WEBVTT - Earnings Analysis: Meta, Microsoft, Alphabet & Amazon Deliver Earnings 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.200 --> 0:00:12.080 This is a breaking news update from Bloomberg. 0:00:12.920 --> 0:00:16.880 Instant reaction and analysis from our three thousand journalists and 0:00:16.920 --> 0:00:18.439 analysts around the world. 0:00:18.680 --> 0:00:20.880 Carol Master along with Tim Steenway getting ready for a 0:00:20.920 --> 0:00:23.720 big drop. You gotta be ready because they're bax seven 0:00:24.000 --> 0:00:26.320 Edla Love of course, co host of Bloomberg Tech on 0:00:26.360 --> 0:00:29.400 Bloomberg Television. He's out there in our San Francisco bureau, 0:00:29.800 --> 0:00:32.600 also with us as our anaag Rana, Bloomberg Intelligence Senior 0:00:32.640 --> 0:00:37.159 technolology analyst. He's out there in Chicago, honoreg I want 0:00:37.159 --> 0:00:39.600 to kick it off with you go where you want. 0:00:39.840 --> 0:00:41.760 There's a lot coming at US. I want to start 0:00:41.760 --> 0:00:42.480 with Microsoft. 0:00:43.400 --> 0:00:45.920 Yeah, so Microsoft did beat a little bit on the 0:00:45.960 --> 0:00:48.720 Azure growth, so thirty eight percent goes to thirty nine, 0:00:49.040 --> 0:00:51.400 So minor inflection up. We're going to hear on the 0:00:51.400 --> 0:00:53.680 call whether they're going to use the they have used 0:00:53.680 --> 0:00:56.680 sheep us internally, and what kind of guidance that they give. 0:00:57.000 --> 0:01:00.440 So that's really Microsoft. But the two biggest shaka are 0:01:00.520 --> 0:01:04.839 actually Google Cloud growth and AWS growth. Both have accelerated 0:01:04.959 --> 0:01:07.959 quite a bit. That shows that their cloud strategy right 0:01:07.959 --> 0:01:11.240 now is doing slightly better than MICROSOFTS. 0:01:11.000 --> 0:01:12.720 And Love though, come on in here again. We've got 0:01:12.720 --> 0:01:15.039 a great Roundtiller Love the Bloomberg Tech co host. That 0:01:15.120 --> 0:01:18.080 was Honor Rna Bloomberg Intelligence senior analyst who we just 0:01:18.120 --> 0:01:19.480 heard from. In in a minute, we're going to bring 0:01:19.560 --> 0:01:24.000 in Ron Westfall Hyperframe Research, Infrastructure and Networking VP and 0:01:24.040 --> 0:01:26.520 practice leader ed what's on your radar? 0:01:27.319 --> 0:01:30.399 How hard it is to follow? Anna rag, I gave 0:01:30.440 --> 0:01:33.520 you a little time, little time? Yeah, look I go 0:01:33.600 --> 0:01:37.840 with it. Logical that AWS growth Amazon Web Services is 0:01:37.880 --> 0:01:41.640 the number one position in cloud computing. Twenty eight percent 0:01:41.760 --> 0:01:45.479 is the highest rate of growth for about fifteen quarters. 0:01:45.200 --> 0:01:48.760 That's that's the severity of the performance. So going into this, 0:01:48.840 --> 0:01:52.080 I'm trying to get a common thread between Alphabet, the 0:01:52.080 --> 0:01:55.480 parent of Google AWS, and Microsoft. We looked for the 0:01:55.520 --> 0:01:58.600 growth rates of cloud because the swing factor in the 0:01:58.600 --> 0:02:02.080 market has been cap to expect. Investors have been willing 0:02:02.120 --> 0:02:04.480 to look at the capital expenditures even if those numbers 0:02:04.480 --> 0:02:08.079 get bigger. But in return, they want to see outperformance 0:02:08.160 --> 0:02:11.520 in cloud computing growth driven by AI and also they 0:02:11.560 --> 0:02:15.399 want to see some kind of forward guidance boosted forward guidance, 0:02:15.440 --> 0:02:18.320 and so in these statements we have the numbers on 0:02:18.360 --> 0:02:21.320 growth of cloud. We don't have a capital expenditures figure 0:02:21.360 --> 0:02:25.040 for AWS that's any different from prior guidance. Meta does 0:02:25.080 --> 0:02:27.480 have a new capital expenditures figure, and I would just 0:02:27.480 --> 0:02:28.640 suggest we go to that next. 0:02:28.720 --> 0:02:30.800 Well, that's exactly where I want to go. One hundred 0:02:30.800 --> 0:02:32.600 and twenty five to one hundred and forty five billion 0:02:32.639 --> 0:02:34.760 dollars increase from a prior range of one hundred and 0:02:34.800 --> 0:02:37.560 fifteen to one hundred and thirty five billion dollars. As 0:02:37.560 --> 0:02:39.799 a result, we're seeing shares of Meta platforms carrilled down 0:02:39.800 --> 0:02:41.400 by six point three percent. 0:02:41.520 --> 0:02:44.720 Yeah. Kurt Wagner, a tech reporter on the Metal Live blog. 0:02:44.800 --> 0:02:47.560 From the release, we anticipate twenty twenty six capex, including 0:02:47.560 --> 0:02:51.280 those principal payments on finance leases, to be in the 0:02:51.360 --> 0:02:53.440 range of that one twenty five to one forty five billion, 0:02:53.680 --> 0:02:57.480 So increase from that range, just to reiterate, So that's 0:02:57.520 --> 0:02:58.120 a problem in. 0:02:58.960 --> 0:03:01.720 Well, let's just do the calculation right, So we know 0:03:01.800 --> 0:03:04.520 that capex is going up, what is the outlook for growth? 0:03:04.840 --> 0:03:06.200 Revenue in the current period? 0:03:06.240 --> 0:03:10.160 Second quarter will be fifty eight billion to sixty one 0:03:10.200 --> 0:03:13.560 billion dollars. Consensus was fifty nine point six billion. That 0:03:14.400 --> 0:03:16.920 is right in line. And we went into this knowing 0:03:17.160 --> 0:03:19.640 based on a summary of the cell side and of 0:03:19.680 --> 0:03:22.840 the buy side that if the CAPEX numbers get higher, 0:03:23.160 --> 0:03:25.959 they want to see growth also going up. In terms 0:03:26.000 --> 0:03:29.320 of guidance going forward, and you know this second quarter 0:03:29.360 --> 0:03:32.720 guide on Meta sales, it's very in line with expectation. 0:03:33.520 --> 0:03:36.280 I want to bring in Ron Westfall, Hyperframe Research, Infrastructure 0:03:36.280 --> 0:03:38.600 and Networking VP and practice leader. I want to stay 0:03:38.600 --> 0:03:41.840 on what Ed was talking about Ron, and that's Meta 0:03:42.960 --> 0:03:47.000 Meta's CAPEX estimate. We're also seeing some headlines. Headwinds in 0:03:47.040 --> 0:03:50.440 the EU and US could significantly impact results. The company 0:03:50.480 --> 0:03:54.000 sees scrutiny on youth related issues as well. Shares of 0:03:54.000 --> 0:03:56.160 Meta platforms right now down about five and a half percent, 0:03:56.200 --> 0:04:00.880 but it does seem like more important is CAPEX number 0:04:00.920 --> 0:04:03.040 hen and twenty five hundred and forty five billion increase 0:04:03.080 --> 0:04:05.480 from that prior range of one hundred and fifteen two 0:04:05.480 --> 0:04:07.640 one hundred and thirty five billion dollars. What are your thoughts? 0:04:09.080 --> 0:04:12.320 Sure, I like to start with looking at the bigger picture. 0:04:12.800 --> 0:04:17.800 I would see Meta as certainly benefiting overall despite the 0:04:17.839 --> 0:04:23.400 recent dip from the overall market expectations that is the 0:04:23.440 --> 0:04:28.280 total addressable market for Meta alongside the other of the 0:04:28.520 --> 0:04:32.359 major four that are coming out this week, is a 0:04:32.440 --> 0:04:36.560 total addressable market of up to eleven trillion dollars, and 0:04:36.640 --> 0:04:40.680 so I think that's going to definitely enable Meta as 0:04:40.720 --> 0:04:45.200 well as the other players to continue with the upswing 0:04:45.360 --> 0:04:48.440 and capex. And yes, that's causing concern, but I think 0:04:48.480 --> 0:04:50.160 what we're looking at is when you look at the 0:04:50.200 --> 0:04:54.720 group burnings, they're projected to grow twenty percent year over year, 0:04:55.240 --> 0:04:58.120 and that is outpacing the overall S and P five 0:04:58.240 --> 0:05:03.279 hundred fourteen point five percent growth expectation. And so as 0:05:03.279 --> 0:05:07.320 a result, I'm anticipating that Meta will definitely be looking 0:05:07.400 --> 0:05:10.880 pretty solid over the course of the year and further out, 0:05:11.279 --> 0:05:16.279 because not only is it upping its CAPEX expenditures, however, 0:05:16.520 --> 0:05:20.159 it's also I think benefiting from trading at a relatively 0:05:20.200 --> 0:05:24.200 conservative forward pe ratio of the lower to mid twenties, 0:05:24.240 --> 0:05:27.040 as you know that fluctuates on a daily basis, and 0:05:27.120 --> 0:05:30.080 they're definitely benefiting from the fact that they're monetizing AI 0:05:30.200 --> 0:05:33.400 more rapidly than some of the other Max seven thanks 0:05:33.440 --> 0:05:38.680 to their social platforms, certainly including Facebook as well as 0:05:38.720 --> 0:05:41.880 Instagram and so I think that's something that will definitely 0:05:41.920 --> 0:05:46.159 be something to definitely look at as we find out 0:05:46.160 --> 0:05:48.159 what Meta is really going to do for the rest 0:05:48.200 --> 0:05:48.640 of the year. 0:05:49.440 --> 0:05:51.240 All right, folks, I want to go over to Amazon. 0:05:51.680 --> 0:05:54.119 A couple of things also popping up, fifty nine point 0:05:54.560 --> 0:05:57.520 three billion year year rise and purchase of property and equipment. 0:05:57.560 --> 0:06:01.880 They say the increase in purchases reflect investment in AI. 0:06:02.279 --> 0:06:05.120 They also say, ed fred free cash flow fil to 0:06:05.200 --> 0:06:07.279 one point two billion for trailing twelve months. Come on 0:06:07.320 --> 0:06:08.160 back in lot though. 0:06:08.240 --> 0:06:11.080 Yeah, so this is exactly what I've got on my screen. 0:06:11.240 --> 0:06:15.200 So the story financially for each company is slightly different. 0:06:15.560 --> 0:06:17.880 If we focus on Amazon, it's spending so much on 0:06:17.960 --> 0:06:23.360 AI infrastructure that trailing twelvemonth three cash flow basically falls 0:06:23.360 --> 0:06:27.400 from twenty six billion dollars to one point two billion dollars. 0:06:27.600 --> 0:06:31.599 Operating cash flow rises. Amazon's are complicated business, right, you know, 0:06:31.760 --> 0:06:36.080 AWS largely accounts for most of operating income, but increasingly, 0:06:36.160 --> 0:06:39.480 like ADS is important on the e commerce side. And 0:06:40.160 --> 0:06:42.520 I'm hoping that that Ana Rag will kind of talk 0:06:42.560 --> 0:06:44.359 a little bit about that this is kind of a 0:06:44.400 --> 0:06:48.840 classics building cycle signal though, and to this point, and 0:06:48.880 --> 0:06:50.440 you know, maybe one of the other guys and weigh 0:06:50.440 --> 0:06:54.920 in on this. I'm just but a journalist, but you know, 0:06:55.360 --> 0:06:58.839 the market has been really sanguine about negative free cash 0:06:58.880 --> 0:07:01.480 flow or the prospect of it. You know that it's 0:07:01.520 --> 0:07:05.680 not something that everyone's like freaked out over. Basically, that's 0:07:05.720 --> 0:07:06.960 a very simple way of putting it. 0:07:07.440 --> 0:07:10.480 Ron come on back in Ron westfall of hyperframe. How 0:07:10.560 --> 0:07:12.560 do you see it in terms of what Amazon's up to. 0:07:12.840 --> 0:07:15.440 I like that idea and this concept of you've got 0:07:15.440 --> 0:07:18.760 to spend to build for future revenue, But how do 0:07:18.800 --> 0:07:19.280 you see it? 0:07:21.080 --> 0:07:27.520 I think AWS is definitely benefiting Amazon's overall prospects, and 0:07:27.600 --> 0:07:30.840 I think that's underlined by the fact that the AWSAI 0:07:30.920 --> 0:07:35.040 revenue run rate has already gone past fifteen billion dollars, 0:07:35.720 --> 0:07:38.840 and that's linking to the fact that as growth is 0:07:39.000 --> 0:07:43.920 projected to accelerate toward twenty five point six percent following 0:07:44.200 --> 0:07:47.840 its landmark one hundred billion dollar infrastructure deal with Anthropic. 0:07:48.360 --> 0:07:50.800 So clearly that's something that I think will create not 0:07:50.840 --> 0:07:54.640 only positive perception, but I think it's giving you know, 0:07:54.680 --> 0:07:58.720 the hard numbers that AWS needs to continue with these 0:07:59.080 --> 0:08:03.920 cap asks expansions. Also, I think it's important to note 0:08:03.960 --> 0:08:08.480 that AWS capacity is selling out immediately, and so that's 0:08:08.520 --> 0:08:11.720 supported by a massive two hundred and forty four billion 0:08:11.760 --> 0:08:17.320 dollar contracted backlog, as well as high margin revenue from 0:08:17.360 --> 0:08:20.840 its trainium and graviton chips, and these I think are 0:08:20.880 --> 0:08:24.760 offset of concerns around the large margin pressure from the 0:08:24.760 --> 0:08:29.280 two hundred billion dollar billion planned and capital expenditures for 0:08:29.640 --> 0:08:32.840 the year. And so you take this together, I think 0:08:33.240 --> 0:08:36.440 net positive is what Amazon is going to bring to 0:08:36.480 --> 0:08:39.280 the table. It's definitely, I think something that applies to 0:08:39.320 --> 0:08:43.479 all the hyperscalers, and Amazon I think is definitely positioned 0:08:43.480 --> 0:08:47.240 to improve on its performance. As a result, we've got. 0:08:47.160 --> 0:08:48.880 To go to Alphabet, which is up three and a 0:08:48.920 --> 0:08:50.280 half percent here in the aftermarket. 0:08:50.360 --> 0:08:53.319 Yeah. The company reported quarterly revenue and profited beat projections. 0:08:53.360 --> 0:08:56.040 It was fueled by strong growth in its cloud computing unit. 0:08:56.400 --> 0:08:59.480 Its signaled that the Internet Giant's unprecedented investments in AI 0:08:59.520 --> 0:09:03.280 infrastructure are beginning to pay off. The company said that 0:09:03.320 --> 0:09:06.440 first quarter revenue excluding those partner payouts, was ninety four 0:09:06.480 --> 0:09:09.319 point seven billion dollars. That compares to the ninety one 0:09:09.320 --> 0:09:12.480 point six billion dollars expected on average by analysts. That's 0:09:12.520 --> 0:09:14.880 according to data compiled by Bloomberg. 0:09:15.000 --> 0:09:17.480 All right, still with us is Ed Lulow, a Bloomberg 0:09:17.480 --> 0:09:20.920 Tech co host Bloomberg TV, and our Agrana Bloomberg Intelligence 0:09:20.960 --> 0:09:25.200 Senior technology analyst, Ed. As we continue to go through 0:09:25.200 --> 0:09:27.400 these numbers and results, where do you want to go? 0:09:28.080 --> 0:09:28.280 Yeah? 0:09:28.280 --> 0:09:29.959 I think you guys have done a masterful job. 0:09:30.480 --> 0:09:33.200 You know, the the cloud growth rate, if we put 0:09:33.320 --> 0:09:36.439 medatus to one side for a minute, is really interesting 0:09:36.480 --> 0:09:39.280 because all things are relative. So you know, Ana rag 0:09:39.360 --> 0:09:42.240 pointed out if you if you focus on Google cloud 0:09:42.600 --> 0:09:47.079 sixty three percent growth. You know, AI is for them 0:09:47.640 --> 0:09:50.599 also boosting search, right, and they had this kind of 0:09:50.720 --> 0:09:54.880 dual benefit, which is really interesting. They reported a metric 0:09:54.920 --> 0:09:57.120 that we've kind of not skipped over, but there's so 0:09:57.240 --> 0:10:00.679 much news it gets buried, which is that Gemini for Enterprise, 0:10:00.760 --> 0:10:05.000 in other words, their AI tool that businesses pay for 0:10:05.600 --> 0:10:09.360 saw its active user base grow forty percent quarter on quarter. 0:10:09.840 --> 0:10:11.960 So there was a big jump in that. And the 0:10:12.000 --> 0:10:13.719 reason I flagged. 0:10:13.320 --> 0:10:16.040 That as important is that that's the standard to which 0:10:16.080 --> 0:10:20.840 we hold open ai right and andthropic. You know, but 0:10:20.920 --> 0:10:23.000 the markets of earlier this week were spooked by the 0:10:23.040 --> 0:10:26.160 Wall Street Journal report of Open AI missing its own 0:10:26.200 --> 0:10:29.400 internal metrics. One of them was the active user base 0:10:29.440 --> 0:10:33.240 of chat GPT, which isn't universally an enterprise product, it's consumer. 0:10:33.480 --> 0:10:36.000 But I find that to be really interesting, and you know, 0:10:36.040 --> 0:10:38.760 it shows tangible growth on the other side of people 0:10:38.800 --> 0:10:43.160 actually using this. This the Gemini tool in the real world, 0:10:43.280 --> 0:10:44.319 you know, right, which. 0:10:44.160 --> 0:10:46.000 We all keep talking about. We need to see, right 0:10:46.000 --> 0:10:48.680 to kind of justify the spend. All right, We're going 0:10:48.760 --> 0:10:52.400 to continue with Ed Ludlow and of course Ron Westfall 0:10:52.520 --> 0:10:55.280 in just a moment. As we mentioned, Alphabet is now 0:10:55.360 --> 0:10:58.559 up about five point eight percent here in the aftermarket. 0:10:58.600 --> 0:11:01.120 We're looking at Amazon down about two point four percent, 0:11:01.280 --> 0:11:04.360 Meta a decline of five point three percent, and then 0:11:04.400 --> 0:11:07.199 we've also got Microsoft out with its results and we're 0:11:07.200 --> 0:11:09.800 seeing this one. It's been under pressure in the aftermarket 0:11:09.840 --> 0:11:11.960 right now, Tim about one point eight percent. 0:11:12.160 --> 0:11:15.280 Hey, we were talking about meta platforms. We have spoken 0:11:15.360 --> 0:11:18.480 quite a bit about Amazon, Qualcom and more. I want 0:11:18.480 --> 0:11:22.480 to bring Alphabet to our attention, six point six percent higher. 0:11:22.800 --> 0:11:25.160 In the after hours, the company reported quarterly revenue and 0:11:25.200 --> 0:11:27.520 profit that beat projections. It was fueled by strong growth 0:11:27.760 --> 0:11:31.160 in its cloud computing unit. That cloud computing unit reported 0:11:31.160 --> 0:11:34.319 sales of twenty billion dollars with a quote meaningful acceleration 0:11:34.400 --> 0:11:38.040 in growth driven by demand for its AI software and infrastructure. 0:11:38.200 --> 0:11:40.400 I want to bring it back in Ed Ludlow, Bloomberg 0:11:40.440 --> 0:11:43.839 Tech co host and Ron Westfall hyper frame research, infrastructure 0:11:43.920 --> 0:11:47.000 networking VP and a practice leader. Ron, I want to 0:11:47.000 --> 0:11:49.520 start with you in alphabet because we are seeing share 0:11:49.600 --> 0:11:52.439 surge in the after hours. The company reported earnings per 0:11:52.440 --> 0:11:55.640 share of five dollars and eleven cents, compared with Wall 0:11:55.640 --> 0:11:59.400 Street's two dollars and sixty two per share estimate. The 0:11:59.440 --> 0:12:02.600 cloud growth to certainly top of mind. We should remind 0:12:02.640 --> 0:12:06.280 everybody that you know, it competes against AWS and Microsoft's Azure. 0:12:07.040 --> 0:12:09.160 This report, though, what sticks out to you? 0:12:11.040 --> 0:12:14.760 Yeah, I think it's pointing to that Google is making 0:12:14.960 --> 0:12:18.400 more in roads in terms of capturing you know, mind 0:12:18.440 --> 0:12:23.360 share amongst the hyper scale competition. And I think what 0:12:23.400 --> 0:12:25.760 we saw is that when you look at Google Cloud 0:12:25.800 --> 0:12:30.559 specifically and reporting over twenty billion revenue, well that basically 0:12:30.800 --> 0:12:33.839 beat out the analyst estimates, and that is I think 0:12:33.880 --> 0:12:37.800 a remarkable sixty three percent you overhear growth rate, and 0:12:37.840 --> 0:12:42.120 so that by itself is congratulatory. And when you look 0:12:42.240 --> 0:12:46.000 further down, it's like, okay, why are the cloud margins 0:12:46.040 --> 0:12:50.520 expanding to nearly thirty percent, up from just twenty percent 0:12:50.880 --> 0:12:54.280 six months ago. I think what is resonating is that 0:12:54.320 --> 0:12:58.439 the company is making the right moves. Certainly, it's acquisition 0:12:58.520 --> 0:13:02.800 of wiz, which closed just last month and has already 0:13:02.840 --> 0:13:08.720 become integrated. It's making Google Cloud a more attractive choice 0:13:08.800 --> 0:13:13.640 for enterprises that are requiring sovereign and highly secure AI environments. 0:13:13.640 --> 0:13:16.839 And that is certainly a hot topic in our conversations, 0:13:17.200 --> 0:13:20.840 and that is sovereign AI is something that will underpin 0:13:21.120 --> 0:13:25.920 confidence and the ability of enterprises to adopt the hyper 0:13:25.920 --> 0:13:29.800 scale AI services and so forth. And certainly that comes 0:13:29.880 --> 0:13:34.439 to inferencing, and that is, you know, ensuring that their propriety, 0:13:34.679 --> 0:13:38.520 proprietary data never falls into the wrong hands, that you know, 0:13:38.559 --> 0:13:40.400 it's not going to be something that will be exposed 0:13:40.720 --> 0:13:44.040 out in the public cloud at part of it. And 0:13:44.120 --> 0:13:46.480 I think what's also important is that what we saw 0:13:46.480 --> 0:13:49.960 at Google Cloud Next just you know, last week, is 0:13:50.000 --> 0:13:54.640 that when it comes to uh, you know, the TPU silicon, 0:13:55.080 --> 0:13:59.120 Google is coming up with innovative ways to augment the 0:13:59.240 --> 0:14:02.160 NVIDIA capable at least they have in house certainly they 0:14:02.240 --> 0:14:05.760 use their TPUs to train their own models in house, 0:14:05.800 --> 0:14:08.560 that includes a Gemini for example. But I think they're 0:14:08.640 --> 0:14:12.640 smart about how they're now diversifying their AI chip sets 0:14:12.679 --> 0:14:16.640 to stand out. That is, now they have TPU what 0:14:16.679 --> 0:14:20.400 they're calling t eight that is that is a specific 0:14:20.880 --> 0:14:24.320 for training only, but now they also have the TPU 0:14:24.400 --> 0:14:27.440 eight I, which is for inferencing. And so what we're 0:14:27.480 --> 0:14:31.080 seeing is a fundamental shift more toward inferencing. That is, 0:14:31.160 --> 0:14:36.160 you know, the AI capabilities being used in play, that is, 0:14:36.520 --> 0:14:41.120 the ability to use handsets and other capabilities that take 0:14:41.200 --> 0:14:44.640 what has already been trained and actually apply to real 0:14:44.680 --> 0:14:48.400 world scenarios. And so as a result, I think this 0:14:48.560 --> 0:14:54.640 is why Alphabet is definitely making inroads with winning more 0:14:55.160 --> 0:14:59.120 cloud business. And if you look at Alphabet overall, I 0:14:59.120 --> 0:15:01.360 think also it's import to note that when it comes 0:15:01.440 --> 0:15:06.440 to diversifying revenue streams that their way MO unit is 0:15:06.480 --> 0:15:10.120 definitely making it would say waves. So that is that's 0:15:10.160 --> 0:15:13.120 already scaling up to one million rides and so that 0:15:13.240 --> 0:15:17.240 I think is something that will definitely continue the revenue 0:15:17.280 --> 0:15:19.240 generating capabilities moving forward. 0:15:19.400 --> 0:15:22.000 Well, we're definitely seeing it. Jine in the aftermarket now 0:15:22.080 --> 0:15:24.760 up about six point two percent here. I mean listen, 0:15:24.800 --> 0:15:27.640 to be fair, Alphabet's definitely been hustling when it comes 0:15:27.720 --> 0:15:30.520 to AI. Amazon right now though down about one point 0:15:30.560 --> 0:15:32.040 nine percent. We want to get a little bit more 0:15:32.080 --> 0:15:35.360 on Amazon. And with that, Matt Day, Bloomberg News Technology 0:15:35.360 --> 0:15:39.120 reporter follows the company joining us right now. Matt, walk 0:15:39.160 --> 0:15:41.560 us through what you think is important for our audience. 0:15:42.800 --> 0:15:45.160 You can go back to what Jeff Bezos said was important, 0:15:45.240 --> 0:15:47.720 his favorite metric, free cash flow. If you look at 0:15:47.760 --> 0:15:49.880 Amazon the last twelve months, it's not zero, but it's 0:15:49.880 --> 0:15:51.520 pretty close to zero, and it's a whole lot closer 0:15:51.560 --> 0:15:54.240 than it was last year. So the reason for that, obviously, 0:15:54.280 --> 0:15:57.600 it's AI spending. It's data centers, a whole lot of 0:15:57.600 --> 0:16:00.720 property and equipment that there's spend money on these days. 0:16:01.840 --> 0:16:05.120 The cloud revenue is good, it's going up. It beat expectations. 0:16:05.480 --> 0:16:08.080 But just a reminder for Amazon investors, they're spending a 0:16:08.080 --> 0:16:09.600 whole lot to get a seat at this table. 0:16:10.760 --> 0:16:12.160 Is the spending paying off? 0:16:13.920 --> 0:16:16.200 It looks like it if you if you roll things 0:16:16.240 --> 0:16:18.800 back a few months ago, folks were really concerned about 0:16:18.800 --> 0:16:22.960 Amazon's position in cloud, and we're just talked about Google, Microsoft, 0:16:23.000 --> 0:16:24.480 was also really hot, and they kind of looked like 0:16:24.520 --> 0:16:26.440 they might be sort of the third place cloud of 0:16:26.480 --> 0:16:29.280 the AI era. To boil it down. Since then, they've 0:16:29.280 --> 0:16:31.800 done these big mechad deals with open Ai, with Anthropic, 0:16:32.320 --> 0:16:33.720 and it looks like some of that is starting to 0:16:33.960 --> 0:16:36.160 filter into their at their cloud results, they've accelerated the 0:16:36.200 --> 0:16:37.040 last couple of quarters. 0:16:37.200 --> 0:16:40.680 Anything you're scratching your head over here, Matt a little. 0:16:40.720 --> 0:16:43.760 The market reaction, honestly, is they beat on so many 0:16:43.800 --> 0:16:46.280 things that if it feels like a lot of these 0:16:46.680 --> 0:16:49.480 big tech names been going between Capex freak out to 0:16:49.760 --> 0:16:51.960 you know, OAI is the future and in quarter quarter, 0:16:52.000 --> 0:16:53.440 it's kind of hard to tell what folks are stinking 0:16:53.480 --> 0:16:54.120 their teeth into. 0:16:54.480 --> 0:16:56.920 Is the yeah, oh, go ahead, Carol, No, go ahead. 0:16:57.000 --> 0:17:02.360 The investing that Amazon has done in open Ai and Anthropic, 0:17:02.640 --> 0:17:05.359 it's committed that they'll h to spend more than one 0:17:05.400 --> 0:17:08.879 hundred billion dollars on AWS services in the coming years 0:17:09.520 --> 0:17:14.680 between those two. How do investors look at that, because 0:17:15.280 --> 0:17:18.080 it's do they look at it as venture like the 0:17:18.160 --> 0:17:21.439 company's making a bet, like a venture capitalist bet, or 0:17:21.440 --> 0:17:26.440 does it look like the companies trying, you know, guaranteeing 0:17:26.720 --> 0:17:31.240 business by making these investments in exchange for AWS usage. 0:17:32.200 --> 0:17:34.159 I mean, some of it is is clearly buying business 0:17:34.160 --> 0:17:35.960 a little bit right, making sure that you've got entitlement 0:17:36.040 --> 0:17:38.800 relationship with open AI that they want to spend. But 0:17:38.800 --> 0:17:40.720 I think there are some long term questions. You know, 0:17:40.760 --> 0:17:43.280 Oracle has seen versions of this. Microsoft have seen this 0:17:43.400 --> 0:17:46.200 where you know, investors start to discount. Okay, Sam Maltman 0:17:46.240 --> 0:17:48.840 has pledged to spend you know, one trillion dollars plus 0:17:48.920 --> 0:17:50.560 all over the place. How much of that is going 0:17:50.600 --> 0:17:53.200 to materialize? Right? So now Amazon's in a position where they've 0:17:53.200 --> 0:17:56.240 definitely got a slice of that alongside anthropic spending. So 0:17:56.320 --> 0:17:59.240 the question is, you know, when does that materialize, Where 0:17:59.240 --> 0:18:00.600 do you start to put that up on the calendar, 0:18:00.640 --> 0:18:02.720 and how much of a sure thing does that become. 0:18:03.240 --> 0:18:06.720 I want to bring back Ron Westfall, Hyperframe Research, Infrastructure Networking, 0:18:06.760 --> 0:18:09.280 a VPN practice leader. He has been with us for 0:18:09.359 --> 0:18:11.560 about an hour as the slew of earnings came in 0:18:11.600 --> 0:18:14.840 at thanks to ED, we know at seventy one seconds 0:18:14.840 --> 0:18:17.800 for all of these companies to report, we're still you know, 0:18:17.880 --> 0:18:20.560 breaking our making our way through all of these I 0:18:20.640 --> 0:18:23.239 weigh in on Amazon, what we've heard from Matt what 0:18:23.280 --> 0:18:27.280 we've heard from Ed as well, because this is a 0:18:27.280 --> 0:18:30.800 company where you know, certainly AWS is the star, but 0:18:30.920 --> 0:18:33.320 it also and that's what moves the needle, but it 0:18:33.359 --> 0:18:37.200 also gives us a good idea of what Americans are 0:18:37.200 --> 0:18:41.640 paying and how American consumer spending is holding up, even 0:18:41.680 --> 0:18:43.600 though that's not really what moves the stock. 0:18:46.440 --> 0:18:50.440 It's amazing. I think when you're looking at Okay, what 0:18:50.960 --> 0:18:56.720 is Amazon doing? That is you know, continuing these organizations 0:18:56.800 --> 0:19:01.600 as well as consumers to you know, use their certainly 0:19:01.640 --> 0:19:08.080 their services. And I think when he snapshot for example AWS, 0:19:08.119 --> 0:19:12.240 that is, you know, the enterprises are using Amazon bedrock, 0:19:12.920 --> 0:19:18.240 and that is underlined by their trainingum to Inferentia chipsets. 0:19:18.720 --> 0:19:22.000 And if you look at that, that chipset business alone 0:19:22.560 --> 0:19:26.640 is reached twenty billion dollars in annualize revenue run rate. 0:19:27.000 --> 0:19:29.280 And so I think this is pointing to that Amazon 0:19:29.400 --> 0:19:33.360 is making the right bets across its entire portfolio. It's 0:19:33.400 --> 0:19:36.959 not just about Okay, how can we improve you know, 0:19:37.000 --> 0:19:42.000 the Amazon experience, but also how can AWS meet business 0:19:42.000 --> 0:19:45.240 needs on across the board basis. And I think, yeah, 0:19:45.280 --> 0:19:47.879 when it comes to fundamentals, when we're looking at Amazon, 0:19:48.600 --> 0:19:52.720 Amazon advertising. He's on track to exceed seventy billion dollars 0:19:53.080 --> 0:19:56.239 in revenue just this year. And that is, you know, 0:19:56.359 --> 0:19:58.600 tied to the fact that there's so much high intent 0:19:58.720 --> 0:20:02.320 purchase data information that they're able to leverage that it's 0:20:02.440 --> 0:20:07.760 improving their capability. So that is again underlying why AI 0:20:08.040 --> 0:20:10.800 is making a difference in terms of their business model. 0:20:11.080 --> 0:20:13.360 And I think it's also reflected in what we talked 0:20:13.400 --> 0:20:13.800 about in. 0:20:13.760 --> 0:20:14.560 Terms of the metas. 0:20:15.160 --> 0:20:17.640 Hey, guys, something I think will improve. 0:20:18.000 --> 0:20:21.080 No, this is all good stuff, really good stuff. We 0:20:21.200 --> 0:20:23.000 could go on and on. Hey, we've got about two 0:20:23.000 --> 0:20:25.880 minutes before we have to wrap up this segment. I'm 0:20:25.920 --> 0:20:28.160 just curious for each of you, what do you think 0:20:28.400 --> 0:20:32.480 was kind of the most important headline or narrative from 0:20:32.560 --> 0:20:36.280 this drop of for results. And Matt, let me start 0:20:36.320 --> 0:20:39.600 with you. I know Amazon's your jams, so maybe go 0:20:39.720 --> 0:20:43.560 there or go anywhere there's a good spot. 0:20:43.600 --> 0:20:46.280 I mean, it's that Amazon's got a seat at the table, 0:20:46.359 --> 0:20:48.879 right They've got all the big models are on a 0:20:49.040 --> 0:20:50.880 WS and so now you know, there was a first 0:20:50.960 --> 0:20:53.040 leg of this AI competition was you know, who's going 0:20:53.080 --> 0:20:55.000 to add the exclusive tie up? This one looks like 0:20:55.080 --> 0:20:57.040 you can get most just about anything anywhere. So who's 0:20:57.040 --> 0:20:59.000 got the better mouse trapping cloud? Looking forward to seeing 0:20:59.000 --> 0:21:00.000 how that transplarers? 0:21:00.240 --> 0:21:02.359 All right, Ron, your turn, come on in here. Just 0:21:02.400 --> 0:21:04.880 the most important bit of info you got from any 0:21:04.920 --> 0:21:07.160 of these companies that reported after the bell. 0:21:07.359 --> 0:21:09.360 And you can't say, ah, yeah, I think they both. 0:21:11.119 --> 0:21:14.119 No, they're demonstrating the runways there that this capex is 0:21:14.160 --> 0:21:16.800 all justified, and I think we're seeing that it's having 0:21:16.840 --> 0:21:19.600 an impact already. We're seeing that the companies that have 0:21:19.720 --> 0:21:23.080 integrated AI to their operations are seeing cash flow margin 0:21:23.160 --> 0:21:26.959 expansion it roughly twice the global average. So yes, it 0:21:27.040 --> 0:21:29.520 is now making a difference. The ROI is there and 0:21:29.520 --> 0:21:30.760 we're seeing the results. 0:21:31.400 --> 0:21:33.280 All right, good stuff, Ron, Thank you so much. Ed, 0:21:33.359 --> 0:21:35.359 come on in, same thing for you. I know you 0:21:35.520 --> 0:21:37.480 kind of love all these It's hard to have a 0:21:37.480 --> 0:21:39.600 favorite child here. But I'm just curious, as you look 0:21:39.640 --> 0:21:42.159 at these headlines and you're thinking about your show tomorrow, 0:21:42.520 --> 0:21:45.400 is there a narrative a headline that really just sticks 0:21:45.400 --> 0:21:45.720