1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: easterne on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:23,960 --> 00:00:26,160 Speaker 2: Walmart coming out with its latest earnings report. 7 00:00:26,239 --> 00:00:29,280 Speaker 3: Jen bartashis it's our senior analyst who covers retail staples 8 00:00:29,320 --> 00:00:32,239 Speaker 3: and packaged food, and Jen, I'm really interested in the 9 00:00:32,240 --> 00:00:37,239 Speaker 3: interplay between oil prices and Walmart's sales. In particular, we 10 00:00:37,320 --> 00:00:42,080 Speaker 3: know that fuel costs are definitely squeezing Walmart's consumers, yet 11 00:00:42,120 --> 00:00:44,800 Speaker 3: Walmart says that it has managed to absorb almost all 12 00:00:44,840 --> 00:00:45,760 Speaker 3: of the fuel increase. 13 00:00:47,040 --> 00:00:50,120 Speaker 4: Yeah, it's an interesting dynamic when you look at it. 14 00:00:50,600 --> 00:00:52,680 Speaker 4: You know, Walmart has really done a good job of 15 00:00:52,720 --> 00:00:55,920 Speaker 4: shifting their business mix, which really gives them a little 16 00:00:55,920 --> 00:00:59,200 Speaker 4: bit more flexibility and how they can offset unexpected high 17 00:00:59,200 --> 00:01:02,600 Speaker 4: costs like we're seeing right now with fuel. The consumer 18 00:01:02,640 --> 00:01:05,000 Speaker 4: for Walmart is certainly anybody in the lower end of 19 00:01:05,000 --> 00:01:08,720 Speaker 4: the consumer spectrum is under some pressure that does get 20 00:01:08,760 --> 00:01:12,600 Speaker 4: amplified when gas prices are higher, and so we see that, 21 00:01:12,720 --> 00:01:14,600 Speaker 4: but at the same time, what it does is it 22 00:01:14,640 --> 00:01:20,160 Speaker 4: does reinforce value focused shopping, which is really Walmart's wheelhouse. 23 00:01:20,920 --> 00:01:25,040 Speaker 4: And so the almost it's almost an odd situation where 24 00:01:25,080 --> 00:01:29,600 Speaker 4: the more stress the consumer is, the more likely Walmart 25 00:01:29,640 --> 00:01:32,280 Speaker 4: is to be able to serve those customers. Not that 26 00:01:32,360 --> 00:01:34,720 Speaker 4: you want that to be a never ending cycle, but 27 00:01:35,080 --> 00:01:37,920 Speaker 4: it is something that is that is out there. You know, 28 00:01:37,959 --> 00:01:41,560 Speaker 4: Walmart is actually they do sell fuel as well, and 29 00:01:41,600 --> 00:01:44,480 Speaker 4: so you know, obviously higher fuel prices does feed their 30 00:01:44,520 --> 00:01:48,240 Speaker 4: top line to a degree, especially for Sam's Club. But 31 00:01:48,560 --> 00:01:50,760 Speaker 4: it is a dynamic that we're going to have to 32 00:01:50,760 --> 00:01:52,520 Speaker 4: watch closely over the next couple months. 33 00:01:53,560 --> 00:01:56,560 Speaker 5: Talk to us about their e commerce business. Every quarter, 34 00:01:56,680 --> 00:01:58,680 Speaker 5: I see this revenue growth from digital and I guess 35 00:01:58,720 --> 00:02:00,559 Speaker 5: this core is a twenty one percent. 36 00:02:00,960 --> 00:02:04,440 Speaker 6: It is extraordinary. How how are they doing that? 37 00:02:05,600 --> 00:02:09,520 Speaker 4: Yeah, their e commerce business is really flourishing. And to 38 00:02:09,560 --> 00:02:12,800 Speaker 4: your point, Paul, it's been multiple I mean, it's just 39 00:02:12,919 --> 00:02:16,280 Speaker 4: on a string of double digit, high twenty percent, mid 40 00:02:16,320 --> 00:02:19,440 Speaker 4: twenty percent growth every quarter. And really what's happening is 41 00:02:19,480 --> 00:02:23,639 Speaker 4: you're seeing a big expansion of their marketplace. So you've 42 00:02:23,680 --> 00:02:27,400 Speaker 4: got more sellers coming into the marketplace, more shoppers buying 43 00:02:27,400 --> 00:02:29,760 Speaker 4: on the wall on the on the marketplace, and that's 44 00:02:29,800 --> 00:02:33,600 Speaker 4: then feeding you know, ad revenue, it's feeding other types 45 00:02:33,639 --> 00:02:37,080 Speaker 4: of revenue for the company, and so it's become this 46 00:02:37,240 --> 00:02:40,639 Speaker 4: virtuous cycle where the more they're putting into it, the 47 00:02:40,639 --> 00:02:44,119 Speaker 4: more people are responding, and the healthier that business becomes. 48 00:02:44,480 --> 00:02:44,600 Speaker 7: You know. 49 00:02:44,639 --> 00:02:47,680 Speaker 4: Walmart has has already said that their e commerce business 50 00:02:47,760 --> 00:02:51,679 Speaker 4: is now profitable, which is really you know great, and 51 00:02:51,760 --> 00:02:55,200 Speaker 4: it's also fuel to that to that growth where they 52 00:02:55,200 --> 00:02:59,400 Speaker 4: can reinvest more easily because they are you know, finding 53 00:02:59,440 --> 00:03:01,919 Speaker 4: it to be a profitable business now. And you can't 54 00:03:01,960 --> 00:03:05,239 Speaker 4: discount things like Walmart Plus, which is their membership program. 55 00:03:05,520 --> 00:03:09,440 Speaker 4: Their membership for income growth was astounding this quarter. They 56 00:03:09,440 --> 00:03:12,360 Speaker 4: said they had a record number of new net ads 57 00:03:12,360 --> 00:03:15,320 Speaker 4: for Walmart Plus this quarter, you know, and a lot 58 00:03:15,360 --> 00:03:18,800 Speaker 4: of Walmart Plus benefits are centered around e commerce and 59 00:03:18,840 --> 00:03:21,520 Speaker 4: so whether you're placing orders for delivery to your house, 60 00:03:21,560 --> 00:03:24,360 Speaker 4: whether it's for ship to your home, all of that 61 00:03:24,440 --> 00:03:26,440 Speaker 4: is contributing to that e commerce success. 62 00:03:26,760 --> 00:03:31,600 Speaker 3: Yeah, their Walmart Plus has a partnership with American Express Platinum, 63 00:03:31,760 --> 00:03:34,600 Speaker 3: and I think that has well. I signed up for 64 00:03:34,600 --> 00:03:38,400 Speaker 3: the AMX Platinum card and I'm very well versed on 65 00:03:38,520 --> 00:03:40,680 Speaker 3: all the different benefits, and this is one of the 66 00:03:40,680 --> 00:03:44,640 Speaker 3: benefits to you know, steal market share away from Amazon. 67 00:03:44,920 --> 00:03:47,520 Speaker 3: Do we have any sense of how well that effort 68 00:03:47,560 --> 00:03:50,240 Speaker 3: is going Walmart Plus versus Amazon. 69 00:03:52,160 --> 00:03:55,200 Speaker 4: We we you know, obviously Walmart does not disclose anything 70 00:03:55,200 --> 00:03:57,400 Speaker 4: about Walmart Plus, but when we look at our when 71 00:03:57,400 --> 00:03:59,640 Speaker 4: we do our analysis, you know, we see, you know, 72 00:04:00,040 --> 00:04:02,720 Speaker 4: millions and millions of households have now joined Walmart Plus 73 00:04:03,000 --> 00:04:06,640 Speaker 4: and the frequency of shop is really increasing. You know. 74 00:04:06,680 --> 00:04:09,040 Speaker 4: For a long time, you know, Walmart had a hard 75 00:04:09,040 --> 00:04:13,000 Speaker 4: time displacing Amazon because people's first inclination when they wanted 76 00:04:13,000 --> 00:04:15,120 Speaker 4: to look for something was to go to Amazon dot Com. 77 00:04:15,800 --> 00:04:18,760 Speaker 4: And that mentality is slowly shifting, and in part it's 78 00:04:18,839 --> 00:04:21,760 Speaker 4: due to these these types of memberships like Walmart Plus. 79 00:04:22,240 --> 00:04:25,560 Speaker 4: So you know, when we estimate the number of households, 80 00:04:25,560 --> 00:04:29,039 Speaker 4: you know, it's continuing to grow. The revenue generated from 81 00:04:29,080 --> 00:04:32,040 Speaker 4: that is just changing the entire profit mix for Walmart. 82 00:04:32,400 --> 00:04:36,120 Speaker 4: And most importantly, this is what helps keep higher income 83 00:04:36,520 --> 00:04:40,719 Speaker 4: households in particular sticky with Walmart as the economy starts 84 00:04:40,760 --> 00:04:43,599 Speaker 4: to improve, because once you're in that ecosystem and you 85 00:04:43,640 --> 00:04:46,200 Speaker 4: get used to the quick delivery and the ease of 86 00:04:46,320 --> 00:04:50,080 Speaker 4: ordering online, you know, especially for things that you order 87 00:04:50,200 --> 00:04:54,200 Speaker 4: with frequency, that makes you very sticky within Walmart, and 88 00:04:54,240 --> 00:04:57,200 Speaker 4: that really bodes well for just their ability to keep 89 00:04:57,240 --> 00:04:58,760 Speaker 4: those customers long term. 90 00:04:59,279 --> 00:05:02,160 Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this. 91 00:05:05,839 --> 00:05:09,520 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 92 00:05:09,600 --> 00:05:12,320 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and 93 00:05:12,320 --> 00:05:15,600 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 94 00:05:15,640 --> 00:05:19,200 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 95 00:05:20,160 --> 00:05:22,200 Speaker 3: You mentioned in Nvidia down and Video was the big 96 00:05:22,240 --> 00:05:25,640 Speaker 3: earnings report that we were waiting for, Ye, Paul, And 97 00:05:26,040 --> 00:05:28,320 Speaker 3: I think everyone's just gotten so used to this chip 98 00:05:28,360 --> 00:05:33,359 Speaker 3: maker blowing out expectations and coming in with these great 99 00:05:33,760 --> 00:05:38,120 Speaker 3: statements of demand, limitless demand, seemingly, and the market's reaction 100 00:05:38,240 --> 00:05:39,520 Speaker 3: is like, Eh, whatever. 101 00:05:39,320 --> 00:05:42,000 Speaker 5: Yeah, they've beaten rays and they've been so good for 102 00:05:42,040 --> 00:05:45,440 Speaker 5: so long, surpassing expectations of the street. But it's if 103 00:05:45,480 --> 00:05:47,240 Speaker 5: nothing else, that's a law of large numbers. 104 00:05:47,279 --> 00:05:48,719 Speaker 6: Maybe a little bit of competition as well. 105 00:05:48,839 --> 00:05:49,120 Speaker 4: All right. 106 00:05:49,160 --> 00:05:51,919 Speaker 3: Angelo Zeno is our senior vice president and equity analysts 107 00:05:51,920 --> 00:05:55,359 Speaker 3: at cfr A Research. He joins us now through zoom 108 00:05:55,720 --> 00:05:58,680 Speaker 3: Angelo we're looking at in Vidia shares now lower by 109 00:05:58,680 --> 00:05:59,640 Speaker 3: almost two percent. 110 00:06:01,000 --> 00:06:03,000 Speaker 2: Is there anything objectionable in the set of results. 111 00:06:05,160 --> 00:06:07,880 Speaker 7: No, I mean, you know, I thought it was overall 112 00:06:07,920 --> 00:06:09,839 Speaker 7: fairly clean type of number. 113 00:06:09,920 --> 00:06:10,080 Speaker 3: You know. 114 00:06:10,120 --> 00:06:12,360 Speaker 7: Maybe the only thing that you know, maybe wasn't as 115 00:06:12,400 --> 00:06:14,520 Speaker 7: clean was the fact that they did, you know, shift 116 00:06:14,520 --> 00:06:16,720 Speaker 7: their business segments around a little bit. But I think 117 00:06:16,720 --> 00:06:19,479 Speaker 7: that would was to be to expected. I mean, it 118 00:06:19,560 --> 00:06:21,560 Speaker 7: was one of those situations where when you kind of 119 00:06:21,560 --> 00:06:23,919 Speaker 7: looked at everything outside of data centers, it was just 120 00:06:23,960 --> 00:06:26,560 Speaker 7: such a small part of their revenue. Whether we talk 121 00:06:26,600 --> 00:06:28,680 Speaker 7: about you know, autos that are about one percent of sales 122 00:06:28,680 --> 00:06:31,719 Speaker 7: that are kind of you know, whatever. Else, even gaming, 123 00:06:31,760 --> 00:06:33,960 Speaker 7: which was once their largest business, was only you know, 124 00:06:34,080 --> 00:06:36,719 Speaker 7: mid single digit percentage of their sales. So kind of 125 00:06:36,760 --> 00:06:39,800 Speaker 7: changing the way they kind of segmented and broke their 126 00:06:39,800 --> 00:06:42,520 Speaker 7: revenue down I think makes a lot of sense. But 127 00:06:42,560 --> 00:06:44,640 Speaker 7: when you kind of look up overall from the results here, 128 00:06:44,680 --> 00:06:46,560 Speaker 7: I mean, it was it was a solid beat and 129 00:06:46,640 --> 00:06:49,280 Speaker 7: raised quarter, as Nvidia has done here over the last 130 00:06:49,320 --> 00:06:51,720 Speaker 7: couple of quarters. You're getting a little bit of a 131 00:06:51,800 --> 00:06:54,160 Speaker 7: selling news, which is, you know, typically what you've seen 132 00:06:54,200 --> 00:06:56,240 Speaker 7: here from in Vidio stock, which is now a stock 133 00:06:56,240 --> 00:06:59,839 Speaker 7: trating about eighteen times our expectations for twenty twenty seven. 134 00:07:00,080 --> 00:07:03,280 Speaker 7: And when investors really want to hear and see long term, 135 00:07:03,400 --> 00:07:05,680 Speaker 7: I mean, what the answer to is the sustainability of 136 00:07:05,720 --> 00:07:09,240 Speaker 7: this stuff, right, And Nvidia can be as optimistic as 137 00:07:09,279 --> 00:07:11,080 Speaker 7: they want looking out through the end of the decade, 138 00:07:11,120 --> 00:07:14,080 Speaker 7: but investors are going to continue to be somewhat cautious 139 00:07:14,560 --> 00:07:15,280 Speaker 7: in that outlook. 140 00:07:15,840 --> 00:07:21,080 Speaker 5: Talk to us about customers, Angelo, you know, they talked 141 00:07:21,120 --> 00:07:25,640 Speaker 5: about maybe governments and other entities becoming big big customers. 142 00:07:26,040 --> 00:07:27,680 Speaker 5: Talked to us about that in the development of that 143 00:07:27,680 --> 00:07:28,720 Speaker 5: part of the business. 144 00:07:29,200 --> 00:07:32,280 Speaker 7: Yeah, I mean so in kind of breaking down this revenue, 145 00:07:32,600 --> 00:07:35,880 Speaker 7: essentially they within data centers, which is what ninety two 146 00:07:35,880 --> 00:07:37,680 Speaker 7: percent of their revenue at this point in time, you're 147 00:07:37,720 --> 00:07:40,320 Speaker 7: looking at about half of that or essentially exactly half 148 00:07:40,360 --> 00:07:42,280 Speaker 7: of it coming from the hyper scalers. And we know 149 00:07:42,320 --> 00:07:45,120 Speaker 7: what the hyperscalers are all doing. We're looking at near 150 00:07:45,160 --> 00:07:49,000 Speaker 7: doubling in terms of hyperscaler CAPEC spend here this year. 151 00:07:49,320 --> 00:07:51,960 Speaker 7: And it's one of those situations where you know, of 152 00:07:52,000 --> 00:07:54,680 Speaker 7: course those growth rates are going to decelerate over time. 153 00:07:54,720 --> 00:07:57,040 Speaker 7: So I think it was smart for Nvidia at this 154 00:07:57,080 --> 00:07:59,600 Speaker 7: point in time to show now that breakdown in terms 155 00:07:59,640 --> 00:08:02,640 Speaker 7: of what else is out there in terms of to 156 00:08:02,680 --> 00:08:06,720 Speaker 7: your point, the sovereign AI opportunities, potentially what the neo 157 00:08:06,800 --> 00:08:09,640 Speaker 7: clouds have to offer, which is also in that other 158 00:08:09,720 --> 00:08:13,400 Speaker 7: half of the bucket there where you could potentially see 159 00:08:13,480 --> 00:08:16,680 Speaker 7: let's call it stronger capex spend at least on a 160 00:08:16,720 --> 00:08:20,680 Speaker 7: relative basis here longer term, because there's a bigger or 161 00:08:20,680 --> 00:08:24,560 Speaker 7: a larger number of participants in that basket, right, So 162 00:08:25,040 --> 00:08:27,160 Speaker 7: you've got the potential for that to be a bigger 163 00:08:27,200 --> 00:08:30,800 Speaker 7: percentage of their total revenue here as we kind of 164 00:08:30,800 --> 00:08:32,719 Speaker 7: look out two to three years from now. I think 165 00:08:32,720 --> 00:08:35,200 Speaker 7: that's at least their expectation, and I think if you 166 00:08:35,280 --> 00:08:39,440 Speaker 7: start seeing that, I think investors will reward that. So again, 167 00:08:39,520 --> 00:08:41,800 Speaker 7: it's one of those situations stop creating about eighteen times 168 00:08:41,800 --> 00:08:43,760 Speaker 7: in night Peer's earnings. But if we see kind of 169 00:08:43,800 --> 00:08:46,520 Speaker 7: maybe a more favorable mix outside of Hyperscalerton, I think 170 00:08:46,559 --> 00:08:48,800 Speaker 7: that could be a good thing, especially since when you 171 00:08:48,800 --> 00:08:52,720 Speaker 7: think about who really plays and sells these AI based 172 00:08:52,760 --> 00:08:56,160 Speaker 7: servers outside of the hyperscalers, it really is largely Intel. 173 00:08:56,800 --> 00:09:00,480 Speaker 2: I'm sorry, Nvidia, gotcha Angela b be where we let 174 00:09:00,480 --> 00:09:00,680 Speaker 2: you go. 175 00:09:00,720 --> 00:09:02,760 Speaker 3: I got to ask about the return of cash, because 176 00:09:03,040 --> 00:09:05,640 Speaker 3: the CFO says they plan to return fifty percent of 177 00:09:05,640 --> 00:09:08,520 Speaker 3: their free cash fload. This year, they announced an eighty 178 00:09:08,520 --> 00:09:11,520 Speaker 3: billion dollar stock buyback plan, boosted their quarterly dividend to 179 00:09:11,600 --> 00:09:14,680 Speaker 3: twenty five cents a share. Does this attract a new 180 00:09:14,840 --> 00:09:17,319 Speaker 3: crowd of investors, a new group of investors or is 181 00:09:17,360 --> 00:09:19,840 Speaker 3: this largely built into expectations? 182 00:09:20,840 --> 00:09:22,560 Speaker 7: I think it's a little bit built in, but I 183 00:09:22,559 --> 00:09:24,360 Speaker 7: think it's a good thing to say. I mean, we're 184 00:09:24,400 --> 00:09:26,800 Speaker 7: looking at them, probably they're probably going to return at 185 00:09:26,880 --> 00:09:30,720 Speaker 7: least one hundred billion, we think in back to shareholders 186 00:09:30,720 --> 00:09:32,640 Speaker 7: here over the next twelve months. And the only other 187 00:09:32,679 --> 00:09:35,120 Speaker 7: company that is anywhere near that is Apple at this 188 00:09:35,160 --> 00:09:36,960 Speaker 7: point in time, especially when you start looking at all 189 00:09:37,000 --> 00:09:40,360 Speaker 7: the hyperscalers out there, Essentially all of them have kind 190 00:09:40,360 --> 00:09:44,440 Speaker 7: of refrained at this point from buying back shares right 191 00:09:44,480 --> 00:09:48,800 Speaker 7: and increasing dividends significantly because of what they're devoting towards 192 00:09:48,880 --> 00:09:51,079 Speaker 7: the capex spent. So that's all that money now is 193 00:09:51,120 --> 00:09:54,320 Speaker 7: going into Nvidia. They can return that cash to shareholders, 194 00:09:54,360 --> 00:09:57,840 Speaker 7: and I think that is somewhat enticing to investors at 195 00:09:57,840 --> 00:09:59,560 Speaker 7: this point in time. So we like the move, and 196 00:09:59,600 --> 00:10:01,840 Speaker 7: we think, especially as growth rates start to disell right 197 00:10:01,880 --> 00:10:03,880 Speaker 7: here over the next two to three years, I think 198 00:10:03,920 --> 00:10:05,840 Speaker 7: that's going to probably become a bigger part of the 199 00:10:05,840 --> 00:10:07,440 Speaker 7: conversation for investors. 200 00:10:08,120 --> 00:10:11,240 Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this. 201 00:10:15,120 --> 00:10:18,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 202 00:10:18,880 --> 00:10:21,959 Speaker 1: weekdays at ten am easterne on Apple Cocklay and Android 203 00:10:22,000 --> 00:10:25,280 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 204 00:10:25,360 --> 00:10:28,480 Speaker 1: you get your podcasts, or watch us live on YouTube. 205 00:10:29,280 --> 00:10:31,880 Speaker 3: All right, Deer reported earnings as well. It's a real 206 00:10:31,920 --> 00:10:34,479 Speaker 3: grab bag towards the end of earning season. You've got retailers, 207 00:10:34,920 --> 00:10:38,400 Speaker 3: You've got farm machinery makers, and video. Yeah, I know, 208 00:10:38,440 --> 00:10:40,360 Speaker 3: and video is just kind of out of sync with 209 00:10:40,400 --> 00:10:42,880 Speaker 3: the rest of the mag seven names. But Deer shares 210 00:10:42,920 --> 00:10:45,680 Speaker 3: are slumping down about eight percent right now. Let's bring 211 00:10:45,679 --> 00:10:48,760 Speaker 3: in christ Ciolino. He is our senior US machinery analyst 212 00:10:48,840 --> 00:10:51,920 Speaker 3: to recap what we learned here from the tractor maker 213 00:10:52,360 --> 00:10:54,720 Speaker 3: and I guess it comes down to the farm economy 214 00:10:54,760 --> 00:10:57,480 Speaker 3: is struggling, and so therefore we're seeing that reflected in 215 00:10:57,600 --> 00:10:58,440 Speaker 3: Deer's results. 216 00:11:00,120 --> 00:11:01,040 Speaker 6: I mean, that's part of it. 217 00:11:01,800 --> 00:11:03,840 Speaker 8: The headline coming out of the quarter was that they 218 00:11:03,840 --> 00:11:05,920 Speaker 8: had a big beat, but really, if you unpack that, 219 00:11:06,120 --> 00:11:09,480 Speaker 8: a lot of that was driven by this AIPA tariff 220 00:11:09,520 --> 00:11:12,240 Speaker 8: refund that they got. If you kind of peel back 221 00:11:12,280 --> 00:11:16,240 Speaker 8: the onion here, their construction business actually continues to perform 222 00:11:16,320 --> 00:11:20,080 Speaker 8: quite well, really good top line and margin performance there, 223 00:11:20,360 --> 00:11:25,360 Speaker 8: and the orders continue to progress nicely and small agen 224 00:11:25,440 --> 00:11:27,880 Speaker 8: turf was good as well. But the weakness on the 225 00:11:27,960 --> 00:11:31,400 Speaker 8: largeag side continues to be a problem for them, and 226 00:11:31,480 --> 00:11:33,480 Speaker 8: really it doesn't really kind of show any signs of 227 00:11:33,520 --> 00:11:36,680 Speaker 8: abating as we look through the balance of this year. 228 00:11:36,840 --> 00:11:40,080 Speaker 8: You have the higher input costs, weak farm fundamentals, so 229 00:11:40,160 --> 00:11:43,040 Speaker 8: still a very challenging setup as we look here in 230 00:11:43,080 --> 00:11:43,680 Speaker 8: the near term. 231 00:11:44,520 --> 00:11:47,880 Speaker 5: Chris, just by my recognition, dere's the first company that 232 00:11:47,920 --> 00:11:51,160 Speaker 5: I can think of that calls out this tariff rebate. 233 00:11:51,160 --> 00:11:54,640 Speaker 5: Can you explain, So what's the company disclosing about this? 234 00:11:54,880 --> 00:11:57,080 Speaker 5: How long did it take to get this rebate? Was 235 00:11:57,080 --> 00:11:59,320 Speaker 5: it everything they were looking for? What are they doing 236 00:11:59,360 --> 00:12:01,360 Speaker 5: with this rebate? Yeah? 237 00:12:01,440 --> 00:12:04,560 Speaker 8: So, interestingly enough, I think they're the second or third 238 00:12:04,679 --> 00:12:07,439 Speaker 8: company at least in my universe that has actually called 239 00:12:07,480 --> 00:12:11,880 Speaker 8: out this this refund claim. It was roughly two hundred 240 00:12:12,040 --> 00:12:15,200 Speaker 8: seventy two million dollars here in the quarter, so we 241 00:12:15,200 --> 00:12:19,760 Speaker 8: think it contributed you know, roughly seventy five cents in 242 00:12:19,800 --> 00:12:23,000 Speaker 8: the quarter. If you look at their gross tariff impact 243 00:12:23,080 --> 00:12:25,600 Speaker 8: for the year, so they were anticipating about one point 244 00:12:25,640 --> 00:12:29,960 Speaker 8: two billion dollar impact for fiscal twenty twenty six. That 245 00:12:30,000 --> 00:12:33,000 Speaker 8: gross number really hasn't changed once you take away some 246 00:12:33,080 --> 00:12:35,160 Speaker 8: of the AIPA and you add back some of the 247 00:12:35,200 --> 00:12:38,520 Speaker 8: Section one twenty two's and some of the other incremental 248 00:12:38,679 --> 00:12:43,079 Speaker 8: tariff costs. Net that hasn't changed. Now you have this refund, 249 00:12:43,120 --> 00:12:46,319 Speaker 8: So when you look on a net basis, it's somewhere 250 00:12:46,400 --> 00:12:49,920 Speaker 8: going to shake out in the nine hundred million dollar range. 251 00:12:50,200 --> 00:12:54,319 Speaker 8: This is relatively new for the machinery guys. I would 252 00:12:54,360 --> 00:12:58,480 Speaker 8: anticipate we may hear similar from other companies next quarter, 253 00:12:59,080 --> 00:13:00,679 Speaker 8: but deer being you know, a little bit of off 254 00:13:00,720 --> 00:13:04,880 Speaker 8: cycle of their fiscal quarter, I would anticipate we'll begin 255 00:13:04,920 --> 00:13:06,360 Speaker 8: to hear more of these moving forward. 256 00:13:06,840 --> 00:13:08,520 Speaker 3: Okay, well, I mean either way, it's going to take 257 00:13:08,520 --> 00:13:10,360 Speaker 3: a while for this to all get resolved. 258 00:13:10,679 --> 00:13:12,240 Speaker 2: What we've seen with other. 259 00:13:12,120 --> 00:13:15,120 Speaker 3: Heavy machinery makers, including Caterpillar, is that the boom and 260 00:13:15,200 --> 00:13:17,800 Speaker 3: AI has benefited them as well. 261 00:13:19,080 --> 00:13:21,040 Speaker 2: Does Deer fit into that categories too. 262 00:13:22,360 --> 00:13:25,360 Speaker 8: It's a stretch, right, so it does help on the 263 00:13:25,400 --> 00:13:30,240 Speaker 8: construction business, particularly during the early phases of any construction, 264 00:13:30,320 --> 00:13:35,000 Speaker 8: whether it's excavation, anything with moving dirt. Deer has a 265 00:13:35,120 --> 00:13:38,320 Speaker 8: strong and really growing position in construction equipment. And I 266 00:13:38,320 --> 00:13:40,920 Speaker 8: think that's one of the big takeaways from this quarter 267 00:13:41,000 --> 00:13:45,040 Speaker 8: is that construction results were very strong, the orders again 268 00:13:45,320 --> 00:13:49,360 Speaker 8: very strong. There seems to be increasing visibility in terms 269 00:13:49,360 --> 00:13:53,400 Speaker 8: of projects as we move into next year, so I 270 00:13:53,400 --> 00:13:56,160 Speaker 8: think that has helped support the weakness that we're seeing 271 00:13:56,200 --> 00:13:59,320 Speaker 8: on the AX side. They've introduced a whole new excavator lineup, 272 00:13:59,559 --> 00:14:03,280 Speaker 8: a lot of new technology and innovations coming through on 273 00:14:03,320 --> 00:14:06,280 Speaker 8: the construction side. So if we look at machinery earnings 274 00:14:06,320 --> 00:14:09,439 Speaker 8: overall this season, i'd say construction continues to be one 275 00:14:09,440 --> 00:14:10,760 Speaker 8: of the biggest bright spots. 276 00:14:11,280 --> 00:14:13,640 Speaker 6: How's the US farmer doing out there. 277 00:14:13,559 --> 00:14:18,720 Speaker 8: Chris, You know, it's tough. Continues to be tough. I 278 00:14:18,800 --> 00:14:20,440 Speaker 8: sound like a little bit of a broken record with 279 00:14:20,560 --> 00:14:22,600 Speaker 8: this seems to be a recurring theme here over the 280 00:14:22,680 --> 00:14:27,320 Speaker 8: past two years. Listen. I do think that twenty twenty 281 00:14:27,400 --> 00:14:30,080 Speaker 8: six will still mark the trough of the cycle. And 282 00:14:30,120 --> 00:14:32,680 Speaker 8: I do think that's important. The debate really now becomes 283 00:14:32,720 --> 00:14:36,720 Speaker 8: around what the trajectory of recovery looks like. Our sense 284 00:14:36,800 --> 00:14:38,640 Speaker 8: is that it's going to be a much more measured 285 00:14:38,680 --> 00:14:41,840 Speaker 8: recovery as we look into twenty seven, and really, you know, 286 00:14:42,120 --> 00:14:44,520 Speaker 8: a lot kind of hinges on what happens here in 287 00:14:44,560 --> 00:14:47,440 Speaker 8: the Middle East. How soon do maybe some of these 288 00:14:47,480 --> 00:14:50,720 Speaker 8: fertilizer and input costs begin to come down. Yes, we've 289 00:14:50,720 --> 00:14:52,760 Speaker 8: seen a little bit of a pickup and crop prices, 290 00:14:52,840 --> 00:14:56,240 Speaker 8: so that helps to a degree, but we need clarity 291 00:14:56,360 --> 00:14:59,680 Speaker 8: in terms of some of the input costs again, particularly 292 00:14:59,720 --> 00:15:02,120 Speaker 8: on the first side, as well as what's going to 293 00:15:02,160 --> 00:15:04,600 Speaker 8: happen in terms of export markets and some of these 294 00:15:04,640 --> 00:15:10,000 Speaker 8: trade relationships and to see how those materialize. So we 295 00:15:10,080 --> 00:15:12,400 Speaker 8: have a much more cautious view in terms of a 296 00:15:12,440 --> 00:15:14,760 Speaker 8: sickle cold recovery as we look into twenty seven. 297 00:15:15,880 --> 00:15:19,000 Speaker 6: Stay with us more from Bloomberg Intelligence coming up after this. 298 00:15:22,920 --> 00:15:26,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 299 00:15:26,680 --> 00:15:29,800 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 300 00:15:29,800 --> 00:15:33,120 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 301 00:15:33,160 --> 00:15:36,280 Speaker 1: you get your podcasts, or watch us live on YouTube. 302 00:15:37,400 --> 00:15:40,280 Speaker 5: Man It is good to be an equity capital markets 303 00:15:40,320 --> 00:15:43,240 Speaker 5: reporter these days. Lots going on at there. Scarlet Ful 304 00:15:43,280 --> 00:15:45,640 Speaker 5: and Paul Soony live here in our Bloomberg Inactor Broker studio, 305 00:15:45,640 --> 00:15:47,200 Speaker 5: streaming live on YouTube as well. 306 00:15:47,240 --> 00:15:49,239 Speaker 6: Anthony Hughes is that equity market's. 307 00:15:49,000 --> 00:15:54,040 Speaker 5: Capital reporter for Bloomberg News, joining us here in studio, Anthony. 308 00:15:54,080 --> 00:15:58,920 Speaker 5: The SpaceX I S one was filed yesterday or dropped, 309 00:15:58,960 --> 00:16:01,920 Speaker 5: as the kids would say. Tom Keen had the notable 310 00:16:02,200 --> 00:16:04,600 Speaker 5: very Keen observation. There's a lot of pictures, a lot 311 00:16:04,640 --> 00:16:07,960 Speaker 5: of photographs in this perspectives you don't typically see that. 312 00:16:08,520 --> 00:16:09,560 Speaker 5: Did you take note of that? 313 00:16:10,120 --> 00:16:12,600 Speaker 9: Yeah, there was definitely a few interesting pictures. I think 314 00:16:12,600 --> 00:16:16,280 Speaker 9: the first four or five pages were rockets flying into 315 00:16:16,320 --> 00:16:19,880 Speaker 9: the air, which is quite an evocative, Yeah picture, evocative 316 00:16:19,920 --> 00:16:23,120 Speaker 9: thing for an IPO and perhaps people who don't you know, 317 00:16:23,280 --> 00:16:25,800 Speaker 9: not you don't want to read the whole document, we'll 318 00:16:25,800 --> 00:16:27,440 Speaker 9: just have a look at those pictures and get excited. 319 00:16:27,480 --> 00:16:30,720 Speaker 9: So that's one possibility. But there's also a rendering I 320 00:16:30,720 --> 00:16:32,480 Speaker 9: think of life on Mars, which I thought was quite 321 00:16:32,520 --> 00:16:33,000 Speaker 9: interesting as well. 322 00:16:33,080 --> 00:16:35,320 Speaker 5: Yeah, yep, So there's a lot there, and then you 323 00:16:35,360 --> 00:16:37,840 Speaker 5: get to the nitty gritty. I noticed, first of all, 324 00:16:38,400 --> 00:16:43,400 Speaker 5: risk factors section are solid thirty eight pages, so I 325 00:16:43,400 --> 00:16:45,640 Speaker 5: mean that takes you. I mean I used to pop 326 00:16:45,680 --> 00:16:47,520 Speaker 5: out perspectus as that were thirty eight pages, and now 327 00:16:47,520 --> 00:16:48,560 Speaker 5: you got the risk factors here. 328 00:16:48,680 --> 00:16:51,000 Speaker 6: What was your takeaway from this filing here? 329 00:16:51,680 --> 00:16:55,440 Speaker 9: Well, I think that there's already been so much written 330 00:16:55,440 --> 00:16:57,360 Speaker 9: about this in a lot of height, but you actually 331 00:16:57,440 --> 00:17:01,160 Speaker 9: read some of the statements in about how much of 332 00:17:03,080 --> 00:17:06,359 Speaker 9: you know, how much of the you know, how many 333 00:17:06,720 --> 00:17:10,639 Speaker 9: projects that SpaceX has that could provide the growth for 334 00:17:10,680 --> 00:17:13,199 Speaker 9: the future. I mean, it's quite phenomenal, and you know, 335 00:17:13,280 --> 00:17:16,280 Speaker 9: people obviously really have to believe in those two get 336 00:17:16,280 --> 00:17:19,160 Speaker 9: excited about this story. But you know, there's one section 337 00:17:19,240 --> 00:17:21,520 Speaker 9: there which is just about the growth strategies of the company, 338 00:17:21,560 --> 00:17:24,040 Speaker 9: and it lists out what they're doing in the space 339 00:17:24,119 --> 00:17:26,560 Speaker 9: launch business, which is about growing the payload capacity of 340 00:17:27,119 --> 00:17:29,600 Speaker 9: the rockets, and they're having they've got the rocket launch 341 00:17:29,720 --> 00:17:33,280 Speaker 9: today of Starship. There's in the starlink business, which is 342 00:17:33,480 --> 00:17:36,440 Speaker 9: which is the one that's doing the best in many ways. 343 00:17:36,760 --> 00:17:39,720 Speaker 9: They're they're looking to build out a mobile mobile phone 344 00:17:39,760 --> 00:17:41,920 Speaker 9: network there and then, but the really interesting one is 345 00:17:42,560 --> 00:17:49,040 Speaker 9: on the AAI side, they're obviously looking to substantially expand 346 00:17:49,040 --> 00:17:51,200 Speaker 9: the amount of compute there and obviously put data centers 347 00:17:51,200 --> 00:17:54,760 Speaker 9: in space, but and then some of those projects in space, 348 00:17:54,800 --> 00:17:58,199 Speaker 9: the really long term stuff is quite amazing around, you know, 349 00:17:58,440 --> 00:18:01,480 Speaker 9: putting a civil as I mentionedalization on Mars, but also 350 00:18:02,760 --> 00:18:06,320 Speaker 9: building a lunar economy and asteroid mining was one. 351 00:18:06,359 --> 00:18:06,560 Speaker 3: I think. 352 00:18:06,560 --> 00:18:09,320 Speaker 9: They also talked about space tourism and what they call 353 00:18:09,400 --> 00:18:13,159 Speaker 9: point to point to terrestrial flights as well, which is 354 00:18:13,200 --> 00:18:17,119 Speaker 9: like basically a spaceship replacing an airline and getting you 355 00:18:17,119 --> 00:18:18,840 Speaker 9: across the world much quicker, which is kind of an 356 00:18:18,880 --> 00:18:21,360 Speaker 9: interesting is an interesting concept. But you know, I think 357 00:18:21,400 --> 00:18:25,119 Speaker 9: to your point about the risk, space has always had 358 00:18:25,119 --> 00:18:27,680 Speaker 9: a huge amount of risks, So you know, people might 359 00:18:28,280 --> 00:18:30,840 Speaker 9: with so much hype around this IPO, people might forget 360 00:18:30,840 --> 00:18:32,320 Speaker 9: that space is very risky endeavor. 361 00:18:33,160 --> 00:18:36,160 Speaker 5: I like they start off strong in this perspective summary. 362 00:18:36,520 --> 00:18:40,159 Speaker 5: Our mission is to build the systems and technology is 363 00:18:40,200 --> 00:18:44,879 Speaker 5: necessary to make life multiplanetary, to understand the true nature 364 00:18:44,880 --> 00:18:48,560 Speaker 5: of the universe, and to extend the late of consciousness 365 00:18:48,600 --> 00:18:49,360 Speaker 5: to the stars. 366 00:18:49,600 --> 00:18:51,600 Speaker 6: That's a solid sentence. Only to find a person who 367 00:18:51,600 --> 00:18:54,520 Speaker 6: wrote that one. Yes, yes, that's not an investment banker 368 00:18:54,600 --> 00:18:55,639 Speaker 6: right now, one, I don't think. 369 00:18:55,840 --> 00:18:56,000 Speaker 8: Yeah. 370 00:18:56,040 --> 00:18:57,800 Speaker 9: I think a few people were commenting that some of 371 00:18:57,840 --> 00:19:00,400 Speaker 9: the prospectives might have been written by AI, even I'm 372 00:19:00,440 --> 00:19:03,800 Speaker 9: not sure whether AI is that creative, but yeah, I 373 00:19:03,840 --> 00:19:05,720 Speaker 9: mean there's also a section of the prospectus which talks 374 00:19:05,760 --> 00:19:07,760 Speaker 9: about the TAM or the total addressable market, and they 375 00:19:07,760 --> 00:19:11,840 Speaker 9: say it's the largest in human history, and interestingly that 376 00:19:12,040 --> 00:19:13,679 Speaker 9: I think it's a twenty seven to twenty eight trillion 377 00:19:13,720 --> 00:19:18,120 Speaker 9: dollar TAM, and interestingly the largest easily a large large 378 00:19:18,119 --> 00:19:20,320 Speaker 9: proportion of that is actually AI. So, you know, I 379 00:19:20,359 --> 00:19:22,840 Speaker 9: think a lot of people's initial reaction maybe once they've 380 00:19:22,880 --> 00:19:24,560 Speaker 9: read a bit more of the fine print about this company, 381 00:19:24,720 --> 00:19:26,440 Speaker 9: are we really investing in more of an AI story 382 00:19:26,440 --> 00:19:28,760 Speaker 9: here than a Space story? And the answer is, well, 383 00:19:29,480 --> 00:19:31,560 Speaker 9: it may be that as we're looking to really scale 384 00:19:31,640 --> 00:19:33,960 Speaker 9: up the revenue and sort of justify this two trillion 385 00:19:33,960 --> 00:19:37,640 Speaker 9: dollar valuation, which at the moment looks pretty far fetched, 386 00:19:38,160 --> 00:19:40,200 Speaker 9: maybe there is a lot of revenue coming through AI 387 00:19:41,280 --> 00:19:43,560 Speaker 9: in the next few years. Particularly they've got this deal 388 00:19:43,560 --> 00:19:45,439 Speaker 9: with Anthropic and that is going to add a bit 389 00:19:45,440 --> 00:19:48,000 Speaker 9: to revenue, So maybe you can see the revenue scale 390 00:19:48,080 --> 00:19:49,920 Speaker 9: up a bit. Still, still you want to see it 391 00:19:49,960 --> 00:19:51,960 Speaker 9: scale up a lot to justify this valuation. 392 00:19:52,040 --> 00:19:52,600 Speaker 6: That's what I say. 393 00:19:52,640 --> 00:19:55,400 Speaker 5: All right, So, do we know anything about any type 394 00:19:55,440 --> 00:19:58,560 Speaker 5: of roadshow that the company and its advisors will go on. 395 00:19:58,960 --> 00:20:00,639 Speaker 9: Yeah, so I mean, like in the IPO, there'll be 396 00:20:00,680 --> 00:20:02,960 Speaker 9: a road show, and at the moment we think it's 397 00:20:03,000 --> 00:20:07,480 Speaker 9: going to start on June four, so fifteen days. 398 00:20:07,520 --> 00:20:09,680 Speaker 6: From the filing, and then. 399 00:20:09,800 --> 00:20:15,399 Speaker 9: We could see the IPO potentially price on June eleven, 400 00:20:15,480 --> 00:20:17,760 Speaker 9: is the current speculation. Then you'd have on that Friday, 401 00:20:17,760 --> 00:20:19,800 Speaker 9: which is the twelfth, you'd see the stop start trading. 402 00:20:19,840 --> 00:20:23,480 Speaker 9: But obviously in the next few weeks we would actually 403 00:20:23,480 --> 00:20:25,840 Speaker 9: see evaluation in the price range, which would be give 404 00:20:25,920 --> 00:20:28,159 Speaker 9: us a much better idea of like whether this is 405 00:20:28,200 --> 00:20:30,200 Speaker 9: going to be a good investment or not. But obviously 406 00:20:30,400 --> 00:20:31,760 Speaker 9: a bunch of hype and a lot of people are 407 00:20:31,760 --> 00:20:32,280 Speaker 9: interested in them. 408 00:20:32,280 --> 00:20:36,359 Speaker 5: Presumably they'll be a video publicly available with kind of 409 00:20:36,359 --> 00:20:37,360 Speaker 5: the road show presentation. 410 00:20:37,440 --> 00:20:37,640 Speaker 6: Yeah. 411 00:20:37,680 --> 00:20:40,680 Speaker 9: So typically there's a retail road show that's publicly available, 412 00:20:40,680 --> 00:20:42,960 Speaker 9: and then there's an institutional roadshow as well, which is 413 00:20:43,000 --> 00:20:48,639 Speaker 9: more you know, may include brought it brought more information, 414 00:20:48,720 --> 00:20:51,480 Speaker 9: but the retail road show would be something would be 415 00:20:51,520 --> 00:20:52,360 Speaker 9: publicly available. 416 00:20:53,119 --> 00:20:57,840 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 417 00:20:58,000 --> 00:21:02,000 Speaker 1: and anywhere else you get your podcast. 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