1
00:00:02,400 --> 00:00:06,720
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:07,320 --> 00:00:09,160
Speaker 2: Now, well one of those days where you know, a

3
00:00:09,160 --> 00:00:11,000
Speaker 2: whole third of the market cap of the S and

4
00:00:11,039 --> 00:00:14,640
Speaker 2: P five hundred reports second quarter Google Cloud revenue coming

5
00:00:14,680 --> 00:00:18,120
Speaker 2: above estimates ten point three five billion dollars, meeting estimates

6
00:00:18,160 --> 00:00:21,520
Speaker 2: of ten point h nine billion. Second quarter revenue excluding

7
00:00:21,640 --> 00:00:24,720
Speaker 2: the traffic acquisition costs coming in above estimates at seventy

8
00:00:24,720 --> 00:00:27,760
Speaker 2: one point three billion versus estimates of seventy point seven

9
00:00:27,920 --> 00:00:32,880
Speaker 2: billion dollars. So in some second quarter revenue excluding TAC

10
00:00:33,159 --> 00:00:34,040
Speaker 2: meeting estimates.

11
00:00:34,360 --> 00:00:36,680
Speaker 3: Yeah, so we're and we did see write some pressure

12
00:00:36,760 --> 00:00:39,520
Speaker 3: on shares of Alphabet here in the aftermarket. So let's

13
00:00:39,520 --> 00:00:41,839
Speaker 3: get to it with our team in the house is

14
00:00:41,880 --> 00:00:45,160
Speaker 3: Bloomberg Intelligence Senior Tech Industry Alice man Deep Singh along

15
00:00:45,159 --> 00:00:47,640
Speaker 3: with Bloomberg News Earnings reporter Red Brown, both in our

16
00:00:47,640 --> 00:00:50,519
Speaker 3: Bloomberg Interactive Broker studio. All right, Man Deep, walk us

17
00:00:50,560 --> 00:00:53,400
Speaker 3: through it the surprises, the strength, the weakness, or anything

18
00:00:53,400 --> 00:00:54,440
Speaker 3: that raises questions for you.

19
00:00:55,160 --> 00:00:59,320
Speaker 4: I think search once again performed very well. It was

20
00:00:59,360 --> 00:01:04,520
Speaker 4: better than census, and with Alphabet, whenever search beats consensus,

21
00:01:04,880 --> 00:01:07,880
Speaker 4: you know the operating margin beat will come. And that

22
00:01:08,040 --> 00:01:11,840
Speaker 4: was the same here. The only number that disappointed was

23
00:01:11,840 --> 00:01:13,440
Speaker 4: a YouTube ass revenue that.

24
00:01:13,560 --> 00:01:15,720
Speaker 3: Sing and I watched a lot of YouTube I don't

25
00:01:15,760 --> 00:01:18,640
Speaker 3: know what, because you could pay to get rid of

26
00:01:18,680 --> 00:01:19,600
Speaker 3: the ass. Yeah, we watched.

27
00:01:19,640 --> 00:01:22,400
Speaker 4: So up until last quarter they made it up through

28
00:01:22,520 --> 00:01:26,560
Speaker 4: better YouTube subscription sales. Now that doesn't seem to be

29
00:01:26,600 --> 00:01:30,400
Speaker 4: the case because the YouTube subscription number is reported alongside

30
00:01:30,400 --> 00:01:33,640
Speaker 4: the app store revenue, so it's hard to unpack whether

31
00:01:34,319 --> 00:01:37,040
Speaker 4: that was the weak part or the app store revenue

32
00:01:37,120 --> 00:01:39,959
Speaker 4: was the weak link. But clearly YouTube was a disappointing

33
00:01:40,000 --> 00:01:41,760
Speaker 4: segment and the results.

34
00:01:41,560 --> 00:01:44,600
Speaker 2: Investors don't seem that disappointed. I mean, shares of Google

35
00:01:44,680 --> 00:01:48,400
Speaker 2: right now, they're bouncing between red and grain, but I

36
00:01:48,400 --> 00:01:51,120
Speaker 2: mean we're talking small moves, and look these are after

37
00:01:51,640 --> 00:01:53,720
Speaker 2: a lot more. It was down a lot more. Yeah,

38
00:01:53,760 --> 00:01:56,840
Speaker 2: and this is before the call and deep. But is

39
00:01:56,880 --> 00:01:59,040
Speaker 2: this like a kind of Hohume earnings report?

40
00:01:59,560 --> 00:02:03,800
Speaker 4: I think, Look, when I look at search growing mid teens,

41
00:02:04,120 --> 00:02:06,760
Speaker 4: that just tells me, you know, a company with two

42
00:02:06,880 --> 00:02:10,120
Speaker 4: hundred billion dollars run rate in search business ninety percent

43
00:02:10,200 --> 00:02:12,960
Speaker 4: market share still manages to grow downble did it?

44
00:02:13,040 --> 00:02:17,040
Speaker 2: So it's it's experimental. AI is working, It's working.

45
00:02:16,760 --> 00:02:21,919
Speaker 4: And it's maintaining market share despite competition from chat rept, being,

46
00:02:22,080 --> 00:02:24,240
Speaker 4: you name it. Everyone keeps talking about.

47
00:02:24,080 --> 00:02:27,560
Speaker 2: How they just said Bing, is there really competition from being.

48
00:02:27,360 --> 00:02:30,440
Speaker 4: Well, Bing has integrated chat cipt now, So that was

49
00:02:30,480 --> 00:02:32,639
Speaker 4: what Satynadella was most excited about.

50
00:02:32,840 --> 00:02:35,280
Speaker 2: I am curious about the lack of ads that I

51
00:02:35,360 --> 00:02:37,680
Speaker 2: see when I look for when I do a Google

52
00:02:37,720 --> 00:02:40,000
Speaker 2: search and I see the experimental AI result, it doesn't

53
00:02:40,000 --> 00:02:41,240
Speaker 2: seem like they're making money for me.

54
00:02:41,760 --> 00:02:45,440
Speaker 4: Yeah, but if you go back in time, Google only

55
00:02:45,520 --> 00:02:50,720
Speaker 4: monetized seventy like seventy percent of their queries are now monetized,

56
00:02:50,800 --> 00:02:53,640
Speaker 4: only thirty percent hour monetized, and that too. It's a

57
00:02:53,800 --> 00:02:57,520
Speaker 4: very keyword driven business, so you know, people bid up

58
00:02:57,520 --> 00:03:00,280
Speaker 4: for keywords. That's what drives the ad pricing. And in

59
00:03:00,280 --> 00:03:04,160
Speaker 4: this case, you know, unlike social media that can increase

60
00:03:04,240 --> 00:03:08,200
Speaker 4: ad loads, Google is not increasing ad loads. It's still

61
00:03:08,320 --> 00:03:11,639
Speaker 4: key or driven and they're able to maintain that share.

62
00:03:12,240 --> 00:03:15,600
Speaker 4: You know, despite chat GPET coming in and for certain queries,

63
00:03:15,639 --> 00:03:18,640
Speaker 4: I'm sure people are going more to chat ChiPT then

64
00:03:18,680 --> 00:03:21,840
Speaker 4: coming to traditional search. But I mean, I think Google

65
00:03:21,880 --> 00:03:25,119
Speaker 4: has a competing offering with Gemini Advance and that will

66
00:03:25,120 --> 00:03:28,680
Speaker 4: be a subscription revenues stream down the line. So in short,

67
00:03:28,800 --> 00:03:31,920
Speaker 4: they've been able to maintain their market share despite all

68
00:03:32,000 --> 00:03:33,720
Speaker 4: the threat, and I think that's good news.

69
00:03:33,480 --> 00:03:36,200
Speaker 3: For stock is down about one percent here in the aftermarket,

70
00:03:36,200 --> 00:03:38,480
Speaker 3: but it's been bouncing around. Stocks up about thirty percent

71
00:03:38,600 --> 00:03:40,960
Speaker 3: year to day forward pe of twenty four. Alphabet is

72
00:03:40,960 --> 00:03:43,880
Speaker 3: game more than sixteen percent since it's blowout first quarter

73
00:03:43,960 --> 00:03:46,600
Speaker 3: report and red brand. I want to bring you into

74
00:03:46,640 --> 00:03:48,960
Speaker 3: it watching it as well, you know, join the conversation

75
00:03:49,040 --> 00:03:50,880
Speaker 3: here with Mandeep. I mean, I'm wondering too if this

76
00:03:50,960 --> 00:03:53,680
Speaker 3: is a quarter that you know safely easily lives up

77
00:03:53,680 --> 00:03:54,520
Speaker 3: to expectations.

78
00:03:54,600 --> 00:03:56,760
Speaker 1: I think man deeperly hit on the Obviously, the two

79
00:03:56,760 --> 00:03:59,040
Speaker 1: biggest things that jumped off the page to me as well,

80
00:03:59,040 --> 00:04:01,880
Speaker 1: which was search and YouTube coming in a little softer.

81
00:04:02,480 --> 00:04:04,240
Speaker 1: But the other thing that's really jumping out to me

82
00:04:04,320 --> 00:04:06,720
Speaker 1: is actually quebecs. If we think about, you know, how

83
00:04:06,720 --> 00:04:10,560
Speaker 1: are they competing with these other companies on gen ai.

84
00:04:11,240 --> 00:04:14,360
Speaker 1: That's where we'll see that investment. And from what I

85
00:04:14,360 --> 00:04:16,520
Speaker 1: can see CAPEX coming thirteen billion, that's I think the

86
00:04:16,520 --> 00:04:19,520
Speaker 1: biggest ever for Alphabet. I think that kind of really

87
00:04:19,560 --> 00:04:22,520
Speaker 1: speaks to where they are headed and kind of another

88
00:04:22,600 --> 00:04:24,520
Speaker 1: doubling down on this commitment and it seems to be

89
00:04:24,520 --> 00:04:29,760
Speaker 1: paying off. So between the search business continuing to grow

90
00:04:29,800 --> 00:04:33,719
Speaker 1: despite its size. Yeah, so definitely interesting there.

91
00:04:34,160 --> 00:04:36,960
Speaker 4: And I just wanted to since he brought up Capex.

92
00:04:37,279 --> 00:04:40,440
Speaker 4: You know, Capex is directly related to their cloud revenue.

93
00:04:40,600 --> 00:04:43,800
Speaker 4: So the fact that cloud sales grew twenty nine percent,

94
00:04:44,240 --> 00:04:46,520
Speaker 4: that Capex is paying off and.

95
00:04:46,520 --> 00:04:48,719
Speaker 3: You know money well spent basically.

96
00:04:48,960 --> 00:04:52,599
Speaker 4: Money we'll spend. And actually cloud margins grew six hundred

97
00:04:52,600 --> 00:04:55,960
Speaker 4: and fifty basis points. So for the longest time, Alphabet

98
00:04:56,040 --> 00:04:59,120
Speaker 4: was criticized because cloud wasn't making money, it was a

99
00:04:59,200 --> 00:05:02,560
Speaker 4: dragon profit. Well guess what in just the past two

100
00:05:02,600 --> 00:05:05,960
Speaker 4: three quarters they have shown over five hundred basis point

101
00:05:06,000 --> 00:05:09,560
Speaker 4: of margin expansion in the business. And that seems to

102
00:05:09,600 --> 00:05:12,159
Speaker 4: be the trend I think based on the guide they're

103
00:05:12,200 --> 00:05:13,479
Speaker 4: saying this will continue.

104
00:05:13,560 --> 00:05:15,159
Speaker 3: Well, this is what we always talk about, right because

105
00:05:15,200 --> 00:05:19,240
Speaker 3: they behind what Microsoft and Amazon right have lagged in

106
00:05:19,360 --> 00:05:22,719
Speaker 3: terms of the cloud. This shows what that they're making progress.

107
00:05:22,920 --> 00:05:26,080
Speaker 4: Well, they had a slower start, so they were always

108
00:05:26,120 --> 00:05:29,040
Speaker 4: the third player, the distant third player. But look at

109
00:05:29,040 --> 00:05:32,159
Speaker 4: the cloud revenue run right now, forty billion dollars. Compare

110
00:05:32,160 --> 00:05:35,800
Speaker 4: that to Microsoft Azure seventy six billion and Amazon Aws

111
00:05:35,800 --> 00:05:38,720
Speaker 4: one hundred billion. But at least they are growing thirty percent.

112
00:05:39,160 --> 00:05:42,280
Speaker 4: So we'll find out whether Microsoft Azure is also growing

113
00:05:42,320 --> 00:05:45,680
Speaker 4: thirty percent. But we know Amazon AWS is growing seventeen percent,

114
00:05:46,040 --> 00:05:49,839
Speaker 4: so clearly their faster growth will help them narrow that gap.

115
00:05:50,240 --> 00:05:53,640
Speaker 1: And deep speaking of Aws and Microsoft, what do these

116
00:05:53,640 --> 00:05:56,000
Speaker 1: results tell you about what we should expect for those

117
00:05:56,000 --> 00:05:57,760
Speaker 1: companies when they report later this quarter.

118
00:05:58,240 --> 00:06:01,279
Speaker 4: I think for Microsoft as again, it's going to be

119
00:06:01,279 --> 00:06:04,400
Speaker 4: a very strong quarter. You will see more than thirty

120
00:06:04,400 --> 00:06:09,000
Speaker 4: percent growth. And Microsoft actually quantifies the contribution from generative

121
00:06:09,000 --> 00:06:12,760
Speaker 4: AI workloads. Last quarter it was seven percentage points. I'm

122
00:06:12,920 --> 00:06:16,200
Speaker 4: expecting it will be slightly highed this quarter, but clearly

123
00:06:16,720 --> 00:06:19,880
Speaker 4: that's where I spend is going is in, you know,

124
00:06:19,920 --> 00:06:23,279
Speaker 4: the generative AI workloads. And I think Microsoft will do

125
00:06:23,360 --> 00:06:26,720
Speaker 4: better than Ada BLUs because Adawlus has been coming from

126
00:06:26,720 --> 00:06:28,440
Speaker 4: behind when it comes to generative AI.

127
00:06:28,480 --> 00:06:30,880
Speaker 3: I just want to mention Amazon. I'm just looking the aftermarket,

128
00:06:31,000 --> 00:06:33,119
Speaker 3: very little movement, maybe up about one third of one percent,

129
00:06:33,120 --> 00:06:34,480
Speaker 3: and I just want to look at Microsoft thir it's

130
00:06:34,480 --> 00:06:35,960
Speaker 3: down about two tents so I don't know that they

131
00:06:35,960 --> 00:06:37,919
Speaker 3: weren't necessari seeing any kind of significant reaction.

132
00:06:38,000 --> 00:06:40,080
Speaker 2: Okay, it's not just Alphabet, but one company that is

133
00:06:40,080 --> 00:06:43,600
Speaker 2: seeing a more significant reaction after hours right now is Tesla,

134
00:06:43,720 --> 00:06:46,960
Speaker 2: down four point six percent as we speak. Second quarter

135
00:06:47,000 --> 00:06:52,960
Speaker 2: adjusted earnings per share missed estimates EPs. Excuse me, adjusted

136
00:06:53,000 --> 00:06:54,720
Speaker 2: earnings per share for the second quarter miss the average

137
00:06:54,760 --> 00:06:56,480
Speaker 2: channel this the estimate. They're also getting quite a bit

138
00:06:56,520 --> 00:07:00,520
Speaker 2: of information on the in from the long presentation about

139
00:07:01,279 --> 00:07:03,160
Speaker 2: how many cars they plan to deliver, fewer than the

140
00:07:03,200 --> 00:07:05,920
Speaker 2: one point eight million cars they delivered in twenty twenty three.

141
00:07:06,720 --> 00:07:08,440
Speaker 2: I know you guys are here to talk about Alphabet,

142
00:07:08,520 --> 00:07:10,360
Speaker 2: but we can't let you leave without talking a little

143
00:07:10,360 --> 00:07:12,440
Speaker 2: bit about what we saw with Tesla, Mandy, what sticks

144
00:07:12,440 --> 00:07:12,800
Speaker 2: out to you.

145
00:07:12,960 --> 00:07:15,640
Speaker 4: I mean, look with Tesla, the fact that they shifted

146
00:07:15,680 --> 00:07:19,440
Speaker 4: out the robotaxi event. That's where all the excitement was,

147
00:07:19,680 --> 00:07:22,840
Speaker 4: and you know right now, I mean, they don't have

148
00:07:22,880 --> 00:07:26,000
Speaker 4: a near term catalyst. Everyone is excited about AI. That

149
00:07:26,160 --> 00:07:28,200
Speaker 4: is where they could have shown their AI. I mean,

150
00:07:28,240 --> 00:07:31,480
Speaker 4: I know, humanoid robots are also a big deal, but

151
00:07:31,680 --> 00:07:34,320
Speaker 4: they gave a date and then they backed off. So

152
00:07:34,840 --> 00:07:37,480
Speaker 4: to me, you know, that's that was never a good

153
00:07:37,520 --> 00:07:39,320
Speaker 4: sign going into the print. What about for you?

154
00:07:39,360 --> 00:07:41,760
Speaker 1: Read well, I think it's interesting that the thing to

155
00:07:41,760 --> 00:07:43,320
Speaker 1: get excited about is kind of this pie and the

156
00:07:43,320 --> 00:07:46,120
Speaker 1: sky idea of a robotaxi that no one has really

157
00:07:46,160 --> 00:07:48,920
Speaker 1: been able to successfully monetize yet. I think that kind

158
00:07:48,920 --> 00:07:50,600
Speaker 1: of speaks to where the company is at, maybe get

159
00:07:50,600 --> 00:07:53,120
Speaker 1: in a little bit away from its true mission, which

160
00:07:53,120 --> 00:07:56,800
Speaker 1: has always been selling evs. You know. But I think

161
00:07:56,840 --> 00:07:58,560
Speaker 1: there are some positives to take away from the support

162
00:07:58,640 --> 00:08:02,120
Speaker 1: they did. They did actually beat gross margin expectations. I

163
00:08:02,120 --> 00:08:04,679
Speaker 1: think that's going to be really important for investors going forward,

164
00:08:04,720 --> 00:08:08,600
Speaker 1: is how can this company continue to trim expenses if

165
00:08:08,600 --> 00:08:10,760
Speaker 1: they aren't going to be seeing really aggressive top line

166
00:08:10,760 --> 00:08:12,560
Speaker 1: growth as they were in the past. So good to

167
00:08:12,560 --> 00:08:15,320
Speaker 1: see them focusing there on improving the efficiency a little bit.

168
00:08:15,360 --> 00:08:18,160
Speaker 3: All right, So just to wrap up top question for

169
00:08:18,200 --> 00:08:20,360
Speaker 3: Tesla that you would make on the call real quickly.

170
00:08:21,320 --> 00:08:23,720
Speaker 1: I mean, it's got to be the roadmap to continuing

171
00:08:23,920 --> 00:08:26,960
Speaker 1: Where does robotaxi? When, where is the robotaxi, when is

172
00:08:27,000 --> 00:08:29,680
Speaker 1: it coming? And again where the is there anywhere we

173
00:08:29,680 --> 00:08:30,720
Speaker 1: can continue trim costs?

174
00:08:31,000 --> 00:08:31,160
Speaker 4: Read?

175
00:08:31,280 --> 00:08:33,679
Speaker 2: Just show me the robotax that elon that I want to.

176
00:08:33,600 --> 00:08:35,280
Speaker 3: Know about the mass market car that's going to like

177
00:08:35,320 --> 00:08:35,959
Speaker 3: sell tons.

178
00:08:35,800 --> 00:08:36,800
Speaker 2: Of the Model three.

179
00:08:36,960 --> 00:08:38,640
Speaker 3: Yeah, I guess I don't know. Go ahead.

180
00:08:38,760 --> 00:08:43,840
Speaker 4: Investors care about FSD software attach rate. That's where the margins.

181
00:08:44,520 --> 00:08:45,440
Speaker 2: Attach rate real quick.

182
00:08:45,480 --> 00:08:49,960
Speaker 4: So attach rate is anyv Tesla AV owner that buys

183
00:08:50,000 --> 00:08:53,160
Speaker 4: the software so you know attaches. If I end up

184
00:08:53,200 --> 00:08:56,920
Speaker 4: buying twelve thousand dollars off FSD software for autonomous driving,

185
00:08:57,360 --> 00:09:00,839
Speaker 4: that's like ninety percent plus gross margin. That's what investors

186
00:09:00,840 --> 00:09:03,959
Speaker 4: get excited about Tesla because they think that gramp will

187
00:09:04,000 --> 00:09:05,720
Speaker 4: continue to grow, the attachment will continue.

188
00:09:05,720 --> 00:09:06,920
Speaker 2: The software company, not a car.

189
00:09:06,960 --> 00:09:09,600
Speaker 3: Come ten seconds. Top question for Alphabet on the call.

190
00:09:09,640 --> 00:09:13,800
Speaker 4: Alphabet, it's really about cloud growth. I mean, how fast

191
00:09:14,000 --> 00:09:17,000
Speaker 4: can it grow and how long the durability of that

192
00:09:17,080 --> 00:09:20,320
Speaker 4: cloud growth. The thirty percent cloud growth unbelievable.

193
00:09:20,440 --> 00:09:23,000
Speaker 3: Man deep saying of Bloomberg Intelligence and Bloomberg News earnings

194
00:09:23,040 --> 00:09:24,760
Speaker 3: report of Red Brown guys, thank you so much, so

195
00:09:24,800 --> 00:09:27,040
Speaker 3: appreciate it. This is Bloomberg BusinessWeek