Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Fourth quarter earnings per
Speaker 1: share coming in above estimates at two dollars and fifteen cents.
Speaker 1: Estimates were for two dollars and thirteen cents. Revenue coming
Speaker 1: in just shy of estimates, but ever so slightly, we
Speaker 1: can go ahead and say that meets estimates at ninety
Speaker 1: six point four to seven billion dollars. Estimates are for
Speaker 1: ninety six point six two billion dollars. Google ad revenue,
Speaker 1: the one that everybody is watching, came in above estimates
Speaker 1: at seventy two point four to six billion. Estimates were
Speaker 1: for seventy one point seven to three billion, and then,
Speaker 1: of course the cloud revenue so important, that was a
Speaker 1: slight miss at eleven point nine to six billion. Estimates
Speaker 1: were for twelve point one nine billion dollars.
Speaker 2: Yeah.
Speaker 3: The company also talking about capital expenditures in twenty twenty five,
Speaker 3: They say they expect to invest about seventy five billion dollars.
Speaker 2: Here.
Speaker 3: Fourth quarter revenue x TAC, traffic and acquisition costs at
Speaker 3: eighty one point sixty two billion. That's a little light, folks,
Speaker 3: eighty two point eighty two billion, And that is what
Speaker 3: maybe is why the stock is down about five five
Speaker 3: and a half percent here in the aftermarket. Keep in
Speaker 3: mind that you know cloud search so important, they are
Speaker 3: facing intensifying competition. Alphabet also saying AI powered Google Cloud
Speaker 3: portfolio has stronger demand. Again one of the two key
Speaker 3: points from earning so far fourth quarter Google cloud revenue. Again,
Speaker 3: as Tim mentioned earlier, so important. This is something that
Speaker 3: has been really helping the company outperform. That is a
Speaker 3: miss eleven point nine to six billion fourth quarter Google
Speaker 3: Cloud revenue. The estimate on the street was twelve point
Speaker 3: nineteen billion. And again, as I mentioned, fourth quarter revenue
Speaker 3: x tach eighty one point sixty two billion, and that
Speaker 3: too is a little light, Tim eighty two point eighty
Speaker 3: two billion. That place for the search business. Those are
Speaker 3: the two important businesses for Alphabet. Down now about six
Speaker 3: percent here in the aftermarket and looking.
Speaker 1: For commentary from Sander Pitchai, the CEO of the company.
Speaker 1: He says that quarter four was a strong quarter, driven
Speaker 1: by our leadership in AI and momentum across the business.
Speaker 1: He says, we are building, testing and launching products and
Speaker 1: models faster than ever in making significant progress and compute
Speaker 1: and driving efficiencies. He goes on to talk about advances
Speaker 1: like AI overviews and circle to search, or increasing user engagement.
Speaker 1: He says that AI powered Google cloud portfolio is seeing
Speaker 1: stronger customer demand, and YouTube continues to be the leader
Speaker 1: in streaming watch time and podcasts.
Speaker 3: All right, so interesting, and again we've got this stockdown
Speaker 3: almost seven percent here in the aftermarket, so some disappointment
Speaker 3: potentially about kind of those misses you are seeing. As
Speaker 3: I mentioned, twenty twenty five capex about seventy five billion.
Speaker 3: This is maybe a big reason why you're seeing some
Speaker 3: of the selling here in the aftermarket. The estimate on
Speaker 3: the street in terms of CAPEX for this year twenty
Speaker 3: twenty five was fifty seven point nine billions. Again, Alphabet
Speaker 3: coming out and saying it's these twenty twenty five capex
Speaker 3: much higher than that seventy five billion dollars. So a
Speaker 3: big spend there on AI, one would assume and others,
Speaker 3: but really AI and that build out seems to continue
Speaker 3: among these big tech companies.
Speaker 1: We're seeing shares move lower, shares tumbling more than seven
Speaker 1: percent after that fourth quarter revenue misses estimates. But I
Speaker 1: got to tell you, Carol, that fourth quarter outlook or
Speaker 1: that fourth quarter revenue excluding traffic acquisition costs only slightly
Speaker 1: shy of estimates eighty one point six two billion dollars,
Speaker 1: so just a little over a billion dollar shy estimates
Speaker 1: were for eighty two point eight two billion dollars.
Speaker 3: Yeah, I think some of it has to do that
Speaker 3: those are two of their biggest businesses right and have
Speaker 3: provided momentum for the company and help them to beat
Speaker 3: analysts estimates last time around that they reported results. So
Speaker 3: to see that maybe some disappointment that they came in
Speaker 3: a little light on both cloud and on their search business.
Speaker 3: And then to see also that Capex spend, you know
Speaker 3: that there might be some concern. So again watching shares
Speaker 3: of Alphabet, which are up about nine percent here in
Speaker 3: twenty twenty five, but now in the aftermarket we're seeing
Speaker 3: pressure and the stock continuing to be down about six
Speaker 3: point seven percent. Running around in a big way is
Speaker 3: our own Man Deep saying he follows Alphabet for us
Speaker 3: Man Deep initial thoughts, it looks like some disappointment on
Speaker 3: two of their biggest businesses. We're also looking at Capex
Speaker 3: that seems to be coming in a higher than what
Speaker 3: the street was expecting. Stock right now is down about
Speaker 3: almost seven percent yeah.
Speaker 2: I mean, look, they did set up a high bar
Speaker 2: for the cloud segment. So the fact that we saw
Speaker 2: a miss there and the other big miss seems to
Speaker 2: be around the YouTube subscription line, even though it's lumped
Speaker 2: into that other segment. But even though they beat on
Speaker 2: YouTube ads, the subscription line seems to have decelerated. But overall,
Speaker 2: I mean, look, the search was very resilient. You can
Speaker 2: see that number was strong, which is why when you
Speaker 2: look at the overall operating income, I mean it was
Speaker 2: in line. So given how much weight we put on
Speaker 2: the cloud and the YouTube segments, the fact that those
Speaker 2: two disappointed is why you are seeing that knee jerk
Speaker 2: reaction cloud YouTube.
Speaker 1: What about Capex the estimates for fifty eight billion dollars roughly.
Speaker 1: Alphabet comes out in this press release and says, seeing
Speaker 1: Capex this year about seventy five billion dollars, is the
Speaker 1: company being punished for that?
Speaker 2: I don't think so, because we know Meta Jeta wasn't there. Yeah. Yeah, look,
Speaker 2: Meta raised their Capex guide by fifty percent for twenty
Speaker 2: twenty five, So to me, this number is in line
Speaker 2: with what Meta is doing. In fact, a lot of
Speaker 2: people expected that the Google will raise and so I
Speaker 2: would be surprised if the stock is down because they
Speaker 2: raised the Capex guide.
Speaker 1: Is this you know, I know, you don't give price targets,
Speaker 1: but seeing a you know, close to seven percent decline
Speaker 1: six and a half percent right now, given that the
Speaker 1: company barely missed on fourth quarter revenue, it seems like
Speaker 1: a big reaction for not that big of a mess.
Speaker 2: Look, the way we look at Alphabet right now is
Speaker 2: everyone feels the you know, the YouTube and the cloud
Speaker 2: businesses are the growth drivers. So they are one hundred
Speaker 2: billion dollar undred almost one third of the overall revenue.
Speaker 2: But that's supposed to be the you know, twenty five
Speaker 2: to thirty percent grower. This search business is supposed to
Speaker 2: decelerate just because they have more competition. And look, I
Speaker 2: think search is a much higher revenue base. So in
Speaker 2: this case, the fact that search continues to be resilient
Speaker 2: and the growth businesses are decelerating, that is why you're
Speaker 2: seeing this sort of reaction. But overall, I would say,
Speaker 2: you know, in the case of a company like Alphabet,
Speaker 2: everything is so interconnected, Like they have six apps with
Speaker 2: over two billion monthly active users. Now YouTube is one
Speaker 2: of those, but then they also have maps and you
Speaker 2: know the course search business and that's where it's powered
Speaker 2: by a common digital ads platform. So it's not worthwhile
Speaker 2: to look at, you know, individual businesses and judge them
Speaker 2: on their performance in a quarter. Overall business continues to
Speaker 2: go very robustly. And you know, you can have a
Speaker 2: quarter where cloud has a slight miss and YouTube has
Speaker 2: a slightness, But I think overall, when you look at
Speaker 2: Alphabet's growth, that's still very strong.
Speaker 3: Mandy, what do you want to know about that cloud miss? Again,
Speaker 3: slight miss and it could be just an off quarter.
Speaker 3: It happens to companies, but it does it say something
Speaker 3: about the AI spend in terms of companies.
Speaker 2: Look, they are raising their capex. We know they will
Speaker 2: be spending seventy five billion dollars, right, how does that
Speaker 2: translate into cloud growth? That's the number one question because
Speaker 2: if it's decelerating and they're increasing their capex, that's not
Speaker 2: a good sign. But my feeling is, you know, this
Speaker 2: is more about compute capacity being available to be deployed
Speaker 2: to the customers. Everyone was compute constrained. We know that
Speaker 2: in twenty twenty four, So is this capex really to
Speaker 2: alleviate that compute constraints, My guess is yes.
Speaker 3: Well, you know, it's so interesting that you say that
Speaker 3: I was having conversation with people about kind of power
Speaker 3: nuclear and so on and so forth, and the demand
Speaker 3: by AI. And you know how we've seen from some
Speaker 3: of these tech companies that their power isn't necessarily there
Speaker 3: to power everything that needs to be done in terms
Speaker 3: of the AI world and all the computing. So does
Speaker 3: that continue to be a drag on some of these numbers,
Speaker 3: and so we have to kind of brush all these
Speaker 3: results with that.
Speaker 2: Well, the one other factor with Alphabet specifically is.
Speaker 3: The RE world isn't there.
Speaker 2: Everyone expects Alphabet to be more kind of compute efficient
Speaker 2: because they have their own TPUs like equivalent of Nvidia GPUs.
Speaker 2: So the fact that they're raising their CAPEX despite having
Speaker 2: their own chips is also somewhat of a negative sign.
Speaker 2: Although I won't put too much into it. I'd wait
Speaker 2: for the call, yeah, for them to explain why, you know,
Speaker 2: they're raising their CAPEX by fifty percent. But essentially the
Speaker 2: logic here is they should be able to give out
Speaker 2: more of their Nvidia GPUs for external consumption and use
Speaker 2: their TPUs for their own consumption, whereas everyone else has
Speaker 2: to use in Vidio GPUs for their own apps. But
Speaker 2: then for Microsoft the remainder goes out for customers. So
Speaker 2: by then logic Google's cloud growth accelerating made a ton
Speaker 2: of sense. The fact that this quarter did turn out
Speaker 2: to be that way, Yeah, it kind of puts that
Speaker 2: into question. Why did the cloud growth decelerator or disappoint?
Speaker 3: We should point out to that shares of Alphabet still
Speaker 3: down about six point six percent in the aftermarket. Kind
Speaker 3: of our red headline is saying Apple Alphabet shares are
Speaker 3: tumbling after fourth quarter revenue missus estimate. But we're talking
Speaker 3: with our man Deep seeing for kind of more clarity
Speaker 3: in terms of what the quarter looked like.
Speaker 1: Yeah, I just want to get man Deep's thoughts on
Speaker 1: Snap because shares of Snap are surging in the after
Speaker 1: hours of about fourteen percent as we speak. The company
Speaker 1: sees first quarter adjusted ebit of from forty to seventy
Speaker 1: five million dollars. Estimate was for seventy nine point nine
Speaker 1: million dollars. Perhaps the reason it's hire is because fourth
Speaker 1: quarter revenue came in at one point five six billion
Speaker 1: dollars billion dollars, beating estimates ever so slightly, and then
Speaker 1: first quarter revenue coming in ces first quarter revenue rather
Speaker 1: from at one point three three billion to one point
Speaker 1: three six billion, the estimate was for one point three
Speaker 1: three billion. This is a company where I feel like
Speaker 1: every quarter the stock moves double digits one way or
Speaker 1: another after earnings. What are your immediate thoughts?
Speaker 2: I mean, look, when you look at Alphabet, they are
Speaker 2: adding you know, almost four or five billion dollars in
Speaker 2: AD revenue search AD revenue every quarter. Look at a
Speaker 2: snap it's a one point five billion dollar quarter. And
Speaker 2: so when you compare it that way, the absolute numbers,
Speaker 2: I mean, their growth is nothing to talk about. Yes,
Speaker 2: the bar was really low and they you know, beat
Speaker 2: the consensus numbers, but in terms of the actual AD dollars,
Speaker 2: this just shows that Alphabet, when you compare you know,
Speaker 2: search and YouTube, they are still getting a lot of
Speaker 2: the incremental and dollars.
Speaker 3: How do you compare Google Cloud versus We're going to
Speaker 3: hear from Amazon obviously, and then we've heard from Microsoft,
Speaker 3: so you know, put that against them and what we're
Speaker 3: hearing from from Alpha better Google, Like, how do you.
Speaker 2: Yeah, I mean, when you look at Microsoft, Azure Clearly
Speaker 2: it's a seventy billion dollar business growing at thirty percent.
Speaker 2: Google Cloud is more fifty billion dollar rund rate close
Speaker 2: to that, growing at mid thirty five percent, but that
Speaker 2: growth seems to have come down, and when you look
Speaker 2: at Amazon Cloud, it's north of one hundred billion dollars
Speaker 2: growing at high teens. So clearly everyone had their kind
Speaker 2: of swim lanes in terms of the expectations and what
Speaker 2: kind of growth number they're supposed to show. But in
Speaker 2: this case, the fact that there was a slight miss
Speaker 2: kind of puts that logic into question. I still think,
Speaker 2: you know, it comes down to the compute availability and
Speaker 2: video GPUs not being available. That and the fact that
Speaker 2: they're raising the capex is a sign that they believe
Speaker 2: the cloud business will continue to grow.
Speaker 3: So if you've seen a retrenchment in capex, you would
Speaker 3: have said, wait a minute, there's something happened potentially.
Speaker 2: And they don't want to miss out on that because
Speaker 2: this is the market where cloud businesses will really accelerate.
Speaker 2: Even with the deep seak efficiency and everything that has
Speaker 2: been talked about, Google should be the best position. Like
Speaker 2: I said, they have their own TPUs, they should be
Speaker 2: able to benefit from the efficiency and so that should
Speaker 2: translate into faster cloud growth. If that's not the case,
Speaker 2: I expect this sort of reaction and maybe that will
Speaker 2: be the case tomorrow.
Speaker 3: Great stuff. Listen, We're going to be following all of
Speaker 3: your reporting and research throughout the evening. So Man Deep,
Speaker 3: thank you so much, Man Deep saying, senior tech industry
Speaker 3: analyst here at Bloomberg Intelligence. We are not done with alphabet.
Speaker 1: Let's bring in Caroline High, the co host of Bloomberg
Speaker 1: Technology on a Bloomberg TV just to recap everybody. Google's
Speaker 1: revenue and its search, advertising and YouTube business. Was it
Speaker 1: better than forecasts? But it looks like traders are focused
Speaker 1: on In that Google Cloud revenue number, it was one
Speaker 1: point nine percent below the consensus forecast. Google Cloud operating
Speaker 1: income was a two point seven percent beat at two
Speaker 1: point one billion dollars, up from eight hundred and sixty
Speaker 1: four million dollars a year earlier. Caroline, why the stockslide? Mean?
Speaker 1: Deep made the point of YouTube in YouTube specifically subscriptions.
Speaker 1: What are you looking at?
Speaker 4: I think it is to your point cloud, the capex
Speaker 4: that's being spent on cloud. But ultimately, remember this is
Speaker 4: exactly what happened to Microsoft. Microsoft beat on its fiscal quarter,
Speaker 4: but the fact that we saw a one percentage point
Speaker 4: drop quarter on quarter in terms of revenue growth from
Speaker 4: the cloud as your business was enough to wipe out
Speaker 4: all of those gains from actually the beat across the
Speaker 4: revenue and overall profitability. So I think again, it's why
Speaker 4: are you not delivering on the growth area? Why are
Speaker 4: you seeing thirty percent increase in Google Cloud revenues rather
Speaker 4: than the higher anticipation? And I wonder if, to Mandy's point,
Speaker 4: it will be because they were limited in scale. The
Speaker 4: supply side is the issue here, not the demand side.
Speaker 3: Well, and they did say AI powered Google Cloud portfolio portfolio.
Speaker 3: Excuse me, how stronger demands. So they're kind of putting
Speaker 3: it out and it almost feels like you want some
Speaker 3: clarification about okay, so give us a little bit more
Speaker 3: color about what's going on here.
Speaker 4: And this is why the calls have been so important.
Speaker 4: Remember we sat here and Apple's numbers came out, stop dropped.
Speaker 4: Then suddenly Tim Cook comes on all buoyant, Meta does
Speaker 4: the same. They were incredibly late. Then numbers did miss
Speaker 4: on a forward looking forecast, but again they came on
Speaker 4: and talked so optimistically about the opportunity if stand up
Speaker 4: pitch I gets it right and says, look, we're still
Speaker 4: just ultimately limited on our capacity thus far, but bear
Speaker 4: with us. We're investing big time. We have got the
Speaker 4: one stop shop for vertically integrated generative AI. We are
Speaker 4: making the Lange larger language model, We're making our chips,
Speaker 4: we're providing it, and it's making our search products still
Speaker 4: so fabulous. He has an ability to navigate some of
Speaker 4: the thornier questions around antitrust, around China and geopolitics.
Speaker 1: Hey, look, Amazon shares reached a new record today, but
Speaker 1: after hours they're down about one point four percent, kind
Speaker 1: of a knee jerk reaction in sympathy with what we
Speaker 1: heard from Alphabet. Does today's report tell us anything about
Speaker 1: what we'll hear from Amazon on Thursday when it comes.
Speaker 3: To the cloud?
Speaker 4: I mean, who knows whether some of the slow down
Speaker 4: and Google is an opportunity for Amazon who had bigger
Speaker 4: scale in data centers. But again, we've heard from Matt
Speaker 4: Garman over at AWS before talking of this need to
Speaker 4: get the Nvidia chips and perhaps that these delays that
Speaker 4: you've had to blackwell for example, and the role at
Speaker 4: has been a supply side thorn in the side for
Speaker 4: a lot of these businesses, and that's why they're turning
Speaker 4: to their own chip designs and why Broadcom is on
Speaker 4: the upside because maybe with bigger capex from Alphabet, it's
Speaker 4: going to again be winning out in terms of business
Speaker 4: as companies like cloud or providers want to depend on
Speaker 4: their own supply side too.
Speaker 1: I do.
Speaker 4: I think there's going to be a knee jeck reaction,
Speaker 4: as you say, but Amazon's got very different business model
Speaker 4: in terms of.
Speaker 3: Advertising as well, Caroline, I have to roll some other
Speaker 3: things in. First of all, let's remind everybody that shares
Speaker 3: of Alphabet or down about six and a quarter percent
Speaker 3: here in the aftermarket, so they've kind of settled at
Speaker 3: this level. And assume as soon as the car comes
Speaker 3: we could see some movement in the stack once again.
Speaker 3: But it's coming in a day where US China teariffs
Speaker 3: against one another. China's return valiatory actions included an antro
Speaker 3: launching an anti trust investigation to Google extraordinary, and then
Speaker 3: just earlier we had Alphabet come out and say Google's
Speaker 3: removed a passage from its AI principles the pledged to
Speaker 3: avoid using the tech technology and potentially harmful applications such
Speaker 3: as weapons. There's just so much here to unpack. The
Speaker 3: regular first of all, the retaliatory actions by China and
Speaker 3: how are you kind of rolling?
Speaker 2: Then?
Speaker 4: Is a just I mean, the stop ended up the
Speaker 4: day at a record high, so people really felt that, yes,
Speaker 4: this is an Android issue most largely, but this is
Speaker 4: the game of tit for tat and ultimately it's not
Speaker 4: going to affect their business model too much in the
Speaker 4: longer term. So I think you're right though, to fold it.
Speaker 4: Maybe the pan andeer element of all of this that
Speaker 4: has been the software bet for generative AI over the
Speaker 4: last year, and they are all around defense, around the
Speaker 4: focus on general to AI and what it can do
Speaker 4: for government, and it has been a limitation in the
Speaker 4: past for Alphabet and Google, but people like upstarts, the
Speaker 4: andriills coming in here being like, you need to be
Speaker 4: okay with making this sort of generative AI in innovation
Speaker 4: before we.
Speaker 1: Let you go. AMD is out with results. Shares in
Speaker 1: the after hours are high about about three point four percent.
Speaker 1: The company c's first quarter revenue coming in at six
Speaker 1: point eight billion to seven point four billion shares climbing
Speaker 1: as first quarter salesfe tops estimates at midpoint. Your knee
Speaker 1: jerk reaction to you AMD relief.
Speaker 4: They needed to assure their investor base, Lisa, who has
Speaker 4: been under a lot of duress because data center serve
Speaker 4: a provision. Ultimately, AI accelerators have not been able to
Speaker 4: match the prowess of Nvidia, everyone feeling, in fact, they've
Speaker 4: been analyst after analysts downgrading the stock, worrying that they
Speaker 4: just aren't there when it comes to a real competitor.
Speaker 4: But the fact that she's able to deliver in margins,
Speaker 4: the fact that she's still saying, like I'm competitor. I'm
Speaker 4: focused on R and D and expenses coming in perhaps
Speaker 4: a little bit higher there. But they need R and D,
Speaker 4: they need to focus on the AI accelerator because they've
Speaker 4: begin really tough competition in the world of PC and
Speaker 4: other And remember you and I are buying PCs as
Speaker 4: much as we used to do.
Speaker 3: All right, grid stuff, I mean, God moving around, Caroline,
Speaker 3: Thank you so much, Caroline High of course, go host
Speaker 3: to Bloomberg technolog Ian Bloomberg TV Catcher at eleven am
Speaker 3: Wall Street time on Bloomberg Television