WEBVTT - Chipmakers Sink as Nvidia Fails to Dispel AI Worry 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.560 or watch us live on YouTube. 0:00:24.320 --> 0:00:26.600 The big earning story of the day is in Vidia 0:00:26.640 --> 0:00:29.720 put out a really, really solid number but being caught 0:00:29.800 --> 0:00:34.320 up in the downdraft. Continued downdraft selling of technology, in 0:00:34.400 --> 0:00:41.639 particular software kind of AI themed names more specifically Kunjan Sobani. 0:00:41.960 --> 0:00:44.280 He is the senior analyst covering the semiconductor companies for 0:00:44.280 --> 0:00:46.920 Bloomberg Intelligence. He's based out in our San Francisco office. 0:00:47.560 --> 0:00:49.400 I'm just reading your research note here. Give us a 0:00:49.479 --> 0:00:51.880 sense of how you think the quarter went for Nvidia. 0:00:53.280 --> 0:00:56.520 Yeah, this was one of the more stronger quarter showings 0:00:56.600 --> 0:00:59.279 if you look at the last four quarters. The one 0:00:59.360 --> 0:01:02.160 Q guide is the next quarter guide blew off most 0:01:02.240 --> 0:01:05.360 of the high bar of the byside bogies that we 0:01:05.600 --> 0:01:09.720 think the buyside was at. There was really nothing negative 0:01:09.959 --> 0:01:12.759 to find, even if we go through a fine core 0:01:13.040 --> 0:01:15.480 in this quarter and print, there were a couple of 0:01:15.560 --> 0:01:19.000 positives that we really liked. One is the revenues from 0:01:19.080 --> 0:01:22.960 their customers outside of the top five CSP and hyper 0:01:22.959 --> 0:01:27.520 scales grew actually faster than those five customers. When we 0:01:27.560 --> 0:01:30.760 look at the whole PHISS last fiscal year, that group 0:01:30.920 --> 0:01:33.920 grew almost close to the top five. So all the 0:01:33.959 --> 0:01:36.080 focus always goes to the top five, but this really 0:01:36.120 --> 0:01:40.480 speaks to the breadth and the quality and the diversification 0:01:40.520 --> 0:01:43.200 of demand for n media products, which is a good 0:01:43.400 --> 0:01:47.319 robust side. Second thing we really liked is networking. So 0:01:47.360 --> 0:01:49.840 if we look at the four Q numbers, majority of 0:01:49.880 --> 0:01:53.120 the beat in data center was coming from networking. Their 0:01:53.160 --> 0:01:58.920 networking attached continues to get stronger and honestly surpassing expectations 0:01:58.920 --> 0:02:01.600 of what investors have or the networking division. And the 0:02:01.640 --> 0:02:04.360 final thing we really liked was the gross margins. We 0:02:04.440 --> 0:02:07.360 all are aware of the rising memory cost, the rising 0:02:07.400 --> 0:02:11.040 way for the rising substrate cost. Despite all of these costs, 0:02:11.200 --> 0:02:14.160 which the company does not pass through to its customers, 0:02:14.160 --> 0:02:16.280 so sort of in a way eats that cost, they're 0:02:16.280 --> 0:02:20.280 able to maintain this ridiculously high software level gross margins 0:02:20.320 --> 0:02:21.400 for a hardware company. 0:02:21.760 --> 0:02:25.040 What about growth and other segments like automotive or edge computing? 0:02:25.080 --> 0:02:27.920 How important are those when it comes to the company's 0:02:28.280 --> 0:02:29.840 long term earnings profile. 0:02:31.360 --> 0:02:33.280 I don't think right now anyonus focus on those when 0:02:33.280 --> 0:02:35.480 you look at the scale, I mean, majority of the 0:02:35.520 --> 0:02:38.160 revenues coming from the data center, right, so they don't 0:02:38.200 --> 0:02:42.160 really move a needle a lot. Automotive, however, will become 0:02:42.320 --> 0:02:44.640 very critical when you think about the next three to 0:02:44.720 --> 0:02:47.560 five years, because once we get to the stage where 0:02:47.639 --> 0:02:51.359 we have a massive deployment of L three plus L 0:02:51.440 --> 0:02:55.560 four plus automobiles on the road, not just in the US, 0:02:55.560 --> 0:02:58.040 but also in China, this is where you know, this 0:02:58.120 --> 0:03:01.480 could bring in tens of billions of dollars of revenue 0:03:01.480 --> 0:03:02.320 for for Nvidia. 0:03:02.720 --> 0:03:05.760 So what are we How should we think about China here? 0:03:05.760 --> 0:03:07.720 Because I can't keep track. I don't know what chip's 0:03:08.120 --> 0:03:10.400 allowed in, not allowed in, how long it will be 0:03:10.440 --> 0:03:12.960 allowed in. Is the company just saying we're just going 0:03:13.000 --> 0:03:15.800 to step back until we get greater clarity. 0:03:15.919 --> 0:03:17.960 Yeah, And that's not just with Nvidia, it's with all 0:03:18.000 --> 0:03:20.560 a chip makers. Right now, I mean for the last 0:03:20.639 --> 0:03:24.160 I guess twelve two to three quarters, nobody's been able 0:03:24.200 --> 0:03:26.960 to ship to China right, so on there's two factors, 0:03:27.200 --> 0:03:29.680 A US allowing them to chip to China and then 0:03:29.720 --> 0:03:33.200 also once that happens, will China accept these chips or not? 0:03:33.320 --> 0:03:37.040 So until that issue is completely resolved, the street has 0:03:37.080 --> 0:03:39.800 taken out numbers. Companies have taken out those numbers. They're 0:03:39.840 --> 0:03:42.320 just not talking and you know, not thinking about that 0:03:42.400 --> 0:03:42.840 right now. 0:03:43.160 --> 0:03:46.560 So it's been a blowout quarter. Any risk that investors 0:03:46.600 --> 0:03:49.240 should be watching that might effect grows and margins in 0:03:49.280 --> 0:03:51.080 the next quarters. 0:03:51.640 --> 0:03:55.320 Nothing specific to the company. What has really been hampering 0:03:55.320 --> 0:03:58.200 the sentiment is this overall AI for TIG. I mean, look, 0:03:58.280 --> 0:04:01.760 on one hand, the top customers who are announcing these 0:04:01.800 --> 0:04:06.280 big capex raises are getting punished because they're spending too much, right, 0:04:06.320 --> 0:04:08.280 So you can't have it both ways. Where the same 0:04:08.360 --> 0:04:11.000 investors who don't like this spending too much from the 0:04:11.040 --> 0:04:14.320 customers and Vidia is getting rewarded because of high capex 0:04:14.360 --> 0:04:16.640 spend will also keep on getting rewarded. So there is 0:04:16.680 --> 0:04:19.440 this AI fatigue that how long can you keep on 0:04:19.600 --> 0:04:22.440 increasing this spend and what happens next year? Every year 0:04:22.440 --> 0:04:25.080 when these numbers go up, a question comes about, well 0:04:25.160 --> 0:04:27.760 can you keep going making them go up again next year? No? 0:04:27.760 --> 0:04:31.040 No, I'm looking at the chip stocks, Kunjohn, your list 0:04:31.080 --> 0:04:34.040 is looking really good here Advanced micro Devices and Intel 0:04:34.040 --> 0:04:37.080 both up ninety percent and Vidia forty percent all on 0:04:37.160 --> 0:04:42.680 trailing twelve month basis. Are tech investors software investors? Are 0:04:42.640 --> 0:04:43.919 they hining out in you? Chip names? 0:04:45.360 --> 0:04:49.000 Well, chip names definitely are doing better from a sector 0:04:49.360 --> 0:04:52.520 perspective overall in the tech and for the obvious reasons. 0:04:52.560 --> 0:04:55.520 When you now look at the EPs growth prospects, the 0:04:55.640 --> 0:04:59.440 revenue growth prospects, right, A significant big portion of now 0:04:59.680 --> 0:05:01.920 that in the next two to three years is definitely 0:05:01.920 --> 0:05:05.800 coming to the chip name. So fundamentally a good spot 0:05:05.839 --> 0:05:06.200 to be in. 0:05:06.279 --> 0:05:11.159 I would say, what's the uh, what's the the next 0:05:11.360 --> 0:05:17.160 play here for the chip space? Here? Is it simply iterating, iterating, iterating, 0:05:17.240 --> 0:05:21.080 iterating on new chips and that drives the longer term 0:05:21.120 --> 0:05:22.320 revenue Outlook. 0:05:23.440 --> 0:05:26.000 Yeah, exactly what you said. Look, when we think about 0:05:26.040 --> 0:05:29.159 the markets where AI has already proliferated, which is really 0:05:29.240 --> 0:05:33.000 data centers, is just keeping up, you know, iterating to 0:05:33.040 --> 0:05:35.839 make the compute more efficient, so we can reach the 0:05:35.920 --> 0:05:38.600 stage where all this AI capex spending is no longer 0:05:38.640 --> 0:05:41.440 a concern because the customers are able to monetize from that. 0:05:41.760 --> 0:05:44.240 The second big wave will come from markets where AI 0:05:44.320 --> 0:05:47.000 has not yet prolifitted. So think of your edge device, 0:05:47.080 --> 0:05:51.200 your smartphones, your PCs, think of your automotive vehicles. Right, 0:05:51.240 --> 0:05:54.120 So this will be the new vectors of secular growth 0:05:54.120 --> 0:05:57.120 for the chip names where if AI proliferates faster here 0:05:57.360 --> 0:05:59.440 they can start collecting a lot more revenue. 0:05:59.800 --> 0:06:01.960 So just very quickly. How confident are you that this 0:06:02.040 --> 0:06:05.039 demand will remain strong so at twenty twenty six and beyond. 0:06:06.800 --> 0:06:10.200 So from the visibility that the Nvidia and its peers 0:06:10.200 --> 0:06:13.080 have announced, it definitely looks like for the chip guys 0:06:13.120 --> 0:06:16.440 at least until first half twenty twenty seven, is sort 0:06:16.480 --> 0:06:19.720 of locked in and pretty safe unless something major macro 0:06:19.960 --> 0:06:23.920 or geopolitical event doesn't happen beyond you know, starting second 0:06:23.960 --> 0:06:26.159 half twenty seven. We don't have a lot of risk 0:06:26.240 --> 0:06:28.719 modeled in, but that is something we cannot say, but 0:06:29.200 --> 0:06:30.880 for sure that it's locked in already. 0:06:31.760 --> 0:06:34.920 Stay with us more from Bloomberg Intelligence coming up after this. 0:06:38.760 --> 0:06:42.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:42.520 --> 0:06:45.640 weekdays at ten am Eastern on Apple Cocklay and Android 0:06:45.640 --> 0:06:48.960 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:49.000 --> 0:06:52.120 you get your podcasts, or watch us live on YouTube. 0:06:53.320 --> 0:06:55.839 We are fortunate here at Bloomberg to speak. Some of 0:06:55.839 --> 0:06:58.680 the really the smartest people out there in the marketplace 0:06:58.680 --> 0:07:00.840 are our next guest certainly qualify. It's been so kind 0:07:00.839 --> 0:07:03.520 to give us time over the years to help us 0:07:03.560 --> 0:07:05.080 get up. You know what's going on in the world 0:07:05.120 --> 0:07:09.400 of technology, and that's Genemunster, Managing partner for Deepwater Asset Management. Gene, 0:07:09.440 --> 0:07:11.360 let's just start with I guess the topic of the day, 0:07:11.360 --> 0:07:13.760 which is in Vidia. You know, I know you tech 0:07:13.760 --> 0:07:16.240 guys look for the beaten raised type of thing, and 0:07:16.280 --> 0:07:18.280 I think that's what we got here. What do you 0:07:18.280 --> 0:07:21.239 make in Vidia's report, Gene. 0:07:21.960 --> 0:07:25.480 Well, there's like three orbits here, Paul. There's the reaction 0:07:25.600 --> 0:07:29.080 the report, the reaction to the report, there's the fundamentals. 0:07:29.120 --> 0:07:31.120 Then there's kind of the AI trade. So there are 0:07:31.320 --> 0:07:35.160 three different orbits. And maybe specifically on the stock being down, 0:07:35.200 --> 0:07:39.640 we'll call it five percent today on what objectively was 0:07:39.760 --> 0:07:42.040 better than the whisper numbers, and some want to zero 0:07:42.120 --> 0:07:45.360 in on what the key whisper was. That was revenue 0:07:45.360 --> 0:07:48.080 growth for the April quarter. The street was in print 0:07:48.160 --> 0:07:51.640 at sixty four percent. The whisper was that they were 0:07:51.680 --> 0:07:54.880 going to guide to around seventy percent, and they guided 0:07:55.000 --> 0:07:58.160 to seventy nine percent. It's the high end of their range. 0:07:58.200 --> 0:08:01.000 And so if you put the together, that's kind of 0:08:01.000 --> 0:08:03.920 why you got that first like up three percent kind 0:08:03.960 --> 0:08:07.400 of reaction when the when initially the numbers hit, the 0:08:07.440 --> 0:08:10.920 guidance hit, and so, like you said, it's about beating rays, 0:08:11.000 --> 0:08:14.880 beating the whispers specifically. So how do you make sense 0:08:14.920 --> 0:08:17.280 if that is in fact the case? How do you 0:08:17.320 --> 0:08:19.920 make sense of what the stock is doing? And I 0:08:19.920 --> 0:08:22.840 think part of it comes down to there is this 0:08:23.000 --> 0:08:26.840 broader narrative just around this company is just getting too big. 0:08:27.480 --> 0:08:30.440 There is also the piece that some of this, like 0:08:30.520 --> 0:08:32.800 I mentioned, is that the whisper number was higher than 0:08:32.840 --> 0:08:37.440 the imprint numbers. Shares of Nvidia since we saw Google 0:08:37.440 --> 0:08:42.080 and Amazon ramp up their capex commentary three weeks ago, 0:08:42.240 --> 0:08:45.160 Shares Nvidia, even with the sell off today are up 0:08:45.200 --> 0:08:48.720 about eight percent now. That compares to the Nasdaq which 0:08:48.760 --> 0:08:52.440 is up about two percent. So essentially some of this 0:08:52.720 --> 0:08:54.640 was priced in even though they beat the numbers. I 0:08:54.640 --> 0:08:57.400 think that's really some important context. But if I may 0:08:57.480 --> 0:09:00.280 just kind of even zoom back even further and look 0:09:00.280 --> 0:09:04.480 at the broader narrative around in Nvidia is since October 0:09:04.520 --> 0:09:08.640 twenty eighth, that's when Meta shares got hit because of 0:09:08.679 --> 0:09:11.840 their big CAPPAX guide and kind of change the narrative 0:09:11.840 --> 0:09:15.160 in terms of how investors think about AI infrastructure since 0:09:15.240 --> 0:09:17.840 October twenty eighth, and the NASAQ is down about four 0:09:17.920 --> 0:09:21.560 percent and shares of Nvidia are down ten percent, even 0:09:21.559 --> 0:09:24.439 though the numbers have gone up, call it thirty percent 0:09:24.559 --> 0:09:27.559 since then. And so what you're really seeing here is 0:09:27.640 --> 0:09:34.360 this continued skepticism that investors have specifically about the sustainability 0:09:34.360 --> 0:09:37.600 of the trade. And I don't think it's any commentary 0:09:37.600 --> 0:09:40.040 about the strength of the fundamentals, but I think that's 0:09:40.040 --> 0:09:42.760 what we're seeing with the share price reaction this morning. 0:09:43.080 --> 0:09:45.319 I think it's also because Nvidia has a huge mote 0:09:45.320 --> 0:09:47.600 in training because if it's GPU, but when it comes 0:09:47.640 --> 0:09:50.160 to inference, not so much. And I feel like that's 0:09:50.160 --> 0:09:53.080 where AMD is a competitor and Broadcom with its custom chips, 0:09:53.080 --> 0:09:55.640 and maybe that's where the disappointment came from, at least 0:09:55.640 --> 0:09:58.600 when we're seeing this morning, well you. 0:09:58.640 --> 0:10:01.520 Know this that all plays in to this longer narrative, 0:10:01.520 --> 0:10:03.640 which had less to do about what was said on 0:10:03.679 --> 0:10:06.760 the call last night and so what you're tapping into 0:10:06.960 --> 0:10:09.360 is as inference, and I just want to quickly frame 0:10:09.400 --> 0:10:12.880 in inference for those listeners who may not be as 0:10:12.880 --> 0:10:15.160 familiar with that. A lot of the AI infrastructure spend, 0:10:15.200 --> 0:10:18.520 of course, has been related to training. The inference piece 0:10:18.600 --> 0:10:21.240 is that's really the substance of what AI is. Think 0:10:21.240 --> 0:10:26.720 of AI's inference inferences. Thinking that piece is there's debates 0:10:26.760 --> 0:10:30.280 about what are the most what are the optimal chips, 0:10:30.640 --> 0:10:33.760 the optimal GPUs you need for that. And my sense 0:10:33.840 --> 0:10:36.640 is that as part of the conversation, I think in 0:10:36.720 --> 0:10:38.680 video is going to be in a great place. I 0:10:38.720 --> 0:10:41.520 suspect that they're going to grow and count, So I 0:10:41.520 --> 0:10:43.280 think inference is going to be huge opportunity. I want 0:10:43.280 --> 0:10:45.800 to just quickly frame in how big inference is that 0:10:45.880 --> 0:10:48.360 you can have multiple winners here if you look at 0:10:48.480 --> 0:10:51.720 the size of inference, Jensen talks about being potentially a 0:10:51.800 --> 0:10:55.960 thousand times bigger than what traditional compute is. What we're 0:10:56.000 --> 0:10:59.120 seeing in our own use of AI internally is we're 0:10:59.120 --> 0:11:02.679 seeing tens of thousands of times more use of tokens 0:11:02.800 --> 0:11:05.920 when it comes to inference. And so inference is this 0:11:06.080 --> 0:11:10.880 scary topic because for some Nvidia investors because this competitive 0:11:10.960 --> 0:11:13.440 dynamic comes up. Do you need less power chips? But 0:11:13.480 --> 0:11:15.760 the reality is the amount of chips still, the amount 0:11:15.800 --> 0:11:18.320 of AI infrastructure that's going to be needed to power 0:11:18.360 --> 0:11:20.959 this over the next decade, I think is being grossly 0:11:21.040 --> 0:11:23.000 underestimated by investors. 0:11:23.559 --> 0:11:26.480 Gene, you've been covering this technology industry for decades. You've 0:11:26.520 --> 0:11:30.719 seen everything. I want to ask you, based upon your experience, 0:11:31.600 --> 0:11:33.840 how do you think about what's happening in the software 0:11:33.880 --> 0:11:36.400 side of the business right now? Stock selling off, particularly 0:11:36.480 --> 0:11:39.840 the software is a service stocks like a software Salesforce 0:11:39.880 --> 0:11:42.800 dot Com Really under the guys that wait, AI is 0:11:42.800 --> 0:11:45.480 going to really disrupt this software business. How do you 0:11:45.720 --> 0:11:47.079 put that into context for people? 0:11:48.600 --> 0:11:52.240 So I think that for those who are reading the 0:11:52.320 --> 0:11:55.720 headlines and looking at the stock reaction to these earnings, 0:11:56.120 --> 0:11:58.080 I think kind of the substance of what's going on 0:11:58.160 --> 0:12:00.800 underneath the hood is being missed. It's really hard for 0:12:00.880 --> 0:12:04.640 I think that audience to really grasp the improvement that 0:12:04.679 --> 0:12:07.640 these models have had over the past three months. Of course, 0:12:07.720 --> 0:12:10.839 open claw and claud code claw work are kind of 0:12:10.880 --> 0:12:14.640 the signature products that have caused some of that breakthrough, 0:12:15.120 --> 0:12:17.920 But that change has had what I think is going 0:12:18.000 --> 0:12:20.600 to have a profound impact on software, and the way 0:12:20.640 --> 0:12:24.239 we've been investing around it is we've lowered our exposure 0:12:24.320 --> 0:12:28.800 to seat based software companies because ultimately, if this is right, 0:12:28.920 --> 0:12:31.320 that knowledge work is going to be impacted, there will 0:12:31.360 --> 0:12:34.200 be less seats out there. AI agents don't purchase seats, 0:12:34.720 --> 0:12:37.600 and separately that the usage based models. So we're still 0:12:37.720 --> 0:12:40.840 holders of companies like data Dog and Snowflake, and so 0:12:41.200 --> 0:12:43.320 those models I think are going to do well. So, Paul, 0:12:43.360 --> 0:12:47.319 the answer is is that software is at a profound crossroad. 0:12:47.440 --> 0:12:49.560 And I don't think that all software has created equal 0:12:49.559 --> 0:12:51.920 I think the usage based models, but I would say 0:12:51.920 --> 0:12:54.760 that software needs to do something that we still haven't seen, 0:12:54.840 --> 0:12:57.800 even with the Salesforce results last night. We need to 0:12:57.840 --> 0:13:01.720 see these software companies stand up and basically punch back 0:13:01.880 --> 0:13:04.720 at AI. They haven't done that. That's exactly what Google 0:13:04.760 --> 0:13:07.960 did in the June quarter last year when they showed 0:13:08.000 --> 0:13:10.920 that they can use generative AI to their advantage and search. 0:13:11.440 --> 0:13:16.760 They really short circuited that negative narrative. And until software 0:13:16.800 --> 0:13:19.439 companies can say, look at our seat growth moving higher, 0:13:19.440 --> 0:13:22.760 look at how our RPU is per user is improving, 0:13:22.960 --> 0:13:26.120 until they really have that flex that stand up. I 0:13:26.120 --> 0:13:29.520 think that this narrative, this negative narrative around software is 0:13:29.559 --> 0:13:30.240 going to persist. 0:13:30.800 --> 0:13:33.680 Gene, Thank you so much yet again. Gene Mounster, Managing partner, 0:13:34.000 --> 0:13:36.520 Deepwater Asset Management. He was one of the first folks 0:13:36.559 --> 0:13:40.240 that kind of got helped me understand what AI is, 0:13:40.600 --> 0:13:41.760 and now I kind of get a little bit of 0:13:41.760 --> 0:13:44.680 a better understanding of what the potential threat for software 0:13:44.720 --> 0:13:46.560 can be when you think about the seat licenses and 0:13:46.600 --> 0:13:50.319 that could be a weakness for some of that revenue model. There. 0:13:51.240 --> 0:13:54.400 Stay with us. More from Bloomberg Intelligence coming up after this. 0:13:58.280 --> 0:14:01.640 You're listening to the Bloomberg and Tellen's podcast. Catch us 0:14:01.720 --> 0:14:04.720 Live weekdays at ten am Eastern on Apple Coarclay, and 0:14:04.720 --> 0:14:08.000 Android Auto with the Bloomberg Business App. Listen on demand 0:14:08.080 --> 0:14:11.640 wherever you get your podcasts, or watch us live on YouTube. 0:14:12.360 --> 0:14:14.599 For months, we've been talking about the potential sale of 0:14:14.640 --> 0:14:18.760 Warner Brothers Discovery, either to Netflix or to Paramount Skydance, 0:14:18.800 --> 0:14:20.480 and we're going to get the latest on that because 0:14:20.480 --> 0:14:23.040 there has been some movement, but these two companies actually 0:14:23.040 --> 0:14:26.680 reported results and let's get the latest. There Etherrong Andath 0:14:26.720 --> 0:14:29.200 and she's the media analyst of Bloomberg Intelligence. Ether will 0:14:29.200 --> 0:14:31.080 get the deal update in a minute, but just give 0:14:31.160 --> 0:14:33.200 us a sense of how these two companies are performing 0:14:33.240 --> 0:14:33.640 on their own. 0:14:35.080 --> 0:14:37.040 I mean, I think you've summed it up perfectly, Paul. 0:14:37.520 --> 0:14:39.560 You know, you said it's a good thing that Warner 0:14:39.600 --> 0:14:42.120 Brothers Discovery is being sold, and that's absolutely right. I mean, 0:14:42.160 --> 0:14:45.800 you look at the TV network's division. This has been 0:14:45.840 --> 0:14:49.040 the problematic division for all of these media companies. TV networks. 0:14:49.040 --> 0:14:53.840 Ibada slumped something like twenty seven percent in the fourth quarter. 0:14:54.160 --> 0:14:56.800 You look at the whole of twenty twenty five, you know, 0:14:56.840 --> 0:15:00.280 Ibada for that segment is down twenty one percent. Writing 0:15:00.360 --> 0:15:01.840 is on the wall. I mean, this is why this 0:15:01.920 --> 0:15:06.000 company is up for sale. It's very clear. And you know, 0:15:06.280 --> 0:15:08.600 I think really what everybody is going to be worried 0:15:08.600 --> 0:15:12.320 about is what is the outlook should the spin happen, 0:15:12.400 --> 0:15:15.360 Should Discovery Global be spun out into a separate company, 0:15:15.640 --> 0:15:19.000 What really is the outlook for the TV network business? 0:15:19.920 --> 0:15:21.920 And again we saw kind of very similar results with 0:15:22.000 --> 0:15:24.680 Paramount as well. Yes, they're making, you know, the best 0:15:24.680 --> 0:15:27.600 of what they can, but again the fundamentals themselves are 0:15:27.640 --> 0:15:28.200 pretty weak. 0:15:28.280 --> 0:15:29.120 Across the board. 0:15:29.640 --> 0:15:32.720 Management also flagged the multi billion dollar efficiency program. How 0:15:32.720 --> 0:15:35.880 should investors think about the trade offs between short term 0:15:35.880 --> 0:15:39.200 cost and long term profitability for these initiatives. 0:15:39.800 --> 0:15:42.080 Yeah, this is what we've always been worried about. I mean, 0:15:42.120 --> 0:15:44.880 we've seen, you know, this story play out multiple times 0:15:44.920 --> 0:15:47.280 Isabelle in all of these media companies, and yes, there's 0:15:47.320 --> 0:15:50.120 always synergies and there's always efficiencies to be extracted, but 0:15:50.200 --> 0:15:52.640 it does come at the expense of long term growth. 0:15:52.760 --> 0:15:55.440 We've seen that with Warner Brothers Discovery. You know, they 0:15:55.520 --> 0:15:58.640 came out with very aggressive synergy targets and yes, they 0:15:58.640 --> 0:16:01.200 were able to deliver on a lot of those, but 0:16:01.320 --> 0:16:05.000 then it did kind of hamper their growth prospects, especially 0:16:05.040 --> 0:16:07.320 you know in the TV networks business, where we've seen 0:16:07.360 --> 0:16:12.080 a significant deterioration in the fundamentals in the outlook. So 0:16:12.160 --> 0:16:14.400 that is always there's you know, it's a very very 0:16:14.440 --> 0:16:17.800 tricky balancing act. There's a very you know, they have 0:16:17.920 --> 0:16:22.520 to walk this really this tie trope. Again. The whole 0:16:22.560 --> 0:16:26.840 deal with Warner Brothers Discovery for Paramount is predicated on 0:16:26.880 --> 0:16:30.240 something like about six to eight billion dollars in synergies. 0:16:30.720 --> 0:16:33.000 So you know, we'll we'll see how all of that 0:16:33.040 --> 0:16:35.160 plays out. But Yeah, it's going to be a tough 0:16:35.280 --> 0:16:39.120 road ahead regardless of whether they win or they don't. 0:16:39.400 --> 0:16:42.440 What is the update on the deal mechanics, ETHA, Where 0:16:42.480 --> 0:16:43.120 are we right now? 0:16:44.080 --> 0:16:47.960 Yeah, So it was really interesting policy. In Paramount's earnings 0:16:47.960 --> 0:16:50.640 release yesterday, they said that, you know, there's a good 0:16:50.720 --> 0:16:54.680 chance of the Paramount thirty one dollars per share offer 0:16:54.720 --> 0:16:58.480 for all of Warner Brothers Discovery being deemed a superior proposal. 0:16:59.200 --> 0:17:01.800 And we've seen of Paramount rally a little bit on that. 0:17:01.880 --> 0:17:04.880 We've also seen actually Netflix rally on that. I think 0:17:04.960 --> 0:17:08.720 investors are becoming more and more comfortable with Netflix kind 0:17:08.720 --> 0:17:11.400 of walking away from this deal. So again, a lot 0:17:11.440 --> 0:17:14.440 to play out here, But there hasn't been any official 0:17:14.480 --> 0:17:18.040 word just yet from the Warner Brothers Discovery board about whether, 0:17:18.320 --> 0:17:21.280 you know, the Paramount proposal is in fact superior. 0:17:21.760 --> 0:17:24.040 It seems like it's still a story that we're going 0:17:24.040 --> 0:17:27.320 to be following closely. Paramount also offered modest revenue growth 0:17:27.320 --> 0:17:30.199 targets for twenty twenty six. What key drivers do you 0:17:30.200 --> 0:17:33.240 think will determine whether the company meets that outlook or 0:17:33.280 --> 0:17:37.240 exceeds that outlook or even surprise investors perhaps. 0:17:38.280 --> 0:17:42.400 I mean, so the organic growth outlook Isabelle. Yes, they're 0:17:42.400 --> 0:17:44.720 trying to do their best. Remember they did you know 0:17:44.840 --> 0:17:47.800 this is this is also a merged company paramount. You know, 0:17:47.840 --> 0:17:51.119 they just recently acquired sky Dance, so they're trying to 0:17:51.200 --> 0:17:54.160 do the best with you know, those new film assets. 0:17:54.200 --> 0:17:56.440 But again, you know, if you just kind of look 0:17:56.440 --> 0:17:59.520 at it across the board, you know, in the context 0:17:59.520 --> 0:18:01.600 of the entire media landscape, it's still a very very 0:18:01.680 --> 0:18:05.680 subscale company. Whether we're looking at streaming numbers you know, 0:18:06.080 --> 0:18:09.119 about eighty million subscribers versus almost three hundred and twenty 0:18:09.320 --> 0:18:12.159 three hundred and thirty million for Netflix, or whether you're 0:18:12.200 --> 0:18:14.840 looking at the film business or even the TV business. 0:18:15.359 --> 0:18:18.840 Everything is fairly subscale. So they definitely need some kind 0:18:18.880 --> 0:18:21.080 of an m and a strategy. Obviously, Warner would be 0:18:21.119 --> 0:18:23.879 perfect if it happens. If it doesn't, we'll have to 0:18:23.920 --> 0:18:26.880 wait and watch. But you know, they're doing their best 0:18:26.960 --> 0:18:29.119 that they can from an organic growth perspective, I just 0:18:29.160 --> 0:18:30.440 don't think it's going to be enough. 0:18:31.320 --> 0:18:34.280 Do you think Netflix will walk away? That would be 0:18:34.320 --> 0:18:34.880 pretty bold. 0:18:37.720 --> 0:18:42.000 They should, you know, collect they should collect the collected 0:18:42.080 --> 0:18:44.680 to almost three billion dollars in termination fear. I mean, 0:18:44.720 --> 0:18:47.520 this is really I mean, you know, you think about 0:18:47.520 --> 0:18:49.240 this PALL in the long term. Yes, it's a great 0:18:49.240 --> 0:18:51.400 asset to have, there's no doubt about it. But there's 0:18:51.600 --> 0:18:53.639 it also comes with a tremendous amount of risk, not 0:18:53.720 --> 0:18:55.879 to mention the biggest one being regulatory. So that's going 0:18:55.920 --> 0:18:58.600 to be a big, big overhang, you know, for the 0:18:58.600 --> 0:19:00.560 next twelve to eighteen months, and and of course after 0:19:00.600 --> 0:19:03.320 that you have integration execution risks. So it's by no 0:19:03.440 --> 0:19:05.840 means is it going to be you know, a Rosie 0:19:05.840 --> 0:19:09.600 path ahead. I actually think Netflix will be better off 0:19:09.600 --> 0:19:10.080 on its own. 0:19:12.080 --> 0:19:14.880 Stay with us more from Bloomberg Intelligence coming up here 0:19:14.920 --> 0:19:15.159 For this. 0:19:18.240 --> 0:19:21.920 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:19:22.000 --> 0:19:25.120 weekdays at ten am Eastern on Apple, Cocklay and Android 0:19:25.119 --> 0:19:28.399 Auto with the Bloomberg Business app. Listen on demand wherever 0:19:28.480 --> 0:19:31.760 you get your podcasts, or watch us live on YouTube. 0:19:32.200 --> 0:19:34.600 We are here in York City at the Bloomberg Interactive 0:19:34.600 --> 0:19:39.080 Brokers Studio, streaming live on YouTube as well. Earning season 0:19:39.920 --> 0:19:45.679 well in gear here and that includes Magna International Chicker MGA. 0:19:46.119 --> 0:19:50.520 Magna is one of the world's largest automotive suppliers headquartered 0:19:50.640 --> 0:19:54.040 in Ontario, Canada. Joining us today is Swami Kota Geary, 0:19:54.760 --> 0:19:57.920 CEO of Magna International. Swami, thanks so much for joining 0:19:58.000 --> 0:20:01.639 us here. I know you guys recently released earnings. What 0:20:01.680 --> 0:20:03.840 can you tell us about your earnings that you just released, 0:20:03.840 --> 0:20:07.760 maybe your outlook that you shared with your investors. 0:20:08.520 --> 0:20:12.159 Good morning, Paul, Thanks for having me. You know, we 0:20:12.280 --> 0:20:15.760 finished really the fourth quarter was strong, helped us finish 0:20:15.840 --> 0:20:19.159 the year twenty twenty five in a strong way, setting 0:20:19.240 --> 0:20:23.439 us up really good for twenty twenty six. We delivered, 0:20:23.720 --> 0:20:27.240 you know, good cash flow. We hit the margin range 0:20:27.280 --> 0:20:30.000 of five point six percent in EBIT that we talked about, 0:20:30.520 --> 0:20:33.160 which set us up really good for twenty twenty six. 0:20:34.000 --> 0:20:38.280 We are forecasting an EBIT range of six to six 0:20:38.320 --> 0:20:43.400 point six. We are confident in the cash flow generation 0:20:43.760 --> 0:20:48.800 and actually converting the earnings to cash. So we gave 0:20:48.880 --> 0:20:51.840 a clear indication that we're going to be returning value 0:20:51.840 --> 0:20:55.040 to the shareholders in the form of repurchase of twenty 0:20:55.040 --> 0:20:58.359 four million shares in twenty twenty six, and all this 0:20:58.560 --> 0:21:03.560 in a flat wallume as you see in our automotive industry, 0:21:04.040 --> 0:21:08.520 that is the result of operational excellence and capital allocation discipline. 0:21:09.080 --> 0:21:11.480 We have been doing this for the last three years 0:21:11.520 --> 0:21:14.960 thirty five to forty BIPs annually, So if you take 0:21:15.000 --> 0:21:18.480 twenty twenty six into account, this is the fourth year 0:21:19.560 --> 0:21:23.359