WEBVTT - BI Weekend: Disney, Palantir Earnings, Musk Stock Award 0:00:02.720 --> 0:00:12.360 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:12.480 --> 0:00:13.600 with Paul Sweeney. 0:00:13.720 --> 0:00:16.959 The real app performance has been the US corporate high yield. 0:00:17.040 --> 0:00:20.680 These are two big time blue chip companies. One person's 0:00:20.720 --> 0:00:23.560 cast is another person's animal spirits. 0:00:23.200 --> 0:00:26.920 Breaking market headlines and corporate news from across the globe. 0:00:26.960 --> 0:00:29.000 Our view is, if the economy is slowing. 0:00:28.600 --> 0:00:31.120 Down, there is the possibility of the debt spirals. 0:00:31.240 --> 0:00:33.760 Both protum competing and AI are going to power the future. 0:00:33.880 --> 0:00:37.239 People are just buying everything with tex Bloomberg Intelligence with 0:00:37.320 --> 0:00:42.240 Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 0:00:42.680 --> 0:00:45.040 I'm Paul Sweeney and I'm Lisa Matteo filling in on 0:00:45.080 --> 0:00:46.160 Bloomberg Intelligence. 0:00:46.240 --> 0:00:48.320 On the Face Bloomberg Intelligence Show, we dig inside the 0:00:48.320 --> 0:00:50.960 big business stories impacting Wall Street and the global markets. 0:00:51.120 --> 0:00:53.080 Each and every week, we provide in depth research and 0:00:53.159 --> 0:00:55.200 data on some of the two thousand companies in one 0:00:55.240 --> 0:00:58.840 hundred and thirty industries our analysts cover worldwide. Today, we'll 0:00:58.840 --> 0:01:02.040 look at why Volunteer Technologies reported its biggest ever quarterly 0:01:02.160 --> 0:01:04.320 sales growth since the company went public. 0:01:04.440 --> 0:01:07.319 Plus, we'll look at how the fast food Jay McDonald's 0:01:07.319 --> 0:01:09.000 returned to sales growth last quarter. 0:01:09.200 --> 0:01:11.560 But first we begin with earnings from the median entertainment 0:01:11.560 --> 0:01:12.759 giant Walt Disney. 0:01:12.959 --> 0:01:15.280 This week, Disney shares fell after the company gave a 0:01:15.319 --> 0:01:17.760 mixed earnings report in the third quarter. The results, well, 0:01:17.800 --> 0:01:20.760 they showed strength in Disney streaming and parks business, but 0:01:20.800 --> 0:01:23.560 the company gave a lukewarm outlook for profit this year. 0:01:23.840 --> 0:01:25.959 For more guest hosts, Isabelle Lee and I rejoined by 0:01:26.000 --> 0:01:29.800 Keitha Rong Onathan Bloomberg Intelligence Analysts on US media. We 0:01:29.800 --> 0:01:33.959 first asked Etha what exactly concerns investors about Disney. 0:01:33.880 --> 0:01:37.280 You know, expectations might have been, you know, slightly high, 0:01:37.480 --> 0:01:39.680 and the fact that they didn't necessarily give us any 0:01:39.720 --> 0:01:43.399 specific guidance for fiscal twenty twenty six. They did point 0:01:43.480 --> 0:01:47.760 to a raised guidance for EPs growth for fiscal twenty 0:01:47.800 --> 0:01:50.120 twenty five eighteen percent now and sort of sixteen percent, 0:01:50.680 --> 0:01:52.960 but they didn't necessarily give us anything specific for fiscal 0:01:52.960 --> 0:01:56.440 twenty twenty six. That could be a slight source of disappointment. 0:01:56.760 --> 0:01:59.920 They did say that they will stop disclosing Disney plusses 0:02:00.040 --> 0:02:03.080 criber numbers, but again this is not something totally unexpected. 0:02:03.080 --> 0:02:05.680 I mean, Netflix has stopped doing this. We're seeing this 0:02:05.760 --> 0:02:08.280 kind of move away from just subscriber numbers to a 0:02:08.320 --> 0:02:09.760 greater focus and profitability. 0:02:10.520 --> 0:02:12.560 I want to zero in on parks because I'm still 0:02:12.600 --> 0:02:14.800 scarred by how expensive it was when I visited a 0:02:14.800 --> 0:02:18.240 couple of years ago as an adult. But how sustainable 0:02:18.280 --> 0:02:21.240 is there strong parks performance given the divergent domestic and 0:02:21.320 --> 0:02:23.120 international performance. 0:02:23.320 --> 0:02:27.000 Very sustainable isabell. So, you know, we saw domestic parks, 0:02:27.000 --> 0:02:29.280 and I say that because you know, domestic parks actually 0:02:29.320 --> 0:02:31.920 coming into this year, coming into this quarter, there were 0:02:31.960 --> 0:02:33.880 a lot of worries, one of course, about the general 0:02:33.960 --> 0:02:36.680 macroeconomic environment, but the bigger source of worry was really 0:02:36.720 --> 0:02:40.720 the opening of Epic Universe, which is you know, Universal's 0:02:40.760 --> 0:02:43.960 big Florida theme parket traction. But the fact that it 0:02:44.040 --> 0:02:48.760 had absolutely no impact at all, or very very modest impact, 0:02:48.800 --> 0:02:51.960 if at all, is really amazing, and it just kind 0:02:51.960 --> 0:02:55.000 of speaks to the resilience in Disney's business model. They 0:02:55.080 --> 0:02:59.080 reported again very very strong per capita growth, you know, 0:02:59.160 --> 0:03:01.840 in terms of food beverages, in terms of concessions. So 0:03:01.919 --> 0:03:03.839 all of that doing really well, and the reason I'm 0:03:03.919 --> 0:03:06.360 so positive about this business going forward. First of all 0:03:06.560 --> 0:03:09.160 it contributes about fifty five to sixty percent of Disney profits. 0:03:09.160 --> 0:03:11.160 Are really really important to their top line, to their 0:03:11.160 --> 0:03:14.760 bottom line. Definitely. They have a lot of upcoming capacity, 0:03:14.840 --> 0:03:17.240 So the biggest source of expansion over the next few 0:03:17.280 --> 0:03:19.560 months is really going to be their cruise ships. They're 0:03:19.639 --> 0:03:23.959 launching two new cruise ships, their biggest ever actually, which 0:03:24.000 --> 0:03:26.840 is going to come on board in November and December. 0:03:27.480 --> 0:03:30.160 One of them sets sail from Asia and that basically 0:03:30.200 --> 0:03:32.840 takes the number of cruise ships to eight cruise ships, 0:03:32.960 --> 0:03:36.200 effectively kind of doubling their capacity in a span of 0:03:36.240 --> 0:03:38.640 just maybe two to three years. So that is going 0:03:38.680 --> 0:03:42.760 to really buoy both top line and bottom line going 0:03:42.800 --> 0:03:45.480 into twenty twenty six. And then beyond that, you really 0:03:45.520 --> 0:03:49.440 have this huge sixty billion capital expansion plan that is 0:03:49.440 --> 0:03:51.400 really going to play out over the next five to 0:03:51.440 --> 0:03:52.880 ten years. So we're going to see a lot more 0:03:52.880 --> 0:03:55.360 attractions all over the world. We're going to see that 0:03:55.400 --> 0:03:58.400 new Abu Dhabi park come out. So there is really 0:03:58.480 --> 0:04:01.520 a lot of you know, sustained momentum that we can 0:04:01.560 --> 0:04:02.960 expect at the parks going forward. 0:04:03.400 --> 0:04:05.200 Keith It talk to us about that deal they just 0:04:05.240 --> 0:04:07.920 made with the NFL it seems like a really positive 0:04:08.000 --> 0:04:09.000 development for the company. 0:04:09.160 --> 0:04:12.320 Yeah, it's really good. I think from a Disney from 0:04:12.360 --> 0:04:15.440 an ESPN standpoint, that they're so closely aligned now with 0:04:15.560 --> 0:04:19.320 the NFL. I mean, the NFL is absolutely the premium property, 0:04:19.360 --> 0:04:21.240 the gold standard, Paul, you know this well when it 0:04:21.279 --> 0:04:23.719 comes to you know, sports properties in the US. And 0:04:23.760 --> 0:04:25.440 the fact now that they're going to be able to 0:04:26.120 --> 0:04:29.880 use all of this content for their upcoming ESPN streaming launch, 0:04:30.320 --> 0:04:32.960 I mean that that itself just kind of gives it 0:04:33.160 --> 0:04:36.000 a tremendous boost, I think even before you know it 0:04:36.080 --> 0:04:39.920 comes on board. So it's great for the product. It's 0:04:39.960 --> 0:04:42.880 also great from a strategic standpoint because the NFL is 0:04:42.920 --> 0:04:45.960 obviously one of the most important sports properties, and this 0:04:46.040 --> 0:04:48.880 really gives them access or it at least definitely gives 0:04:48.920 --> 0:04:51.360 them a little bit of an advantageous position compared to 0:04:51.440 --> 0:04:53.559 let's say, an Amazon or a Netflix or an Apple 0:04:53.600 --> 0:04:56.000 if they want to ever outbid you know, the current 0:04:56.040 --> 0:05:00.480 media partners. So definitely, I think strategically, very very sound 0:05:00.480 --> 0:05:01.800 move on the part of Disney. 0:05:02.080 --> 0:05:03.960 So it seems like we had a good quarter. Runway 0:05:04.000 --> 0:05:06.960 for growth is really just long and wide. What downside 0:05:07.040 --> 0:05:10.839 risks remain then, especially around the macro uncertainty and tiriff exposure. 0:05:10.960 --> 0:05:14.000 Do you see, Yeah, maybe a little bit of execution risks. 0:05:14.000 --> 0:05:16.080 So we still really don't know how this hole. I mean, 0:05:16.200 --> 0:05:20.280 obviously everybody's very excited for the ESPN product launch, but 0:05:20.320 --> 0:05:22.960 we still don't know how exactly that's going to play out. Again, 0:05:23.000 --> 0:05:24.640 a huge source of upside is going to be the 0:05:24.680 --> 0:05:28.000 streaming business. Everybody is expecting huge cost savings when it 0:05:28.040 --> 0:05:30.599 comes to the integration of Hulu and Disney Plus. But 0:05:30.680 --> 0:05:32.520 again execution is a little bit of a risk. And 0:05:32.520 --> 0:05:36.200 then you pointed out, you know, macro factors. Remember, Disney 0:05:36.279 --> 0:05:39.440 still obviously has huge exposure because of its parks business, 0:05:39.640 --> 0:05:42.000 and anytime we see kind of a slowdown in the economy, 0:05:42.279 --> 0:05:44.520 we do feel that in the parks as well. And 0:05:44.600 --> 0:05:47.680 of course advertising also, so you know, they do have 0:05:47.720 --> 0:05:51.159 a substantial exposure to advertising because of their TV networks business. 0:05:51.320 --> 0:05:53.160 So there again we can see a little bit of 0:05:53.520 --> 0:05:55.880 an impact. But overall, as it stands right now, the 0:05:55.880 --> 0:05:58.279 business seems to be in really good shape all right here. 0:05:58.480 --> 0:06:00.919 The problem childs though, are the podcast networks in the 0:06:00.960 --> 0:06:03.760 cable networks. What you know, just because of cord cutting, 0:06:03.760 --> 0:06:07.080 that they're just declining businesses. What's the company saying that 0:06:07.120 --> 0:06:08.640 what we're going to do with those businesses. 0:06:08.839 --> 0:06:11.840 They haven't said anything explicitly, Paul. So a few years ago, 0:06:11.960 --> 0:06:14.280 you know, this idea was floated that maybe they kind 0:06:14.320 --> 0:06:17.360 of spin off ABC their broadcast network, maybe they spin 0:06:17.440 --> 0:06:21.120 off their linear cable channels, all of that. You know, 0:06:21.480 --> 0:06:23.960 noise has kind of quietened down. You know, Bob Biger 0:06:23.960 --> 0:06:26.280 basically said, no, no, no, we need these businesses. They're 0:06:26.320 --> 0:06:28.880 all kind of integral to the whole Disney story. So 0:06:28.920 --> 0:06:33.120 we haven't heard anything recently that being said. Just this 0:06:33.200 --> 0:06:36.200 whole deal with the NFL, the NFL kind of taking 0:06:36.240 --> 0:06:39.760 an equity stake, it almost seems like they are prepping 0:06:39.920 --> 0:06:42.960 for ESPN to kind of ESPN and maybe ABC to 0:06:43.040 --> 0:06:46.320 kind of coast solo. Remember, Bob Biger only has a 0:06:46.320 --> 0:06:49.159 few more months left, so the end of twenty twenty 0:06:49.200 --> 0:06:53.680 six he leaves Disney, or at least that's what he says. Yeah, 0:06:53.760 --> 0:06:57.320 we think, and I really think he kind of wants 0:06:57.040 --> 0:07:00.480 to get this deal done so to separate es because 0:07:00.480 --> 0:07:03.640 it's not really core to the rest of the Disney properties. 0:07:04.360 --> 0:07:06.039 But again, it's a little bit of a weight and watch, 0:07:06.080 --> 0:07:09.560 but nothing explicitly stated from Disney management about what they 0:07:09.600 --> 0:07:11.480 want to do with the linear piece of the business. 0:07:11.720 --> 0:07:14.320 So ESPN is getting a fresh spin. Within August twenty 0:07:14.320 --> 0:07:17.120 one launch, it will be thirty dollars a month for 0:07:17.200 --> 0:07:19.600 the new streaming app. What do you make of that price? 0:07:19.760 --> 0:07:21.480 You think people will pay up for it or is 0:07:21.480 --> 0:07:22.080 that steep? 0:07:22.360 --> 0:07:24.440 It's a high price point, There's no doubt about it. 0:07:24.480 --> 0:07:26.400 I think most people were kind of expecting somewhere in 0:07:26.440 --> 0:07:29.280 the twenty three to twenty five dollars range. That said, 0:07:29.360 --> 0:07:32.000 what you know, we just ran a survey actually at 0:07:32.040 --> 0:07:34.880 Bloomberg Intelligence, and what we found is that there's actually 0:07:34.880 --> 0:07:37.360 a lot of interest in this product. So we think 0:07:37.360 --> 0:07:39.480 that the updake will be fairly strong. And the updake 0:07:39.600 --> 0:07:41.920 not so much as a standalone product, but when you 0:07:41.960 --> 0:07:45.200 bundle it with Disney Plus and Hulu, so they are 0:07:45.280 --> 0:07:48.600 running a pretty attractive promotion. So for the first year, 0:07:48.640 --> 0:07:52.840 you can get Disney Plus, Hulu and ESPN at a 0:07:52.840 --> 0:07:55.160 thirty to thirty dollars price point, which which seems like 0:07:55.240 --> 0:07:56.960 really good value. So I think we're going to see 0:07:57.000 --> 0:07:59.920 a lot of people come in initially through the bund 0:08:00.280 --> 0:08:01.040 at least. 0:08:01.160 --> 0:08:04.080 Our thanks to Githa Ranganath and Bloomberg Intelligence analyst on 0:08:04.280 --> 0:08:05.000 US media. 0:08:05.160 --> 0:08:07.680 We move next to recent news from the beverage company 0:08:07.800 --> 0:08:08.480 Molson Cores. 0:08:08.680 --> 0:08:11.080 This week, the company lowered its full year guidance for 0:08:11.120 --> 0:08:14.040 the second quarter in a row. It cited continued pressure 0:08:14.080 --> 0:08:17.120 from a week consumer, falling US market share, and rising 0:08:17.240 --> 0:08:18.960 costs tied to aluminum tariffs. 0:08:19.200 --> 0:08:21.320 For more, Lisa and I were joined by Ken Shay, 0:08:21.400 --> 0:08:24.960 Bloomberg Intelligence senior consumer products analysts. We first asked Ken 0:08:25.080 --> 0:08:27.960 just how much aluminum tariffs have been impacting Molson. 0:08:28.000 --> 0:08:31.520 Course, it's material, you know, they describe it as an 0:08:31.560 --> 0:08:35.720 indirect cost, but it really spiked up there in the quarter, 0:08:36.760 --> 0:08:38.959 you know, encroaching on their margin. I think though the 0:08:39.120 --> 0:08:42.960 bigger picture though here is the continued week sales, the 0:08:43.000 --> 0:08:45.680 lackluster sales were seeing in the US beer market and 0:08:45.720 --> 0:08:48.199 alcoholic beverages in general. You know, this is their peak 0:08:48.240 --> 0:08:50.920 summer selling season. This is when you know these companies 0:08:50.920 --> 0:08:54.480 should be thriving, and it looks like the summer selling 0:08:54.520 --> 0:08:57.079 season in the US for alcoholic beverages is going to 0:08:57.120 --> 0:09:02.520 be a dud. It's a cautious consumer, it's a particular 0:09:03.200 --> 0:09:06.840 pressures on the Hispanic demographic. It's it was a lousy 0:09:07.000 --> 0:09:09.920 June in terms of the weather and key markets, and 0:09:10.080 --> 0:09:14.920 basically all the big brewers are setting up for a 0:09:14.960 --> 0:09:18.160 tough second half as you know, these trends continue. You know, 0:09:18.679 --> 0:09:21.840 I expect continued sluggish performance in the second half as well. 0:09:22.360 --> 0:09:25.280 So is this beer thing? Is it the kind of 0:09:25.280 --> 0:09:27.000 a global thing? I mean, I know, you guys at 0:09:27.080 --> 0:09:30.160 Bloomberg Intelligence, you get the data that choose consumption of 0:09:30.200 --> 0:09:31.000 everything out there. 0:09:31.480 --> 0:09:34.000 In the case of most in course, Paul, yeah, they 0:09:34.240 --> 0:09:38.120 have a big operation in Europe, Eastern Europe, many parts 0:09:38.160 --> 0:09:41.280 of Western Europe, and that they had lower volumes as well. 0:09:41.880 --> 0:09:44.200 It was saved by higher prices to a degree. But 0:09:44.559 --> 0:09:47.600 you know, again the big picture is that consumers are 0:09:47.600 --> 0:09:49.280 just not going out to the bars as much. On 0:09:49.320 --> 0:09:52.480 premise sales, we're particularly weak. That could be weather related, 0:09:52.480 --> 0:09:57.280 I mean, that's just another example, but also I think 0:09:57.320 --> 0:09:59.880 it could be, you know, the culmination of a lot 0:09:59.880 --> 0:10:02.920 of price increases over the last few years. Maybe we've 0:10:02.960 --> 0:10:05.160 hit a point where there's some sticker shot going on here. 0:10:05.800 --> 0:10:07.760 And what about people drinking he said, not going to 0:10:07.840 --> 0:10:11.240 the bar, But what about just drinking less alcohol in general. 0:10:12.360 --> 0:10:14.520 Well, that's a great point, least, I think longer term, 0:10:14.600 --> 0:10:17.360 you have some secular headwinds as well, things you've talked 0:10:17.360 --> 0:10:19.960 about in the past. You know, the spread of legal cannabis, 0:10:20.040 --> 0:10:22.920 particularly here in the US. In the US, you also 0:10:23.040 --> 0:10:26.320 have these intoxicating hemp drinks which are all the rage 0:10:26.400 --> 0:10:29.720 now in many markets. You have the GLP one users 0:10:29.760 --> 0:10:33.720 are cutting back. Gen Z doesn't seem to embrace alcohol 0:10:33.760 --> 0:10:35.840 as much as their parents did. All those things are 0:10:35.840 --> 0:10:38.559 weighing on it longer term, but that, combined with some 0:10:38.679 --> 0:10:41.200 near term pressures, is really weighing on these companies. 0:10:41.640 --> 0:10:44.640 It's a disappointing discussion here. I mean, not that we're 0:10:44.640 --> 0:10:47.280 gonna have fun here. I'll tell you here's the problem 0:10:47.320 --> 0:10:50.280 with all this white claw and sea breeze and I 0:10:50.320 --> 0:10:51.920 don't know what you know, the iced tea and vodka, 0:10:52.000 --> 0:10:52.760 what's that all about? 0:10:53.080 --> 0:10:53.640 Is that a fad? 0:10:54.559 --> 0:10:56.559 It seems to have some legs there, you know, the 0:10:56.600 --> 0:10:58.880 pre mixed cocktails. Well, let me put it this way. 0:10:58.920 --> 0:11:00.760 With some of the things that did l in the 0:11:00.840 --> 0:11:06.480 quarter are things like bush light apple, you know, some flavor. 0:11:07.320 --> 0:11:09.520 You know, some of the hard teas are doing well. 0:11:09.960 --> 0:11:12.480 The premixes continue to do well, So I think the 0:11:12.600 --> 0:11:15.120 way you could take away is maybe the consumer, while 0:11:15.440 --> 0:11:17.920 you know economizing, is also looking for a flavor and 0:11:18.000 --> 0:11:21.360 different variety. And also the non alcoholic and low alcoholic 0:11:21.920 --> 0:11:24.880 segment continues to do well from a low base. So 0:11:25.000 --> 0:11:27.640 I think in the second half I would expect a 0:11:27.760 --> 0:11:33.520 higher level of promotion and innovation along those themes low 0:11:33.559 --> 0:11:37.120 alcohol and no alcohol flavor innovation that's going to be 0:11:37.200 --> 0:11:39.760 really popular. I think in the second half the super volume. 0:11:40.200 --> 0:11:42.079 Hey, before you go, can you break down some of 0:11:42.120 --> 0:11:44.839 those macro economic headwinds that the company's facing. 0:11:45.400 --> 0:11:48.760 Sure, well, they The primary one is just you know, 0:11:49.120 --> 0:11:52.559 consumer confidence. Consumers just feel you know, they're reading the 0:11:52.600 --> 0:11:55.920 papers all these you know, tire fund certainties, and you 0:11:56.040 --> 0:11:59.679 know the pressure on the Hispanics in particular, what's going 0:11:59.760 --> 0:12:02.120 on there. Those are the big things, you know, And 0:12:02.120 --> 0:12:04.040 I don't think it's anything major, but it's it's just 0:12:04.200 --> 0:12:06.760 enough on the margin that these are purchases that can 0:12:06.800 --> 0:12:10.520 be deferred and consumers by and large r. 0:12:11.000 --> 0:12:14.720 A our thanks to Kenhey Bloomberg Intelligence senior consumer products analysts. 0:12:14.960 --> 0:12:16.839 Coming up, we'll look at earnings from one of the 0:12:16.920 --> 0:12:20.080 world's biggest producers of heavy machinery Caterpillar. 0:12:20.440 --> 0:12:23.400 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:23.480 --> 0:12:26.319 depth research and data on two thousand companies one hundred 0:12:26.320 --> 0:12:27.079 and thirty industries. 0:12:27.160 --> 0:12:30.360 You can access Bloomberg Intelligence via bi Go and the terminal. 0:12:30.440 --> 0:12:33.640 I'm Lise Matteo and I'm Paul Sweeney. This is Bloomberg. 0:12:38.120 --> 0:12:41.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:41.920 --> 0:12:44.960 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:45.000 --> 0:12:48.280 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:48.360 --> 0:12:51.439 you get your podcasts, or watch us live on YouTube. 0:12:52.280 --> 0:12:54.480 I'm Paul Sweeney and I'm Lice Matteo. Filling in on 0:12:54.559 --> 0:12:55.599 Bloomberg Intelligence. 0:12:55.840 --> 0:12:59.080 Move now to earning from the software company Palaneer Technologies. 0:12:59.200 --> 0:13:02.320 This week, palente reported its biggest ever quarterly sales growth 0:13:02.360 --> 0:13:06.280 since the company went public, and Palenteer cited astonishing impact 0:13:06.360 --> 0:13:09.160 of artificial intelligence technology on its business. 0:13:09.480 --> 0:13:11.400 For more, Lisa and I were joined by Mandeep saying 0:13:11.400 --> 0:13:15.120 Bloomberg Intelligence, senior tech industry analyst. We first asked man 0:13:15.160 --> 0:13:18.280 Deep if Palenteer should be considered a dominant software company 0:13:18.360 --> 0:13:18.920 of the future. 0:13:19.320 --> 0:13:22.960 I mean, clearly there is a lot baked into the valuation, 0:13:23.280 --> 0:13:27.439 But I want to focus on, you know, the net 0:13:27.559 --> 0:13:31.360 new ERR, which is a metric that software companies are 0:13:31.440 --> 0:13:36.959 measured on. And when you compare Palenteers commercial segment revenue, 0:13:36.960 --> 0:13:41.920 which everyone is excited about, their total deal value that's 0:13:42.000 --> 0:13:45.880 remaining is around two point eight billion, the new ARR 0:13:46.160 --> 0:13:51.000 increased by five hundred million. Contrast that with a Microsoft 0:13:51.360 --> 0:13:55.559 or a Google Cloud. Microsoft added almost nine billion in 0:13:55.679 --> 0:13:59.520 net new ARR this quarter, and they talked about, you know, 0:14:00.200 --> 0:14:05.040 being used across one hundred million Microsoft Copilot users twenty 0:14:05.120 --> 0:14:09.559 million GitHub Copilot users. So from that perspective, you know, 0:14:10.600 --> 0:14:14.400 Balenteers increase in remaining deal value of five hundred million 0:14:14.559 --> 0:14:19.240 looks pretty small. I mean, Palenteers overall revenue rund rate 0:14:19.360 --> 0:14:23.920 is four billion. Microsoft clearly is you know, a company 0:14:24.000 --> 0:14:28.560 that's almost one hundred times or eighty times more bigger 0:14:28.680 --> 0:14:32.520 than Palenteer. But it just goes to show that even 0:14:32.600 --> 0:14:36.560 on a net new AIRR basis, Microsoft is adding more 0:14:36.640 --> 0:14:40.000 revenue per quarter than a Palenteer is. And still people 0:14:40.080 --> 0:14:45.000 are very excited about Palenteers prospects. And to my mind, clearly, 0:14:45.280 --> 0:14:48.440 you know, they have a product that is appealing to 0:14:48.720 --> 0:14:52.800 a certain section of enterprise users. But at this valuation, 0:14:53.200 --> 0:14:56.320 I mean, they can't sustain that for the next thirty 0:14:56.400 --> 0:15:00.160 forty quarters, which is what they need to show to 0:15:00.240 --> 0:15:03.360 grow into the evaluation. And I just don't see from 0:15:03.400 --> 0:15:07.120 a product perspective they'll have the same kind of appeal 0:15:07.480 --> 0:15:10.600 as a Microsoft Copilot or a Google Cloud or you know, 0:15:10.720 --> 0:15:12.480 any of these large companies. 0:15:12.640 --> 0:15:14.600 Some question today, how do you guys value this thing? 0:15:14.720 --> 0:15:16.480 I mean, I got it at like two three hundred 0:15:16.520 --> 0:15:17.920 times earning, So that's not the way to go. 0:15:18.560 --> 0:15:21.360 So we've seen that with you know, new IPOs. When 0:15:21.400 --> 0:15:24.160 they come to the market, they get a premium multiple. 0:15:24.480 --> 0:15:27.560 They get traded at you know, thirty forty time sales. 0:15:27.600 --> 0:15:31.600 Snowflake which is a competitor to Palenteer, when it went public, 0:15:32.120 --> 0:15:36.040 it traded at sixty seventy time sales. Look at where 0:15:36.120 --> 0:15:39.280 the stock is now. It's flat since the IPO. Even 0:15:39.320 --> 0:15:42.880 though the company has grown top line at thirty thirty 0:15:42.920 --> 0:15:46.560 five percent Kegger, the stock is flat. So that's what 0:15:46.720 --> 0:15:50.120 I mean by growing into the valuation, because there is 0:15:50.360 --> 0:15:53.920 so much embedded in that upfront multiple that even growing 0:15:54.000 --> 0:15:57.240 at thirty percent is not enough. Palenteer really needs to 0:15:57.320 --> 0:16:00.640 grow at fifty percent to be able to show any 0:16:00.920 --> 0:16:03.320 sort of stock return from this point on, Can I 0:16:03.400 --> 0:16:05.480 do that? No? I mean that's why I said I 0:16:05.600 --> 0:16:10.560 compare the product. My initial comments were around comparing Palenteers 0:16:10.640 --> 0:16:15.240 product versus other large enterprise software makers and even you know, 0:16:15.960 --> 0:16:20.080 you go down the list Salesforce Service, now Adobe like, 0:16:20.280 --> 0:16:23.280 these are much bigger companies and they have compounded at 0:16:23.320 --> 0:16:26.600 twenty percent Keger over the years because they had a 0:16:26.680 --> 0:16:29.920 seat base or a consumption based model. We don't even 0:16:30.120 --> 0:16:33.520 know what kind of a business model Palenteer has. Yes, 0:16:33.600 --> 0:16:37.600 it's winning government deals, Yes it's winning some enterprise deals, 0:16:37.840 --> 0:16:40.640 but we don't know how they account for that revenue 0:16:40.680 --> 0:16:42.840 every quarter. Is it a seat based model, is a 0:16:42.920 --> 0:16:46.080 consumption base? We don't have that kind of visibility to 0:16:46.160 --> 0:16:47.040 their business model. 0:16:48.240 --> 0:16:51.160 In a Concter party, I can tell you the Google story, 0:16:51.320 --> 0:16:53.800 I can tell you that Microsoft story. I have no 0:16:53.960 --> 0:16:56.440 idea what the Palenteer story is. Can you explain it 0:16:56.480 --> 0:16:57.520 to me like I'm a five year old? 0:16:57.920 --> 0:17:01.440 Yeah, so their software out of the box will help 0:17:01.560 --> 0:17:05.080 you make sense of your big data strategy. They really 0:17:05.320 --> 0:17:09.480 curved out a name for themselves when big data became 0:17:09.640 --> 0:17:13.000 the thing. When a company had a large amount of data, 0:17:13.119 --> 0:17:16.560 whether it's log data or some other type of reporting data, 0:17:17.240 --> 0:17:19.800 they would help you make sense of it because they 0:17:19.880 --> 0:17:23.399 have something proprietary that no one else has in terms 0:17:23.480 --> 0:17:27.720 of organizing that data and making it usable. So that's 0:17:27.760 --> 0:17:32.240 their value proposition. But with the AI wave and llms, 0:17:32.320 --> 0:17:36.200 they were able to integrate LLM calls within their offering 0:17:36.720 --> 0:17:40.320 to develop a customer service or a supply chain use 0:17:40.400 --> 0:17:44.760 case that you can apply AI on top of their ontology, 0:17:44.800 --> 0:17:47.320 which is their core product. And a lot of other 0:17:47.400 --> 0:17:49.840 companies are doing the same. To my mind, Microsoft is 0:17:49.920 --> 0:17:53.480 doing the same for their customers. They're trying to embed 0:17:53.680 --> 0:17:56.879 open AI with their core offerings with their CRM system 0:17:57.320 --> 0:18:00.800 and help them deploy customer service use case. So the 0:18:01.000 --> 0:18:05.159 differentiation of Balenteer versus Microsoft, to my mind is not 0:18:05.440 --> 0:18:08.360 that big as the valuation reflects. And that's where I'm 0:18:08.440 --> 0:18:12.159 betting they're not going to grow fifty percent for the 0:18:12.280 --> 0:18:15.640 next twelve to twenty quarters, which is what the valuation 0:18:15.800 --> 0:18:16.280 is implying. 0:18:16.359 --> 0:18:18.240 Now, how would you compare what they do as far 0:18:18.320 --> 0:18:21.480 as a government contractor versus the commercial side, like which 0:18:21.640 --> 0:18:22.919 is doing better for them? 0:18:23.040 --> 0:18:26.280 Yeah, so they have a much higher exposure to government side. 0:18:26.320 --> 0:18:28.639 I mean, government side is still more than fifty percent 0:18:28.720 --> 0:18:32.560 of their revenue, and all these large enterprise software companies 0:18:32.880 --> 0:18:36.520 they have ten to fifteen percent government exposure. So Palenteer's 0:18:36.600 --> 0:18:41.800 government exposure is way too large compared to other software makers. 0:18:42.040 --> 0:18:45.560 And on top of that, their international sales seem to 0:18:45.640 --> 0:18:49.680 be declining at least, you know, on the commercial side 0:18:49.760 --> 0:18:53.840 because of the polarizing views of the management. So if 0:18:53.880 --> 0:18:57.439 they were more balanced, probably they would win more international business. 0:18:57.520 --> 0:19:00.560 But right now this is a US centric story, and 0:19:00.880 --> 0:19:03.600 that's where I think it sort of puts a dent 0:19:03.680 --> 0:19:06.600 to the growth rate down the line once they run 0:19:06.680 --> 0:19:09.040 out of the deals that they currently have signed. 0:19:09.520 --> 0:19:12.320 Our thanks to Man Deep, saying Bloomberg Intelligence senior tech 0:19:12.400 --> 0:19:13.320 industry analyst. 0:19:13.560 --> 0:19:15.439 We look next at earnings from one of the world's 0:19:15.480 --> 0:19:19.160 biggest producers of heavy machinery, Caterpillar. This week, the company 0:19:19.200 --> 0:19:22.200 posted qually earnings that missed analyst expectations. 0:19:22.320 --> 0:19:25.440 Caterpillar also said it now expects full year adjusted operating 0:19:25.480 --> 0:19:28.120 profit to fall in the bottom of its annual target range, 0:19:28.400 --> 0:19:30.760 even with higher annual sales and the companies that it 0:19:30.800 --> 0:19:34.160 expects to face net incremental tariffs on one point three 0:19:34.240 --> 0:19:36.440 to one point five billion dollars this year. 0:19:36.720 --> 0:19:38.720 For more, Lisa and I were joined by Chris Gielino, 0:19:38.720 --> 0:19:42.720 Bloomberg Intelligence senior US machinery analyst. We first asked Chris 0:19:42.920 --> 0:19:45.560 to discuss his takeaways from Caterpillar's earnings. 0:19:46.080 --> 0:19:47.800 The print was a little weak. It came in a 0:19:47.800 --> 0:19:51.600 little below expectations. The big takeaway here is that underlying 0:19:51.680 --> 0:19:55.879 demand is still pretty darn resilient. You had backlog ubsequentially 0:19:56.000 --> 0:19:59.480 again this quarter, which set another record. You had improving 0:19:59.600 --> 0:20:03.280 order trad across all three of their main businesses. Dealer 0:20:03.359 --> 0:20:06.560 inventories still remain quite low, and the company actually raise 0:20:06.600 --> 0:20:09.159 their sales guidance for the year. So you know, that 0:20:09.280 --> 0:20:12.640 seems to suggest us that underlying demand is still intact 0:20:12.720 --> 0:20:14.640 despite all these these tariff headwinds. 0:20:15.280 --> 0:20:17.359 And now, how do their results kind of match up 0:20:17.400 --> 0:20:20.679 to some of their their peers. They believe there's Terex Lindsay, 0:20:21.000 --> 0:20:23.359 who already opened their books. How does Caterpillar match up? 0:20:24.000 --> 0:20:27.280 Yeah, I characterized the overall earning season for for US 0:20:27.400 --> 0:20:30.920 machinery is kind of mixed if you think about really 0:20:31.040 --> 0:20:36.200 construction peers, which which is kind of more Caterpillars sweet spot. 0:20:37.359 --> 0:20:39.680 That's a market that's you know, kind of bouncing along 0:20:39.720 --> 0:20:40.159 the bottom. 0:20:40.240 --> 0:20:40.359