WEBVTT - Alphabet's Bond Sale Signals AI Confidence 0:00:02.520 --> 0:00:11.039 Bloomberg Audio Studios, Podcasts, radio news. 0:00:13.560 --> 0:00:17.160 Bloomberg Tech is live from the heart of Silicon. 0:00:16.720 --> 0:00:20.840 Valley with Ed Ludlow in San Francisco. 0:00:22.440 --> 0:00:26.000 This is Bloomberg Tech, coming off another megabond sale. Alphabet 0:00:26.000 --> 0:00:28.400 looking to raise as much as twenty five billion dollars 0:00:28.560 --> 0:00:31.600 from its latest offering, a deal that will test investor 0:00:31.640 --> 0:00:35.239 appetite for AI related debts, plus a rough day for 0:00:35.280 --> 0:00:39.040 Western Digital or WD. The storage giant slides after a 0:00:39.080 --> 0:00:44.200 disappointing outlook despite the broader AI infrastructure boom, and Sequoia's 0:00:44.280 --> 0:00:47.320 leaders Alfred Lynn and Pat Grady join us on the 0:00:47.360 --> 0:00:51.519 future of the storied venture capital firm. It is a 0:00:51.560 --> 0:00:54.360 debt day, That's what we're talking about. Today's big number 0:00:54.400 --> 0:00:58.240 eighty nine point five billion dollars. That's how much Alphabet 0:00:58.360 --> 0:01:02.880 debt has been sold globally since twenty twenty five. Looking 0:01:02.960 --> 0:01:06.800 at shares of Alphabet, the Google parent in the equity market, 0:01:07.160 --> 0:01:10.319 the stock is flat but had been under some pressure 0:01:10.319 --> 0:01:13.400 in the last twenty four hours about a wave of departures. 0:01:13.440 --> 0:01:15.120 Will bring you that story later on. I want to 0:01:15.200 --> 0:01:18.080 zero in on AI debt and get more in Alphabet 0:01:18.080 --> 0:01:22.440 with Robert Schiffman Bloomberg Intelligence Senior credit analyst. This is 0:01:22.480 --> 0:01:25.800 a twenty five billion dollar dollar denominated offering. 0:01:25.840 --> 0:01:26.960 Ten parts, right. 0:01:27.200 --> 0:01:32.040 But it's the latest in a sequence of bond market activity. 0:01:32.600 --> 0:01:37.720 You write borrowing fears question mark, answer your question mark. 0:01:39.840 --> 0:01:42.280 Yeah, the answer right now is no. I think the 0:01:42.480 --> 0:01:46.080 second quarter prints that we saw for the biggest hyperscalers 0:01:46.640 --> 0:01:48.760 actually prove to people that all the money that they're 0:01:48.760 --> 0:01:52.880 spending is being monetized and the confidence levels improved. You're 0:01:52.920 --> 0:01:55.680 seeing that with share prices and you're seeing that with 0:01:55.760 --> 0:01:58.840 bond prices. The demand for this deal, I think is 0:01:58.880 --> 0:02:01.840 going to be substantial. Heard already was that the books 0:02:01.840 --> 0:02:05.080 were at sixty five billion. I think they're only going 0:02:05.120 --> 0:02:09.680 to issue twenty five billion dollars, so not raising its positive. Obviously, 0:02:09.760 --> 0:02:11.760 their cost of capital is going up a little bit, 0:02:12.080 --> 0:02:15.640 but after increasing their capex guidance by twenty billion just 0:02:15.680 --> 0:02:17.760 a week or so ago, there shouldn't be a surprise 0:02:17.800 --> 0:02:20.160 to anybody. And quite frankly, I think they're actually front 0:02:20.200 --> 0:02:23.080 running a lot of next year's borrowing and this may 0:02:23.200 --> 0:02:28.240 actually help technicals going into twenty twenty seven versus hurt them. 0:02:27.800 --> 0:02:29.120 On a US dollar basis. 0:02:29.160 --> 0:02:32.000 You know, alphabet it's forty two point five billion dollars 0:02:32.040 --> 0:02:36.720 since twenty five Amazon's seventy seven billion dollars. You know, 0:02:37.080 --> 0:02:40.200 you have done a really good job shift of explaining 0:02:40.240 --> 0:02:43.320 to the blombog tech audience why it's different in here 0:02:43.360 --> 0:02:46.320 and now to say that the dot com bubble, the 0:02:46.320 --> 0:02:48.639 financial crisis, Like, what do the balance sheets of these 0:02:48.680 --> 0:02:53.120 companies and their top line growth outlooks differ from that 0:02:53.160 --> 0:02:54.040 period in history. 0:02:55.040 --> 0:02:59.120 Well, these are real businesses that are generating cash, that 0:02:59.200 --> 0:03:01.720 are just spending more money these days to make more 0:03:01.760 --> 0:03:05.560 cash down the line. We're starting up with a tremendous 0:03:05.560 --> 0:03:07.560 amount of balance sheet flexibility. I'll will be trade at 0:03:07.600 --> 0:03:10.160 double A plus at S and P. They're one notch 0:03:10.200 --> 0:03:12.480 away from the highest potential rating that you can have. 0:03:13.040 --> 0:03:15.760 And the raider said this morning they have two hundred 0:03:15.760 --> 0:03:19.639 billion dollars of net debt capacity within their current ratings. 0:03:19.760 --> 0:03:22.240 That means just to fall a notch to mid mid 0:03:22.240 --> 0:03:25.280 double A, they would have to issue another two hundred 0:03:25.280 --> 0:03:28.280 billion dollars a debt and spend it. So I think 0:03:28.360 --> 0:03:30.519 the flexibility that you see from we've set a time 0:03:30.520 --> 0:03:33.840 and time again these amount rushmore of credits enables them 0:03:33.880 --> 0:03:36.640 to borrow as much as they want. And the concerns 0:03:36.680 --> 0:03:39.200 that people have been having that they're not going to 0:03:39.200 --> 0:03:42.200 be able to fund themselves as Capex budgets go up 0:03:42.240 --> 0:03:46.120 by fifty or one hundred percent next year, it's just 0:03:46.200 --> 0:03:50.200 not true. They can borrow, they can raise the money. 0:03:50.320 --> 0:03:53.680 The demand is there, the balance sheet flexibility is there, 0:03:53.880 --> 0:03:56.480 and people are now getting paid for it versus two 0:03:56.600 --> 0:03:58.800 or three years ago, when you've got basically no spread 0:03:58.800 --> 0:03:59.840 to own any of these names. 0:04:00.920 --> 0:04:04.360 Robert Schiffman, Bloomberg Intelligence, senior credit analysts, Thank you very much. 0:04:04.600 --> 0:04:07.160 I mentioned that the news story for Google, which is. 0:04:07.120 --> 0:04:11.120 Google is undergoing its biggest AI leadership shake up in years. 0:04:11.200 --> 0:04:15.160 Longtime AI executive Jeff Dean is leaving to launch a 0:04:15.240 --> 0:04:20.920 startup with several senior DeepMind researchers, while DeepMind CEO Demisasabs 0:04:21.279 --> 0:04:24.479 is stepping back from day to day operations to become 0:04:24.600 --> 0:04:28.320 chairman of deep Mind but also Alphabet's chief scientists. The 0:04:28.440 --> 0:04:31.960 changes come as Google faces mounting pressure to keep pace 0:04:32.000 --> 0:04:35.800 in the airas race, with investors basically questioning whether the 0:04:35.839 --> 0:04:39.080 company can retain top talent and turn its AI research 0:04:39.360 --> 0:04:42.279 into commercial success. That was the stock story of yesterday 0:04:42.880 --> 0:04:46.159 let's stick with Alphabet. Joining us is Natie Gallager, Princeville 0:04:46.200 --> 0:04:49.680 economist and director at Board. I want to go very 0:04:49.680 --> 0:04:52.039 briefly back to Alphabet, going back. 0:04:51.839 --> 0:04:52.800 To the bomb market. 0:04:53.240 --> 0:04:56.359 What does that signal about where we are in a 0:04:56.400 --> 0:04:57.359 capex cycle? 0:04:58.520 --> 0:05:01.480 You know, it really signals that we'reking continuing to mature 0:05:01.480 --> 0:05:02.440 in the capex cycle. 0:05:02.640 --> 0:05:03.320 We have had the. 0:05:03.360 --> 0:05:06.760 Hyper scalers, you know, largely following a similar playbook that's 0:05:06.760 --> 0:05:11.320 to utilize internal cash flows, keep leverage low. Right, when 0:05:11.360 --> 0:05:14.400 you do look at the balance sheets more holistically, solvency 0:05:14.440 --> 0:05:17.240 really isn't an issue, and so I really see no 0:05:17.320 --> 0:05:20.840 cause for concern when we talk about Alphabet specifically. They 0:05:20.920 --> 0:05:23.120 just had their first quarter of negative cash flows since 0:05:23.160 --> 0:05:25.440 they went to IPO in two thousand and four. So 0:05:26.279 --> 0:05:27.120 I'm not surprised to. 0:05:27.120 --> 0:05:27.600 See it. 0:05:29.000 --> 0:05:33.520 The economists view of seeing companies of Alphabet scale, and 0:05:33.560 --> 0:05:37.680 they're not unique in that respect entering negative free cash flow. 0:05:37.720 --> 0:05:39.599 Does that go into the economic model? 0:05:41.480 --> 0:05:41.880 Ye know it. 0:05:42.160 --> 0:05:46.920 It speaks more holistically to the commitment of spending by 0:05:47.080 --> 0:05:51.560 these hyper scalers on AI, right, and they're absolutely spending 0:05:51.600 --> 0:05:54.080 with the belief that future cash flows are really going 0:05:54.240 --> 0:05:57.200 to validate that level of spending. Now, you know, we've 0:05:57.240 --> 0:06:00.520 talked about this before, but really the question becomes not, 0:06:00.920 --> 0:06:03.040 you know, can they continue to do so It's very likely, 0:06:03.080 --> 0:06:06.520 you know, they're in very strong positions balance sheet wise. 0:06:06.640 --> 0:06:09.480 The real conversation is around the risk and what capital 0:06:09.520 --> 0:06:12.480 misallocation looks like if the bet doesn't pay off. 0:06:14.160 --> 0:06:16.960 I want to go back a little bit to Federal 0:06:17.000 --> 0:06:20.960 Reserve Chair WASH's first meeting and press conference because he 0:06:21.080 --> 0:06:25.480 discussed capex, the Capex boom and paraphrasing, but what he 0:06:25.520 --> 0:06:28.960 said is that kapex boom is driving up prices of 0:06:29.040 --> 0:06:32.520 AI infrastructure, right, That was his analysis. Is there an 0:06:32.520 --> 0:06:36.600 inflationary impact elsewhere in the economy from what's happening in AI? 0:06:38.120 --> 0:06:41.240 You know, there is a broader conversation happening right now. 0:06:41.360 --> 0:06:44.680 How much of the economic growth we are experiencing is 0:06:44.680 --> 0:06:48.120 it because of AI? And there's really you know, multiple 0:06:48.160 --> 0:06:50.680 areas in the economy that this can come out. One 0:06:50.960 --> 0:06:54.560 is capex by these companies directly. The other is actually 0:06:54.600 --> 0:06:57.360 an asset price valuations. Right, so, think of all of 0:06:57.400 --> 0:06:59.120 the gains that have really happened in the stock market 0:06:59.200 --> 0:07:01.800 right now, very strong argument that that is in fact 0:07:01.880 --> 0:07:04.920 inflationary because when people have more money, what do they 0:07:04.920 --> 0:07:08.280 do They spend more money longer term. And Warsh has 0:07:08.320 --> 0:07:11.360 come out and said this sort of historically, there's a 0:07:11.400 --> 0:07:15.960 belief system that because AI increases productivity, it's actually disinflationary 0:07:16.000 --> 0:07:18.320 in the long term, which is why as a Federal 0:07:18.400 --> 0:07:21.880 Reserve chairman he's very or has shared comfort with having 0:07:21.920 --> 0:07:24.440 a lower neutral rate in the future. 0:07:26.120 --> 0:07:29.800 Every day was trying to understand the impact of AI 0:07:29.880 --> 0:07:31.880 on the real economy, Like, if you look at labor 0:07:31.920 --> 0:07:36.840 productivity where it runs now relative to pre pandemic, is 0:07:36.840 --> 0:07:40.280 there any tangible evidence in front of you that AI 0:07:40.480 --> 0:07:43.080 is in some way impacting that data. 0:07:44.200 --> 0:07:46.480 Yeah, it's a great question because, I mean, you know, 0:07:46.480 --> 0:07:48.560 when we talk about the overall implication of AI and 0:07:48.600 --> 0:07:50.360 making it all worth it, right, we have to talk 0:07:50.400 --> 0:07:54.840 about productivity. When we look at a pre pandemic sort 0:07:54.840 --> 0:07:57.880 of productivity growth rate, average growth rate, we were at 0:07:57.920 --> 0:08:01.120 about one point five percent pandemic. We've been closer to 0:08:01.120 --> 0:08:03.240 two point five to two point seven five percent on 0:08:03.400 --> 0:08:05.160 like an annualized basis. 0:08:05.920 --> 0:08:07.080 Now on the front. 0:08:06.840 --> 0:08:08.240 That looks really great, right, You get a lot of 0:08:08.240 --> 0:08:11.160 people that are saying, hey, that's happening contemporaneously. With AI 0:08:11.920 --> 0:08:15.080 story done right, we have the AI productivity story, But 0:08:15.320 --> 0:08:17.280 what we actually can do is a lot better. Right, 0:08:17.280 --> 0:08:19.720 we can look deeper and look at metrics like total 0:08:19.760 --> 0:08:24.520 factor productivity utilization adjusted, and that helps us really tease out, okay, 0:08:24.800 --> 0:08:27.360 out of productivity growth, how much of this is really 0:08:27.400 --> 0:08:31.480 coming from innovation, and that on a four quarter basis 0:08:31.600 --> 0:08:35.040 is trailing at aboutzero point seven percent, so that's essentially 0:08:35.280 --> 0:08:38.480 flat quarter one twenty twenty six. The data is of 0:08:38.559 --> 0:08:41.079 its delayed Quarter one twenty twenty six actually came in 0:08:41.160 --> 0:08:46.160 negative two point seven six percent. Now there's contemporary contemporaneous 0:08:46.200 --> 0:08:48.120 impacts with the straight of hormose closure, so we can't 0:08:48.160 --> 0:08:51.439 perfectly extrapolate. But I share all of this to really 0:08:52.040 --> 0:08:54.080 say that at this point in time, we don't have 0:08:54.160 --> 0:08:58.440 the macro evidence that AI is meaningfully impacting productivity. 0:08:59.440 --> 0:09:01.280 I appreciate that because I feel like it connects the 0:09:01.280 --> 0:09:03.080 dots from the data points that a lot of the 0:09:03.120 --> 0:09:05.920 software companies gave in earnings on how AI is actually 0:09:05.920 --> 0:09:09.240 being used. Nacy Gallagher of Board, thank you very much. Indeed, 0:09:09.480 --> 0:09:11.800 another big story, take a look at shares of SpaceX 0:09:12.200 --> 0:09:15.959 which are behaving Interestingly, they're up three percent in the session. 0:09:15.960 --> 0:09:19.959 There was a heavy decline yesterday. Reminder that they there 0:09:20.000 --> 0:09:23.240 is a lock up expiration on around nine hundred million shares, 0:09:23.800 --> 0:09:27.520 which was a complicated structure for lock up post IPO 0:09:28.280 --> 0:09:31.360 from mid June. Right now, the stocks are hire three percent. 0:09:31.559 --> 0:09:33.840 Will continue to track it coming up. We are still 0:09:33.880 --> 0:09:35.959 in a thick of earnings, and this time it's all 0:09:36.000 --> 0:09:38.640 about hardware WDCO earning. 0:09:38.679 --> 0:09:41.000 Tan joins us. Next the s is Splimberg Tech. 0:09:49.120 --> 0:09:52.000 Let's take a look at some of the storage stocks, Sandy, Seagate, 0:09:52.040 --> 0:09:57.560 Western Digital differing performance Sandist to the downside, Seagate higher 0:09:57.840 --> 0:10:01.440 on earnings performance. Western Digitals down nine percent at one 0:10:01.480 --> 0:10:04.000 point in the session, have been down more than twenty 0:10:04.040 --> 0:10:06.560 percent and on track for its biggest drop since the 0:10:06.640 --> 0:10:07.800 year two thousand. 0:10:08.800 --> 0:10:10.000 That has turned around somewhat. 0:10:10.080 --> 0:10:15.160 Let's stay with WDWDCEO Irving ten joins US. Now we're 0:10:15.200 --> 0:10:19.320 getting back to the AI hard disk drive story. Irving, 0:10:19.360 --> 0:10:21.080 it's great to have you back on the show. You know, 0:10:21.120 --> 0:10:25.160 like investors still believe in that story AI hard disk Drive. 0:10:26.320 --> 0:10:29.880 Your stock is under some pressure. Just reflect on the 0:10:29.920 --> 0:10:32.000 moment that you try to outline in this in this 0:10:32.080 --> 0:10:32.840 earnings print. 0:10:33.760 --> 0:10:35.559 Yeah, well, first of all, thank you very much for 0:10:36.000 --> 0:10:38.960 having me back. If you look at the results that 0:10:39.000 --> 0:10:41.960 we delivered in Q fourth it's called twenty six, they 0:10:42.000 --> 0:10:45.160 were very strong. We had over forty percent revenue growth, 0:10:45.160 --> 0:10:49.040 grass margin was above fifty four percent, very strong cash 0:10:49.040 --> 0:10:52.600 flow generation as well. If anything, probably the expectations were 0:10:52.679 --> 0:10:55.040 very high in terms of the increased amount of exerbikes 0:10:55.040 --> 0:10:57.600 that we could supply into the market. But if you 0:10:57.640 --> 0:11:03.160 take a step back, really the fundamental for ongoing revenue growth, margin, expansion, 0:11:03.720 --> 0:11:07.480 cash flow generation remain very strong. On the demand side, 0:11:07.760 --> 0:11:12.840 demand from hyperscalarists, neo clouds, physical remans very robust, and 0:11:12.880 --> 0:11:16.200 we continue to see over twenty five percent KEIG or 0:11:16.200 --> 0:11:21.080 demand from a demand perspective over the next five years. Similarly, 0:11:21.120 --> 0:11:24.640 on the supply side, we have a very robust roadmap 0:11:24.760 --> 0:11:27.160 that we have put in place that will be able 0:11:27.200 --> 0:11:29.840 to meet this demand. And so it's pretty much a 0:11:29.840 --> 0:11:32.720 function of just quarterly transitions that we're going through. 0:11:34.280 --> 0:11:36.560 I think what you're touching on there is, you know, 0:11:36.760 --> 0:11:40.280 storage is distinct in many ways from what's happening in memory, 0:11:40.600 --> 0:11:44.760 in some ways highly analogous. Right, there is a pricing 0:11:44.840 --> 0:11:49.880 story there there is a demand outpacing supply story and 0:11:49.920 --> 0:11:55.400 your industry facing the balancing act of expanding output manufacturing 0:11:55.400 --> 0:11:58.240 capacity on a permanent basis or not. 0:11:58.760 --> 0:11:59.920 How are you managing all of that? 0:12:01.160 --> 0:12:03.680 Yeah, So, first of all, thank you for highlighting that 0:12:03.679 --> 0:12:07.680 it's a clear distinction between memory, which is like nan 0:12:07.840 --> 0:12:11.160 and d RAM versus storage, right because memory and like computer, 0:12:11.280 --> 0:12:14.200 is being recycled all the time for different workloads, but 0:12:14.280 --> 0:12:16.920 the data that's being generated continues to be stored. 0:12:16.960 --> 0:12:18.120 It isn't getting deleted. 0:12:18.160 --> 0:12:20.840 So the amount of data storage requirements is just compounding 0:12:21.400 --> 0:12:24.160 over time, which puts a lot of more demand on 0:12:24.200 --> 0:12:28.640 our products on an ongoing basis. And how we're trying 0:12:28.640 --> 0:12:31.760 to solve for that is really to technology. We're not 0:12:32.000 --> 0:12:35.600 investing in increasing the number of drive units we're producing. 0:12:36.200 --> 0:12:39.440 We continue to invest in technology to increase the amount 0:12:39.480 --> 0:12:42.080 of hits and media that we produce because that's the 0:12:42.080 --> 0:12:46.520 big driver of capacity in a drive. So we're currently 0:12:46.520 --> 0:12:48.920 shipping a thirty two terer By hard Drive as on 0:12:49.000 --> 0:12:51.840 top of the line drive, but starting this quarter will 0:12:51.840 --> 0:12:53.720 be shipping a forty terrer byke Drive. So that's an 0:12:53.760 --> 0:12:57.360 ability to drive over thirty percent capacity to customers without 0:12:57.400 --> 0:12:58.680 adding any unit capacity. 0:12:59.480 --> 0:13:02.400 Could you go into how that works, you know, bring 0:13:02.400 --> 0:13:06.640 a forty terabyte drive to market, the engineering complexity of it, 0:13:07.440 --> 0:13:09.400 and how much do the customers have to sort of 0:13:09.880 --> 0:13:14.280 re architect their infrastructure to accommodate for that new generation 0:13:14.400 --> 0:13:15.760 of HDD. 0:13:16.679 --> 0:13:17.760 Yeah, well, hard drives. 0:13:18.240 --> 0:13:20.600 Actually, as an engineer, I always use hard drives as 0:13:20.600 --> 0:13:23.040 a model of engineering. We use tutors or the periodic 0:13:23.080 --> 0:13:26.439 table in our product, so as we move from capacity 0:13:26.440 --> 0:13:29.480 point to capacity point, there's a lot of re engineering 0:13:29.480 --> 0:13:31.960 that goes on into the recipe of our media designs, 0:13:32.400 --> 0:13:34.760 the recipe of our hit design. So it's quite an 0:13:34.800 --> 0:13:37.720 engineering feed. Obviously, we have great teams that have years 0:13:37.720 --> 0:13:40.200 of experience doing that. At the same time, we work 0:13:40.320 --> 0:13:43.120 very closely with our customers to make sure we go 0:13:43.240 --> 0:13:47.760 through very robust qualification processes because customers are very sensitive 0:13:47.800 --> 0:13:52.000 to the quality and reliability of their data storage capability. 0:13:53.320 --> 0:13:57.480 The other sort of highly analogous factor that's in front 0:13:57.480 --> 0:14:00.839 of you is long term agreements with the memory market. 0:14:00.840 --> 0:14:03.480 We see long term agreements coming in as well, so 0:14:03.559 --> 0:14:06.400 you have these in place, like twenty twenty nine, twenty thirty, 0:14:06.440 --> 0:14:09.600 twenty thirty one, how do you know how to price 0:14:09.640 --> 0:14:14.080 an agreement today going that far into the future, It's. 0:14:13.960 --> 0:14:14.760 A really good question. 0:14:14.800 --> 0:14:18.680 We do have ltas in place locked in till twenty nine, 0:14:18.920 --> 0:14:21.640 We have customer demand. Customers are coming us to put 0:14:21.760 --> 0:14:25.000 ltas in place to support demand from twenty nine, thirty 0:14:25.320 --> 0:14:28.200 and thirty one. They have really good visibility in terms 0:14:28.240 --> 0:14:31.000 of the storage requirements that they need because they're looking 0:14:31.040 --> 0:14:33.880 at their entire AI infrastructure stack, everything. 0:14:33.520 --> 0:14:35.680 From GPUs, CPUs to. 0:14:35.920 --> 0:14:40.200 HBMS to storage, and they realize you have to take 0:14:40.240 --> 0:14:42.960 a much longer term time horizon in terms of how 0:14:42.960 --> 0:14:43.320 they plan. 0:14:43.440 --> 0:14:45.120 So we are working very closely with them. 0:14:45.560 --> 0:14:49.080 We're definitely locking in the sort of exerbyte supply that 0:14:49.120 --> 0:14:51.240 they need, but what we're working through with them is 0:14:51.280 --> 0:14:53.680 still the commercial construct or how we would price something 0:14:53.960 --> 0:14:54.880 further out into right. 0:14:55.880 --> 0:14:57.720 So let me look at it another way. 0:14:57.920 --> 0:15:00.520 Somebody comes to you and says, serving I'm a big 0:15:00.560 --> 0:15:03.160 customer and I want to lock you in till twenty 0:15:03.240 --> 0:15:05.280 thirty one. Why might you say no. 0:15:06.680 --> 0:15:08.960 Well, what we were saying, ed is if you need 0:15:09.040 --> 0:15:11.880 six hundred exobytes of storage in twenty thirty one, we 0:15:11.960 --> 0:15:14.920 will deliver that to you. How we actually price it. 0:15:15.080 --> 0:15:17.200 We're still in negotiations with them where we might have 0:15:17.240 --> 0:15:20.440 a base price for a percentage of that volume, and 0:15:20.480 --> 0:15:23.680 then atop tip pricing structure as we increase the capacity 0:15:23.760 --> 0:15:25.040 we deliver to them. 0:15:25.480 --> 0:15:27.440 I don't mean to trivialize this in any way, but 0:15:27.680 --> 0:15:30.480 you know, like it's the hard dis drive moment, you know, 0:15:30.560 --> 0:15:33.760 make hard dis drive great again. What's that been like 0:15:33.840 --> 0:15:37.160 for you to put the technology at the forefront of 0:15:37.200 --> 0:15:38.280 discussion at the moment? 0:15:39.400 --> 0:15:40.720 Well, it's really exciting. 0:15:40.760 --> 0:15:43.080 I mean, people thought that hard drives were a thing 0:15:43.080 --> 0:15:46.239 of the past, but it's shown to be a fundamental 0:15:46.240 --> 0:15:49.360 piece of the AI infrastructure. Steck with eighty percent of 0:15:49.480 --> 0:15:52.080 all storage in the cloud, and AI is continuing to 0:15:52.160 --> 0:15:54.280 recite and hard drives both today and going forward. 0:15:54.320 --> 0:15:55.680 So it's a very exciting time for us. 0:15:56.160 --> 0:15:58.120 It's a great challenge and I always tell my teams 0:15:58.120 --> 0:16:00.480 there's a great responsibility that we have to deliver to 0:16:00.520 --> 0:16:03.200 the industry to enable this once in a lifetime opportunity 0:16:03.240 --> 0:16:04.240 that AI is creating. 0:16:04.960 --> 0:16:07.040 So go back to the stock again. 0:16:07.080 --> 0:16:09.240 It's down about eight or nine percent right now, was 0:16:09.280 --> 0:16:12.240 down twenty one percent, its biggest drop on paper since 0:16:12.360 --> 0:16:15.240 December of two thousand a lot of the analysts are 0:16:15.240 --> 0:16:18.880 talking about your comparison against Seagate, what Seagate's doing on 0:16:18.960 --> 0:16:21.920 margin expansion, et cetera. You know, how would you answer 0:16:21.960 --> 0:16:25.400 those those analyst reports on how you are performing relative 0:16:25.440 --> 0:16:26.120 to your peer. 0:16:27.080 --> 0:16:30.520 Yeah, as I mentioned in the beginning, there'll always be 0:16:30.600 --> 0:16:34.720 quarter to quarter variations at you know, we were the 0:16:34.720 --> 0:16:36.840 first album one out for thirty two terabyte. 0:16:36.840 --> 0:16:37.760 We gain on them. 0:16:38.440 --> 0:16:40.240 They have a new platform coming out, so they're a 0:16:40.240 --> 0:16:42.360 bit of hit in terms of the exobyte storage they 0:16:42.360 --> 0:16:45.360 can deliver that drives cross margin expansion. We have the 0:16:45.400 --> 0:16:48.400 forty terabyte coming out in Q three of our fiscal 0:16:48.480 --> 0:16:50.840 year and we expect it by that period of time. Sorry, 0:16:50.960 --> 0:16:53.280 we have a forty terabyte out right now. It's going 0:16:53.320 --> 0:16:55.480 to cross fifty percent of all the bits with ship 0:16:55.840 --> 0:16:57.760 by fiscal Q three and that will. 0:16:57.520 --> 0:16:59.600 Give us another driver of exobitte growth. 0:17:00.040 --> 0:17:03.160 So this constant evolution of technology and the transition points 0:17:03.160 --> 0:17:06.960 that we introduce them will result in some time shifts 0:17:07.000 --> 0:17:08.600 in terms of results and performance. 0:17:08.760 --> 0:17:12.520 Right w dco eving ten back on Bloomberg Tech, Thank 0:17:12.520 --> 0:17:13.080 you very much. 0:17:13.119 --> 0:17:15.320 Indeed, Okay, coming up, we're going to stay with earnings 0:17:15.359 --> 0:17:18.560 and it's Figma, Pigma CEO didn't Field joins us this 0:17:18.600 --> 0:17:19.600 is Bloomberg Tech. 0:17:29.359 --> 0:17:32.359 Time now for talking tech, I'm your hira anand first up. 0:17:32.400 --> 0:17:35.600 Deep Zeek says it prints a quote significant price hike 0:17:35.680 --> 0:17:38.919 for its AI products. While the changes weren't specified, the 0:17:38.920 --> 0:17:42.359 announcement is an unusual shift from the Chinese AI companies 0:17:42.520 --> 0:17:47.159 that haven't emphasized low cost models. Plus Metta's recently released 0:17:47.280 --> 0:17:50.800 muse Spark one point one breached an outside firm system 0:17:51.240 --> 0:17:55.879 and access the intranet drink cybersecurity testing. This comes just 0:17:56.040 --> 0:18:00.600 days after similar incidents from models by Open Ai and Anthropic, 0:18:01.400 --> 0:18:05.199 and Pigma CEO decided to forfeit forty six million dollars 0:18:05.280 --> 0:18:08.160 in company stock awards in an effort to ease investor 0:18:08.200 --> 0:18:13.119 concerns over AI. Dylan Field made the forfeiture voluntarily and 0:18:13.160 --> 0:18:16.720 no replacement awards were issued. Looking forward to the interview. 0:18:16.560 --> 0:18:19.119 Ed Yeah, thank you, Hira, Let's stick with Figma. 0:18:19.200 --> 0:18:21.639 It comes as the company reported it's second quarter sales 0:18:21.640 --> 0:18:25.280 and profits that exceeded analyst expectations. Shares are on track 0:18:25.480 --> 0:18:28.520 for their biggest drops since September, down seventeen percent or so. 0:18:28.800 --> 0:18:30.960 A lot of that is the guide for the third 0:18:31.040 --> 0:18:34.040 court of the current period. Figma CEO Dylan Field is 0:18:34.080 --> 0:18:38.080 with us. I think, you know, beyond the numbers themselves, Dylan, 0:18:38.560 --> 0:18:41.840 someone are looking at this and saying, well, there's lots 0:18:41.880 --> 0:18:46.360 of new Figma products. Is Dylan being conservative in guiding 0:18:46.400 --> 0:18:48.879 how those new products are showing up in the in 0:18:48.880 --> 0:18:50.080 the latter part of this year. 0:18:51.800 --> 0:18:53.679 Well, first of all, going to see you again and 0:18:53.720 --> 0:18:54.600 thanks for having me on. 0:18:56.160 --> 0:18:59.520 Yeah, I mean, I think that as we look at 0:19:00.119 --> 0:19:05.520 forecasting in general, our guidance does not always price in 0:19:06.520 --> 0:19:09.400 potential upside of efforts that have not proven themselves yet, 0:19:10.880 --> 0:19:14.159 and we tried to make sure that we guide based 0:19:14.240 --> 0:19:17.040 on what we can observe and what we did observe. 0:19:17.080 --> 0:19:21.360 This quarter was very strong revenue growth year over year, 0:19:21.440 --> 0:19:24.239 revenue grew by forty eight percent, and this is our 0:19:24.240 --> 0:19:28.439 third consecutive quarter of accelerated growth. It's also our first 0:19:28.520 --> 0:19:32.800 full quarter of IU modernization, and our NDR was about 0:19:32.840 --> 0:19:37.320 one thirty six percent. So overall, we felt very strong 0:19:38.320 --> 0:19:41.600 and we are very much investing for what's ahead. 0:19:43.359 --> 0:19:47.240 How are the customers behaving, like, what's the story in 0:19:47.280 --> 0:19:49.440 the fields that you sell your software into? 0:19:49.520 --> 0:19:54.919 Dylan, Yeah, I would say that customers have been on 0:19:55.000 --> 0:19:57.359 definitely a journey as they look to figure out how 0:19:57.400 --> 0:20:01.439 do we integrate AI into the workflow. And some of 0:20:01.440 --> 0:20:06.240 those customers that journey, they really understood where they're at 0:20:06.280 --> 0:20:09.720 and what they're doing even end of last year and 0:20:09.760 --> 0:20:13.080 we're doubling down on Figma. Then others, I think, have 0:20:13.320 --> 0:20:16.760 those maybe the early adopters, others have been working through 0:20:16.800 --> 0:20:21.560 that process of figuring it out throughout the last six months, 0:20:22.119 --> 0:20:25.320 and they're also coming back to double down on Figma fully. 0:20:25.880 --> 0:20:28.920 And I think that as workflows change, what we're trying 0:20:28.960 --> 0:20:31.080 to do is meet customers where they are. 0:20:31.680 --> 0:20:33.560 So what we see. 0:20:33.320 --> 0:20:37.560 Our customers sometimes starting with design, sometimes starting in code, 0:20:37.800 --> 0:20:40.320 and with our MCP, they can pull their work into Figma, 0:20:40.800 --> 0:20:43.159 or they can read from Figma to go build and 0:20:43.200 --> 0:20:45.879 more of that will be fully encompassed in the Figma 0:20:45.960 --> 0:20:47.840 workflow with our agents in the future. 0:20:48.880 --> 0:20:51.080 Dylan, A lot of people today are reading the story 0:20:51.200 --> 0:20:54.679 Pigma CEO four fits forty six million dollars in stock 0:20:55.119 --> 0:20:56.320 after share decline. 0:20:56.840 --> 0:20:58.000 What was your thinking on that? 0:21:00.000 --> 0:21:03.880 I did a while back, so it wasn't linked to yesterday, 0:21:05.200 --> 0:21:07.320 but yeah, I mean, look, dilution is something that I 0:21:07.359 --> 0:21:11.679 feel just like our shareholders feel and given that this 0:21:11.760 --> 0:21:15.119 is an investment period right now, that felt like the 0:21:15.240 --> 0:21:18.880 thing that made sense to do. And yeah, I mean 0:21:18.920 --> 0:21:21.520 mostly I've just been My entire head is in how 0:21:21.560 --> 0:21:23.240 do we invest for the future because we have so 0:21:23.400 --> 0:21:24.640 much we can grow right now? 0:21:25.119 --> 0:21:29.560 Is still trying to bail firms? Yes, we just have 0:21:29.720 --> 0:21:31.960 thirty seconds, Cinema. What are you most focused on building 0:21:32.040 --> 0:21:32.480 right now? 0:21:33.680 --> 0:21:35.280 I'm focused on a few things. 0:21:35.560 --> 0:21:38.679