreciate it.
Speaker 2: I've in fine.
Speaker 3: Seth, Research director, chief investment officer of A Tiger's Financial Partners,
Speaker 3: over five hundred million in assets under management as of
Speaker 3: the middle of this year.
Speaker 2: Joining us right here in New York City.
Speaker 5: Stay with us more from Bloomberg Business Week Daily coming
Speaker 5: up after this.
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Speaker 5: Okay, once again, got to bring in what's going on
Speaker 5: with these companies? Microsoft sliding after reporting that modest EPs beat.
Speaker 5: We're waiting for Microsoft's call to get forward guidance, so
Speaker 5: that's important to keep in mind. A small one point
Speaker 5: two percent beat on adjusted diluted EPs, Alphabet soaring as
Speaker 5: AI cloud demand, supercharges earnings, and then meta platforms. Looking
Speaker 5: at our live blog on meta earnings again, waiting for
Speaker 5: the call to start, sheares a meta platform still down
Speaker 5: about seven and a half percent. We're going to talk
Speaker 5: to Kurt Wagner in just a few minutes and really
Speaker 5: get the details on this one time charge close to
Speaker 5: sixteen billion dollars because still got to get to the bottom.
Speaker 1: Of the well.
Speaker 3: And I can't ignore and you pointed this out this
Speaker 3: you know, expecting total expenses to significant increase in twenty
Speaker 3: twenty six, continuing to invest at historic levels in AI,
Speaker 3: so the spend is on.
Speaker 2: Let's see what Brooke May has to say.
Speaker 3: She's a managing partner at the independent wealth management and
Speaker 3: advisory firm Evans May Wealth. They have one and a
Speaker 3: half billion dollars in assets under manager. She is with
Speaker 3: us from Carmel, Indiana. Brook, nice to have you hear
Speaker 3: a lot of earnings. What jumps out especially among what
Speaker 3: We've got three of the MAGS seven out with.
Speaker 2: With the reports, So let me try that again. What
Speaker 2: jumps out at you?
Speaker 7: Yeah, you know it's mixed you really right now, with
Speaker 7: the street wants to see as that firms are able
Speaker 7: to spend on AI and monetize it, so those who
Speaker 7: can are going to be rewarded. When we look at
Speaker 7: the mag seven earnings expectation, earnings are expected to be
Speaker 7: up about fifteen percent this quarter, and as we saw,
Speaker 7: Tesla had disappointing earnings last week, and so we really
Speaker 7: want to see decent earnings growth from the other six names.
Speaker 7: We've got three reporting today, We've got Apple and Amazon
Speaker 7: reporting tomorrow. And not only is it earnings growth, but
Speaker 7: it's what are they spending to improve the business, how
Speaker 7: are they investing in AI? And then how are they
Speaker 7: going to monetize it?
Speaker 2: So are these decent earnings in your view?
Speaker 3: From Meta, Microsoft and Alphabet because the only one that's
Speaker 3: really moving up in the aftermarket is Alphabet. So, as
Speaker 3: you said, we want to see decent earnings. So we
Speaker 3: got three of the big mag seven that reported, are
Speaker 3: they decent earnings? Because right now got Meta dropping in
Speaker 3: the aftermarket, and you also have Microsoft under pressure here
Speaker 3: in the after market.
Speaker 7: Yeah, Alphabet is the horse that I would put my
Speaker 7: money on right now. You know, they've blown their earnings
Speaker 7: out of the water. You know, not only did they
Speaker 7: have good earnings growth, but you know, the cloud growth
Speaker 7: was very strong. You know, search is strong. You know,
Speaker 7: the street wants to see that Jim and I can
Speaker 7: compete with not just Chat GBT, but other social media
Speaker 7: search engines, and you know we're seeing that. In addition
Speaker 7: to they want to see that AI driven ad performance
Speaker 7: is improving. Plus YouTube you know what does what does
Speaker 7: the ad revenue look like? There? So there's a lot
Speaker 7: going on with each of these companies, but right now
Speaker 7: Alphabet is the one who's really knocked the ball, or
Speaker 7: knock the cover off the ball.
Speaker 5: But is that just is that? Is that just quarterly
Speaker 5: or you know we we just spoke to Ivan Findeseth
Speaker 5: and on rog Rana and I think it was on
Speaker 5: a rog who made the comment about these companies are
Speaker 5: planning for the next three to five years and Wall
Speaker 5: Street is looking looking at the next one to two
Speaker 5: quarters exactly.
Speaker 3: I think Angelo Zeno Angela He said it's not really
Speaker 3: so important this quarter, he said, you know, expect to
Speaker 3: double their revenue, like you know over I forget the timeframe,
Speaker 3: but that's the longer term for Microsoft in particular.
Speaker 5: So Brook is your is your comment just about this quarter?
Speaker 5: Is it about the long run? With Alphabet being the
Speaker 5: horse to pick?
Speaker 2: I think it.
Speaker 7: Varies quarter by quarter. You know, when we look last
Speaker 7: quarter the Max seven, they were expected to grow their
Speaker 7: earning similar to this quarter around fourteen percent, and artist
Speaker 7: growth is actually over twenty six percent. So it's going
Speaker 7: to be very quarter by quarter. These companies, you know,
Speaker 7: are evolving and the platform, the AI space is evolving
Speaker 7: very quickly, and some are figuring out. Some have been
Speaker 7: late to invest in AI and now we're playing catchup. Alphabet, though,
Speaker 7: is one that we feel like really is a front
Speaker 7: runner in addition to Nvidia right now. If I had
Speaker 7: to pick two of the seven, that's where I would
Speaker 7: put my money.
Speaker 3: Let's talk Meta just real quickly, and we want to
Speaker 3: bring in Kurt Wagner Bloomberg News Senior Technology Reports.
Speaker 5: You're working I see in these working right now.
Speaker 2: We are too.
Speaker 8: We're trying to have a head z up Yer coming
Speaker 8: to me I'm over here sending emails.
Speaker 2: What's going on?
Speaker 3: Hey, making the sausage in front of everybody, because this
Speaker 3: is what it is. Long get we get a big
Speaker 3: drop of earnings. You can do it no matter what
Speaker 3: MENA do. You can you explain this Meta, MENA.
Speaker 4: I'll do.
Speaker 2: I'll do my best.
Speaker 8: I mean, the numbers weren't bad from a revenue standpoint.
Speaker 8: They beat Q three revenue. The guidance for Q four
Speaker 8: was right in line with what they've all, you know,
Speaker 8: what people were expecting for the holiday quarter, which is
Speaker 8: always the most important. I think the key here is
Speaker 8: that they said that they're spending in twenty twenty six
Speaker 8: is going to be way more. They were already spending,
Speaker 8: you know, between seventy and seventy two billion this year
Speaker 8: in capital expenditures. The spending I think was up, you know,
Speaker 8: more than thirty percent. Now next year they said it's
Speaker 8: going to be meaningfully larger. So if you were sitting here,
Speaker 8: you know, trying to get comfortable with this idea that
Speaker 8: Meta is throwing tens of billions per year, hundreds of
Speaker 8: billions over the next decade on AI, you probably were
Speaker 8: hoping that the Q four numbers were going to be
Speaker 8: a home run, right, not just an inline sort of well,
Speaker 8: we'll do what we said we were going to do.
Speaker 8: You want that to be a lot larger if you're
Speaker 8: going to hear that the spending is going to ramp
Speaker 8: up as dramatically as it will in twenty twenty six.
Speaker 5: So, Kurt, you think the increased projection for expenses or
Speaker 5: the is what's moving the stock lower rather than this
Speaker 5: one time tax charge, which yes, we're going to ask
Speaker 5: you about.
Speaker 8: That'd be that'd be my take because the one time
Speaker 8: tax charge is one time, one time, one time, and
Speaker 8: it's for a quarter that's now over and done with.
Speaker 8: And meta if you, you know, take them at their words,
Speaker 8: says that this big beautiful bill, which is what they
Speaker 8: attributed this one time tax charge too, is actually going
Speaker 8: to be the bill is going to help them tax
Speaker 8: wise long term. So I think if you believe that
Speaker 8: to be the case, there was a one time accounting
Speaker 8: thing in Q three, And to me, the bigger flag
Speaker 8: is that they are, you know, again going to meaningfully
Speaker 8: increase spend here.
Speaker 5: That's really helpful. Look, you wrote the book on Twitter
Speaker 5: before it was called X. You cover social media platforms.
Speaker 5: You are not a tax attorney, but I'm still going
Speaker 5: to ask you this question. Sure, Why why is Meta
Speaker 5: Platforms the only one that's reporting this one time expense
Speaker 5: at least thus far?
Speaker 8: Should I go back to my phone pretend to be
Speaker 8: emailing so I don't know. I don't know. I'm told
Speaker 8: that this is something that actually the other companies are
Speaker 8: dealing with. I was told IBM and Broadcom similarly, who
Speaker 8: have already reported had similar tax things. I presume maybe
Speaker 8: at other companies will as well, so I don't think
Speaker 8: they're the only one. Perhaps it's sort of getting a
Speaker 8: little bit more of a tension than others. It's also
Speaker 8: possible that Meta is choosing. I believe they chose to
Speaker 8: do this giant one time tax thing. It's possible others, maybe,
Speaker 8: the implication being that maybe they could spread this out.
Speaker 8: You're right, I'm not a tax expert, so I'm sort
Speaker 8: of offering a little bit of you know, guesswork.
Speaker 5: It's helpful, though, but.
Speaker 8: I do I don't think they're the only ones number
Speaker 8: one and number two. It's possible other companies are handling
Speaker 8: it in a slightly different way that That's what I
Speaker 8: will leave you with. I can't say for certain you
Speaker 8: know that, don't ask any follow ups.
Speaker 2: That's why IM going to say, right, maybe they thought.
Speaker 3: It was going to be a distraction from that they're
Speaker 3: spending more money. I don't know, but it's like really
Speaker 3: got me scratching my head, Kurt, do not go anywhere.
Speaker 2: We're going to come back to you.
Speaker 5: In just emails. We're coming back to you.
Speaker 3: Can okay, you come back in just a second. Hey,
Speaker 3: we want to go back to Brook May, managing partner
Speaker 3: at the Independent Wealth Management Advisory from Evans Maywealth. So, Brooke,
Speaker 3: is there an investment play off of what we got
Speaker 3: from Meta, Microsoft and Alphabet today?
Speaker 7: For you?
Speaker 3: You mentioned I think that Alphabet was the name you like,
Speaker 3: are you selling Meta? Are you selling Microsoft?
Speaker 2: On this?
Speaker 7: Microsoft is one I think we're going to have to reassess.
Speaker 7: When we look at Microsoft. You know, they're not cheap.
Speaker 7: They're trading it thirty four times forward earnings and when
Speaker 7: you compare that to their growth right, it's almost a
Speaker 7: three where you know there their pe is about three
Speaker 7: times their growth rate and to us, that's expensive. You know,
Speaker 7: we do want to continue to see momentum in their
Speaker 7: cloud business and we expect that revenue to continue to
Speaker 7: be double digits. But you know, Azure, for example, is
Speaker 7: having a hard time keeping up with demand. The stock
Speaker 7: was only at four percent since the last earnings announcement,
Speaker 7: and it sounds like, you know, they might have wiped
Speaker 7: all of that out today. And so you know, we
Speaker 7: need a catalyst, and I don't necessarily see the catalyst
Speaker 7: in the near term for Microsoft to move meaningfully higher.
Speaker 3: And I should point out that shares and Microsoft have
Speaker 3: come off their lows in the aftermarket, still down, but
Speaker 3: just down about one point three percent, so not as
Speaker 3: negative as we saw earlier. Heybrook, thanks so much for
Speaker 3: breaking all this down with s Brook May, managing partner
Speaker 3: at Devans Maywelth joining us from Indiana.
Speaker 5: I want to bring back in Kurt Wagner. He's Bloomberg
Speaker 5: News senior technology reporter. He joins us from Denver, and Kirk,
Speaker 5: I want to talk about the smart glasses, the ray Ban,
Speaker 5: Metas or whatever super Intelligent is working on. This is
Speaker 5: what Mark Zuckerberg called out in the press release before
Speaker 5: this one time charge. He said, if we deliver even
Speaker 5: a fraction of the opportunity ahead, the next few years
Speaker 5: will be the most exciting period in our history. The
Speaker 5: preceding sentence was Meta Superintelligence Labs is off to a
Speaker 5: great start, and we continue to lead the industry in
Speaker 5: AI glasses. Is this the next computing platform?
Speaker 8: I'm going to go ahead and say yes, because it's
Speaker 8: the only one that I think seems to be being
Speaker 8: built at the moment that I can think of. Like
Speaker 8: that is in the way that you know, you think
Speaker 8: of a phone, right or a tablet or a personal device,
Speaker 8: and so it makes sense to me that the phone
Speaker 8: would evolve into something else at some point. I do
Speaker 8: understand why they think glasses could be that thing. It's
Speaker 8: something people already wear its hands free, which I think
Speaker 8: is a huge perk. I think the challenge is going
Speaker 8: to be, as with everything one, can you make the
Speaker 8: technology so small and subtle that wearing these glasses on
Speaker 8: your face doesn't feel weird or look weird because people
Speaker 8: aren't going to want to do it if they don't
Speaker 8: feel natural wearing the technology out in public. And then,
Speaker 8: you know, I think too, Meta's gonna have a lot
Speaker 8: of competition. We've already seen Apple, you know, coming up
Speaker 8: with their own device, Google coming up with their own device.
Speaker 8: I'm sure there will be others. So you know, on
Speaker 8: the one hand, if everyone is building towards this, it
Speaker 8: makes me think that it's even more likely that this
Speaker 8: becomes the thing after the phone. On the other hand,
Speaker 8: it's going to be harder and harder for Meta to
Speaker 8: maintain that lead that I do think they have right now.
Speaker 8: They're kind of the first one. You know, they're the
Speaker 8: first ones with like a mainstream kind of hit in
Speaker 8: terms of the Meta ray bands, but you know that
Speaker 8: has a lot of technological sort of steps still to
Speaker 8: go before it I think reaches that level that we
Speaker 8: were just talking about.
Speaker 3: So what's your number one question that you would ask
Speaker 3: Mark Zuckerberg today or he and his team.
Speaker 8: Well, I would want to know if he's got more
Speaker 8: investments coming in the AI space. And I don't mean
Speaker 8: just like investing in chips or invest in data centers,
Speaker 8: but like we've seen some of these other tech companies
Speaker 8: make become equity shareholders or equity stakeholders and other AI startups.
Speaker 8: And because Meta can't necessarily acquire a lot right now,
Speaker 8: you may recall they're dealing with a lot of anti
Speaker 8: trust stuff in DC. We spent several weeks at their
Speaker 8: trial earlier this year. It feels like acquiring AI for
Speaker 8: them is going to be hard, but the idea of
Speaker 8: a mega investment seems more reasonable. So, you know, as
Speaker 8: we're talking about AI and spending, and I'd be curious
Speaker 8: to know, is all this going towards infrastructure or you,
Speaker 8: you know, you being Meta going to become a major
Speaker 8: shareholder in one of these other promising AI platforms.
Speaker 3: You know, it's interesting they do talk about continuing to
Speaker 3: build their own infrastructure and contracting with third party cloud providers.
Speaker 2: So yeah, I mean, this is how it's going to be, right, We're.
Speaker 3: Going to well, we'll look for some more news certainly
Speaker 3: on this when it comes to Meta and all of them.
Speaker 2: Kurt, thank you, Thank you.
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