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Speaker 1: where innovation, money and power collide in Silicon Valley and beyond.
Speaker 1: This is Bloomberg Technology with Caroline Hyde.
Speaker 2: And Ed Lovelow live from New York on Caroline Hyde.
Speaker 3: And Aunt Jackie Devalos in San Francisco. This is Bloomberg
Speaker 3: Technology coming up.
Speaker 2: Apple in the geopolitical cross has as.
Speaker 4: China weighs a potential antitrust pope into the app store practices,
Speaker 4: plus Alphabet shares tumble after posting slower growth in its
Speaker 4: cloud business and a seventy five billion dollar capital expenditure commitment,
Speaker 4: and AMD falls on a disappointing outlook for its AI
Speaker 4: chip growth. That and so many more earnings coming up
Speaker 4: and Apple off by one point three percent. A key
Speaker 4: issue here is China and the US and a potential
Speaker 4: antitrust probe coming from China all regarding its app store.
Speaker 4: Let's get to it, Bloomberg's Peter Alstrom, because the timing
Speaker 4: here is of course amid this tip for Tap from
Speaker 4: US and China in Taris.
Speaker 2: But this started before Trump came to office.
Speaker 5: Yeah, that's exactly right.
Speaker 6: So what we've heard from sources is that Beijing regulators
Speaker 6: are looking at Apple and specifically the policies around its
Speaker 6: app store.
Speaker 5: It takes a thirty percent.
Speaker 6: Of cut of app revenue, like it does in other
Speaker 6: countries too, and also it kind of walks down payment
Speaker 6: systems because it wants you to make those payments through
Speaker 6: the Apple Store in particular. So we've heard that SAMR,
Speaker 6: the regulator there, is taking.
Speaker 5: A close look at Apple.
Speaker 6: They've called in executives from the company and some other
Speaker 6: executives too to find out more information. Now the balls
Speaker 6: and Apple's court to respond to some sort of in
Speaker 6: some sort of way and see whether they're able to
Speaker 6: address this or whether regulators are going to have to
Speaker 6: take more action to be fair. Though this is the
Speaker 6: same kind of action that Apple has faced in other
Speaker 6: countries too, where there are concerns about the app store,
Speaker 6: how much money it takes away from developers, and whether
Speaker 6: that's actually a level playing field for other companies.
Speaker 3: Peter, one of the outstanding questions is is this just
Speaker 3: a bit more bark than bite and what is the
Speaker 3: time horizon here? Because a lot of these probes take
Speaker 3: time to play out. Do you have a sense of
Speaker 3: how long it'll take before companies actually see a hit
Speaker 3: from some of these probes.
Speaker 6: Yeah, that's a very good question. This is coming, of course,
Speaker 6: in the middle of this kind of geopolitical tit for
Speaker 6: tap between the United States and China. So the US
Speaker 6: levied the ten percent tariffs on Chinese imports, and China
Speaker 6: has responded with some more careful targeted things, including an
Speaker 6: investigation into Google, which has a similar kind of app
Speaker 6: store issue. Doesn't have that many operations in the country
Speaker 6: beyond that, so I think.
Speaker 5: Politics are going to play a role here.
Speaker 6: We're going to see how that plays into the negotiations
Speaker 6: with these companies. Visiing has a very forceful regulatory arm.
Speaker 6: If they do decide to go ahead and take action
Speaker 6: against Apple, Google, we know they're investigating in Nvidia too,
Speaker 6: it could be very putitive for those countries, but at companies,
Speaker 6: but it may have to do with the dynamics between
Speaker 6: the two countries in fact, rather than the companies themselves.
Speaker 3: Bloomberg's Peter Alstrom, we thank you. Alphabet's share is dropping
Speaker 3: after fourth quarter earnings missed expectations yesterday. Investors were disappointed
Speaker 3: by a slowdown in sales and Google's cloud unit. For
Speaker 3: more on this, we're joined by Brent phil from Jeffries. Brent, I,
Speaker 3: you know when we look at Google, Alphabet's cloud sales
Speaker 3: lagged by two percent. This was, you know, behind estimates.
Speaker 3: It's the second hike per scaler to lag on this
Speaker 3: front in the last week. Microsoft last week posted disappointed
Speaker 3: cloud numbers. What's driving the decline for Google specifically because
Speaker 3: the Microsoft story was a little bit different there.
Speaker 7: Yeah, I mean the common thread is Google and Microsoft
Speaker 7: are indicating, you know, slower growth.
Speaker 8: Now.
Speaker 7: Want to be clear, last quarter was an anomaly for Google,
Speaker 7: so growth went to thirty five and then went to
Speaker 7: thirty this last quarter, So I think everyone is concerned
Speaker 7: about the magnitude that they did say there were some
Speaker 7: one time items. Growth in Q four is still up
Speaker 7: from the front half of the year, so it's not
Speaker 7: like things are falling out of the sky.
Speaker 8: And even for Microsoft, right.
Speaker 7: They had low thirty percent growth, they wanted to see
Speaker 7: mid thirties and they didn't see that acceleration.
Speaker 2: They took up the table.
Speaker 7: So we're still talking, you know, thirty percent growth across
Speaker 7: both companies, and we were at the beginning of the
Speaker 7: AI changed, So I wouldn't I'd be careful to look
Speaker 7: at just one quarter and say it's a massive trend.
Speaker 7: The trend has actually been pretty healthy. And then I
Speaker 7: think the other thing is you kind of have this
Speaker 7: bug zopper light as we call it with AI. Everyone
Speaker 7: gets attracted to this light over here and says.
Speaker 1: AI AI AI, and then.
Speaker 7: They forget about the core workloads, right, And so Microsoft
Speaker 7: highlighted that their aipiece was strong, the non aipiece was
Speaker 7: a little weaker. So again I think part of this
Speaker 7: is we're on a journey, or at the beginning of
Speaker 7: the journey, there are going to be some rocks and
Speaker 7: pebbles and you know, barking dogs across the path on
Speaker 7: the way that you got to navigate. And it's not
Speaker 7: like a straight line up. But ultimately I think it's
Speaker 7: pretty good.
Speaker 2: Now that but Brent, just on the pretty good thing.
Speaker 4: Can I just ask about the seventy five billion dollar
Speaker 4: capex though, because we are trying to understand whether you
Speaker 4: should be committing such significant investment at this time. If
Speaker 4: the return on AI is still questioned.
Speaker 7: One hundred percent, you should be committing the question that
Speaker 7: everyone's asking in every company when you ask the companies
Speaker 7: of this question, and Microsoft will say do you want
Speaker 7: us to get five percent market share fifty We're at
Speaker 7: one of the big biggest tectonic shifts, the CM medtronic
Speaker 7: every board in America. Globally, we're talking about China taking
Speaker 7: down a trillion dollars in market cap last Monday. Do
Speaker 7: you you want to be involved or not? And there's
Speaker 7: a price to admission. And so this is very clear
Speaker 7: that the time to spend is now, and the time
Speaker 7: to spend is now in four or five six quarters.
Speaker 4: And so to your point, what happened last Monday, the
Speaker 4: takedown was born by Deep Sea And actually we did
Speaker 4: hear from soopitch I talking about Deep Seak. Just take
Speaker 4: a listen.
Speaker 9: Run There's been a lot of observations on deep Seek.
Speaker 9: First of all, you know, I think tremendous team. I
Speaker 9: think they've done very very good work. I would say
Speaker 9: both are two point zero flash models or two point
Speaker 9: zero flash thinking models. You know, they are some of
Speaker 9: the most efficient models out there, including comparing to Deep Seeks.
Speaker 4: From your perspective, does Alphabet able to compete when it
Speaker 4: comes to cheaper models?
Speaker 7: Yeah, I mean, look, the China training thing is nonsense. Okay, dude,
Speaker 7: Sacks from the White house came nonsense. Nonsense, Okay, so
Speaker 7: we got to get that off the table. The technology
Speaker 7: is there, but the training run costant six million is nonsense.
Speaker 7: So I think, yeah, look they're going to be We
Speaker 7: have software companies using twenty five lll ms and lasting
Speaker 7: twenty five into it using ten. These are all going
Speaker 7: to commoditize and they're all going to have a place,
Speaker 7: and deepseq will have a place.
Speaker 8: But it's not this.
Speaker 7: You open your garage s dooor with one button and
Speaker 7: you open your iPhone with another button. There's getting me
Speaker 7: multiple multiple buttons. Okay, it's not just one.
Speaker 8: And so we think.
Speaker 7: Ultimately the big platforms with the users, with the capital
Speaker 7: and the data win and Google has a lot of data,
Speaker 7: they have a lot of great technology. So again this
Speaker 7: is why Meta is doing so well. Meta is going
Speaker 7: to perform very well with LAMA. So we are o
Speaker 7: a believer that look, yeah, better AI efficiency will come,
Speaker 7: but it's not coming at the pace that the market
Speaker 7: thinks with deep seak.
Speaker 8: It's just not.
Speaker 7: And look at all the capics numbers between the last
Speaker 7: Meta and Google. They've raised capis by twenty five billion.
Speaker 7: If it was that efficient, these are pretty smart companies.
Speaker 7: They don't want to waste shareholder money. They don't want
Speaker 7: to waste They have a lot of loyees that work
Speaker 7: there because they get paid in stock, Like they wouldn't
Speaker 7: do this if they felt like, oh, yeah, it's so efficient,
Speaker 7: Like why would you jack up the numbers as much
Speaker 7: as they have. So again, I think everyone's being misled
Speaker 7: by one comment from a Chinese comment firm that you
Speaker 7: can validate the spend and the bring.
Speaker 3: I'm curious if you can kind of speak to maybe
Speaker 3: you know, shifting back to Google's bread and butter search
Speaker 3: YouTube and bring in the artificial intelligence picture here, because
Speaker 3: while we're steeing seeing some of this still kind of
Speaker 3: come out on the cloud side, what sort of benefit
Speaker 3: are investors pricing in on the YouTube and search side.
Speaker 3: What AI boost are you expecting there in the next
Speaker 3: couple quarters.
Speaker 7: Well, no one's pricing anything today, so obviously stocks off
Speaker 7: big on this kind of you know, minor miss if
Speaker 7: you will. But ultimately, we think AI is going to
Speaker 7: have a huge role. Like you look at Gemini. I've
Speaker 7: and using it every day and over time, Gemini is
Speaker 7: going to get smarter and I think there's a role
Speaker 7: of core Search. I'm looking for a restaurant. I'm looking
Speaker 7: for hours of the local small business. I need to
Speaker 7: visit too. I need to get the answer of what's
Speaker 7: the population of Iceland, And I want to ask Gemini
Speaker 7: or I want a quick quick response in Gemini. These
Speaker 7: things are going to effectively I think searching, what's happening
Speaker 7: with AI and these AI agents are going to are
Speaker 7: going to effectively melt together, and so it will be
Speaker 7: a seamless experience. I think Google can do this, So
Speaker 7: there'll be chance, there'll be times where you've seen it
Speaker 7: at and sometimes you don't. Is that going to force
Speaker 7: advertisers to run away?
Speaker 8: I don't think so.
Speaker 7: Look at YouTube great numbers, Look at core search good numbers.
Speaker 7: The issue in Google's quarter has nothing to do with
Speaker 7: the core business, has to do with the smallest business
Speaker 7: at Cloud and Capex is up massively. Guess what Meta Microsoft,
Speaker 7: everyone else is doing the same thing.
Speaker 3: Yeah, and you've got to.
Speaker 8: Do it right now.
Speaker 7: So and look, we've said at this AI journey is
Speaker 7: going to take time. It's going to be a long journey,
Speaker 7: and we're at the beginning of it.
Speaker 2: Well said.
Speaker 4: And Alphabet just coming down from some record hires of
Speaker 4: yesterday as well. Jeffrey's Analystprent phil is so good to
Speaker 4: catch up with you, Thank you very much. Coming up,
Speaker 4: we're going to talk more earnings, AMD disappointing with its
Speaker 4: AI outlook. More of the chip maker's earnings and other
Speaker 4: in the silicon sector next. But as AMD fall, so
Speaker 4: tutors snap quick check on those earnings after a mixed outlook,
Speaker 4: basically sparing a load of downgrades on the street. Wills Fargo,
Speaker 4: for example, cutting it to an equal weight, saying solid
Speaker 4: revenue trends, but not enough to outweigh the period of reinvestment.
Speaker 2: This is BlueBag Technology.
Speaker 4: Shares of AMD tumbling today after the chipmaker left investors
Speaker 4: with a disappointing outlook for its AI data center business,
Speaker 4: saying they see strong double digit growth for more. Joanne Feoenie,
Speaker 4: Advisor's capital management partner joins us in investors, they don't
Speaker 4: just want double digit glows. They want a doubling of
Speaker 4: AI business, right.
Speaker 10: They want a lot line, that's for sure. And what
Speaker 10: they overlook is what's going on with the rest of
Speaker 10: the business. I mean, you know, look at how much
Speaker 10: share that AMD has taken from Intel. A data center
Speaker 10: business has nearly doubled twenty twenty four or twenty twenty three.
Speaker 10: It's PC client business up more than.
Speaker 8: Fifty percent for the whole year. They've done a tremendous.
Speaker 10: Job of really taking advantage of Intel's problems. But I've
Speaker 10: been doing it by being able to develop superior chips
Speaker 10: of its own.
Speaker 3: You're right, you know, Joanne, They're not getting a ton
Speaker 3: of credit for that revenue beat doubling their other unit.
Speaker 3: I'm curious if you can kind of speak to what
Speaker 3: they said about that estimate miss on the data center
Speaker 3: unit and what does it say about AMD's standing in
Speaker 3: the AI ecosystem broadly.
Speaker 10: Yeah, so, you know, the problem they had with their
Speaker 10: report was that the their entry into the AI side
Speaker 10: of data center is something that's a little bit slower
Speaker 10: to roll out than people were hoping, and expectations were
Speaker 10: high heading into the quarter. And so this new chip
Speaker 10: that is expected to you know, really push AMD into
Speaker 10: this business, you know, more securely, and they've only just
Speaker 10: started rolling out this whole line of chips. That new chip,
Speaker 10: the mi I three point fifty, is now expected to
Speaker 10: ramp until the second half of this year, and so
Speaker 10: consequently their guidance was softer than expected for the data center.
Speaker 10: That doesn't take anything away from the core datata center.
Speaker 8: Business, which continues to grow.
Speaker 10: But we are in a seasonally weaker quarter for PCs
Speaker 10: and for data center, and with a little bit less
Speaker 10: of a ramp on those new chaps, the gross margin
Speaker 10: takes a bit of a hit. And so you know,
Speaker 10: in the semiconductor world, gross margin is everything. And so
Speaker 10: whenever you see a decline in the gross margin expectations
Speaker 10: relative to or you know, outlook relative to expectations, typically
Speaker 10: stocks go down. But you know, more importantly, their second
Speaker 10: half for this ramp remains intact. It's just become a
Speaker 10: little bit of a wait.
Speaker 8: And see game.
Speaker 10: And some shorter term investors don't tolerate that well and
Speaker 10: they get out of the stock and they say, okay,
Speaker 10: we'll get back in later. You know, for long term investors,
Speaker 10: you know, it becomes a ride this out moment. You
Speaker 10: don't know when sentiment is going to change. People could say, okay,
Speaker 10: it's coming in the second half.
Speaker 8: Well that's July. Oh maybe I should.
Speaker 10: Start buying it, you know, in March, or you know,
Speaker 10: maybe I had better get ahead of that buying spurt
Speaker 10: and buy it, you know, later this month now that
Speaker 10: it's come down. So it's really hard to time this
Speaker 10: kind of thing. What you have to rely on is
Speaker 10: that the fundamentals are good.
Speaker 3: Speaking of the short term disruptions, Deep Seek also came
Speaker 3: up on the earnings call, and I was surprised to
Speaker 3: hear that the CEO projected a tone of confidence that
Speaker 3: they could actually benefit from some of these algorithmic breakthroughs.
Speaker 3: I'm curious if you can explain how does AMD and
Speaker 3: you know, perhaps even Qualcom's foothold and edge devices like
Speaker 3: phones make it better position perhaps to handle some of
Speaker 3: you know, the disruptions coming from a deep Seek or
Speaker 3: models like it, as opposed to an Invidia that really
Speaker 3: saw it shares tank in the wake of that.
Speaker 10: Yeah, so the deep Seek innovation, the news was surprising
Speaker 10: because they were able to achieve efficiency potentially more quickly
Speaker 10: than folksould imagine. But efficiency is always something that comes
Speaker 10: to this space. Right, Chips get smaller, faster, cheaper over time,
Speaker 10: but that never led folks to buy fewer chips. Same
Speaker 10: thing here, Right, the models become cheaper and more efficient
Speaker 10: over time, but that doesn't mean that folks are going
Speaker 10: to step away from buying the best ships they can
Speaker 10: now AMD Qualcom you have more of a focus on
Speaker 10: the inference side of this, that is the use of
Speaker 10: the models, and that's where greater efficiency will mean more use,
Speaker 10: and I think that's what they're focused on. More use
Speaker 10: is good for them. It's going to mean more chips
Speaker 10: are going to be needed to roll out those applications,
Speaker 10: and so hey, if the market shifts from the training chips,
Speaker 10: where you absolutely have to have the highest quality, most
Speaker 10: powerful and vid chips over to the inference side where
Speaker 10: there are different components like memory and speed, that plays
Speaker 10: into their strengths and on benefits.
Speaker 2: You go amine Qualcom off to the bell today.
Speaker 8: Yeah. Absolutely.
Speaker 10: You know, ARM is more diversified, I say, in a
Speaker 10: more diffuse in their exposure.
Speaker 8: I mean, yes, they.
Speaker 10: Certainly play a role in a lot of the chips
Speaker 10: that go into the AI infrastructure, but they also are
Speaker 10: more heavily tilted towards smartphones and in a very broad way,
Speaker 10: Qualcom obviously more smartphone oriented. But fortunately for them, the
Speaker 10: smartphones they go into tend to go to the higher
Speaker 10: end consumer and that is an area that continues to
Speaker 10: be strong. So we actually We do own Qualcom. We've
Speaker 10: owned it for a long time for clients. We like
Speaker 10: their growth potential. We also like the income with their
Speaker 10: pretty solid dividend.
Speaker 3: Lots to see today after the bell, Joey un Feenie
Speaker 3: of Advisor's Capital Management, Thank you. Electronic Arts cut its
Speaker 3: full year revenue outlook yesterday. That follows a decline in
Speaker 3: the company's third quarter sales. For more on what we
Speaker 3: learned from the video game publisher, were joined by Bloomberg's
Speaker 3: Jason Schreyer. Jason, This stirred concerns among investors that EA
Speaker 3: Games can continue to squeeze growth from its Tent Bowl
Speaker 3: soccer franchise games that counts for a big slice of
Speaker 3: its overall revenues. What did you learn from the earnings
Speaker 3: call about how the company plans to turn this around?
Speaker 11: Yeah, so it was an interesting call last night. EA
Speaker 11: had already reported preliminary results a couple of weeks ago
Speaker 11: and taking a bath in the sock as a result.
Speaker 11: I believe they're down about twenty percent.
Speaker 8: They had a.
Speaker 11: Slight gain overnight, partially because they said they were buying
Speaker 11: back a billion dollars in the stock.
Speaker 8: And yeah, I mean.
Speaker 11: They are looking at the Soccer franchise that is their
Speaker 11: big money maker. I believe it's something like seventy four
Speaker 11: seventy five percent of revenue, and their business is now
Speaker 11: from live service, meaning not just selling a game on
Speaker 11: a store shelf, but also recurring revenue getting players to
Speaker 11: buy stuff within the game after it launches, and the
Speaker 11: soccer game is a big part of that. This recent
Speaker 11: kind of disappointing quarter as a result of this new
Speaker 11: soccer game not having the same kind of long term revenues.
Speaker 5: That they hoped for.
Speaker 4: Anice in augustanding for example, calling out lower user acquisition
Speaker 4: software engagement with FC. They also then turn their attention
Speaker 4: to Battlefield and basically a slipping calendar date there too
Speaker 4: a bit.
Speaker 11: Jason, Yeah, it looks like they are planning on releasing
Speaker 11: the new Battlefield at some point this coming fiscal year,
Speaker 11: so before April of next year. And yeah, this one
Speaker 11: has been a little while in the making. It's been
Speaker 11: a while since Thea's recent Battlefield A most recent battlefield game,
Speaker 11: Battlefield has never been able to keep up with the
Speaker 11: biggest rival, Call of Duty from Activision Blizzards, so it'll
Speaker 11: be interesting to see how they perform this time they
Speaker 11: for I believe the first time.
Speaker 8: They have four different.
Speaker 11: Studios within the EA organization just working on this single
Speaker 11: battlefield game, so it is a humongous bet for them.
Speaker 3: Jason, one of the company's challenges right now is getting
Speaker 3: users to play the updated version of the game, but
Speaker 3: they're still pretty interested in playing the older version of
Speaker 3: the game. How does the company typically deal with something
Speaker 3: like that?
Speaker 11: This is the eternal video game industry problem right now,
Speaker 11: which is that you have so many people who just
Speaker 11: don't feel compelled to keep buying new games every single
Speaker 11: year when they can still have a great time playing
Speaker 11: their older games, playing Fortnite, or playing a previous iteration
Speaker 11: of the sports game. In the sports it's been interesting
Speaker 11: Traditionally a company like EA has been able to get
Speaker 11: people to keep buying new releases because of roster updates
Speaker 11: and kind of slight feature enhancements. In the case of
Speaker 11: the soccer games formerly called FIFA now called EA Sports FC,
Speaker 11: one of their biggest in restences is kind of like
Speaker 11: this Ultimate Team mode where basically players have to buy
Speaker 11: these kind of loop boxes or card packs that give
Speaker 11: them randomly generated players and stats, and it's this whole
Speaker 11: big ecosystem that a lot of people have criticized for
Speaker 11: filling a whole lot like gambling, and EA's hope is
Speaker 11: that EA has said that the most recent entry is
Speaker 11: a little bit unbalanced, players didn't like a lot of
Speaker 11: things about it, and they're hoping that a big update
Speaker 11: they just released a couple of weeks ago will fix
Speaker 11: things and kept people back on track.
Speaker 4: Jason, Sure, thanks so much for the update on EA.
Speaker 4: Now on to more earnings. Uber shares falling on wheat
Speaker 4: gross booking guidance, bloomag In challenges analyst Man it's seeing
Speaker 4: is in the house, and look they're blaming weather. You're
Speaker 4: actually more worried about broader deceleration from ultimately months of
Speaker 4: music with Yeah.
Speaker 12: Look, I think when you look at their three year
Speaker 12: target of mid to high teens, what could kind of
Speaker 12: get them there? It has to be the mobility segment
Speaker 12: that is the core business. The delivery side isn't that
Speaker 12: profitable still, then you compare them to DoorDash and on
Speaker 12: the mobility side, everyone is so worried about Wemo rolling
Speaker 12: out to ten more cities. Now, granted, the number of
Speaker 12: rides that Wemo is doing is a fraction of.
Speaker 2: What Aniba has a relationship but only in two cities.
Speaker 5: So that's the catch here.
Speaker 12: It's not, you know, a relationship that spreads across all
Speaker 12: the cities. And that's what I think investors are worried about.
Speaker 12: If testa robotaxis were to come this year, and that's
Speaker 12: a big if, and they get all the regulatory approvals
Speaker 12: they need, then you could make the case that mobility,
Speaker 12: you know, growth will slow down. And DoorDash has partnered
Speaker 12: with Lyft now, so I would say lift should benefit
Speaker 12: from Doordasher's distribution. So all those factors kind of weigh
Speaker 12: on the user growth, and then it's very hard to
Speaker 12: make a case that the right frequency will grow given
Speaker 12: Wemo is expanding in all these new cities.
Speaker 3: Man Deep in thirty seconds. Uber sid it's self driving business. Car,
Speaker 3: It's self driving car business years ago. What's it's strategy today?
Speaker 3: Has the company said anything about how plans to go
Speaker 3: about that?
Speaker 12: Yeah, they mentioned that they will be looking for the
Speaker 12: right acquisitions and you know, they don't want to spend
Speaker 12: too much in terms of making an acquisition, but it's
Speaker 12: pretty obvious that they will be looking for tokens and
Speaker 12: you know, adding their own technology to avoid being disintermediated.
Speaker 3: Here wull bring intelligence analysts man deeps in me.
Speaker 2: Thank you, Welcome back to Blue meg Tenology. I'm Caroline
Speaker 2: Hid in New York.
Speaker 3: And I'm Jackie Devalas in San Francisco.
Speaker 4: Quick check on these markets. First, Disney off by a
Speaker 4: one percent. Interesting is they managed to do particularly well
Speaker 4: in streaming in terms of profitability. They're still seeing the
Speaker 4: more honor to effect really bullying up. What's happening in
Speaker 4: terms of their movie making business. Entertainment was flat. Let's
Speaker 4: have a little look at what the CFO was talking
Speaker 4: about in terms of the Disney numbers, which did.
Speaker 2: Beat on a profit basis.
Speaker 4: Jonathan Pharaoh and Lisa ramo It sat down with the CFO,
Speaker 4: Hugh Johnston earlier this morning.
Speaker 2: Here's what he said about streaming strengths.
Speaker 13: The streaming business is doing extremely well. This is a
Speaker 13: business we invested pretty heavily in a couple of years ago,
Speaker 13: and what you're seeing now is the benefit of those investments.
Speaker 13: Our expectation is will continue to grow, subs, will improve margins.
Speaker 13: We should make more than a billion dollars in that
Speaker 13: business this year and next year we're looking at double
Speaker 13: digit margins in that business. So certainly a ton of
Speaker 13: positive momentum. Now you get into the question of why.
Speaker 13: A lot of it is the great content that's coming
Speaker 13: from the studio side of the house, both on the
Speaker 13: TV and the movie side of our entertainment business. We
Speaker 13: wanta to Inside Out to Deadpool, all terrific hits, and
Speaker 13: on the TV side, the combination of Abbot, Elementary, Showgun
Speaker 13: and high potential causing viewership to grow. We're seeing higher engagement,
Speaker 13: We're seeing churn ultimately coming down over the course of
Speaker 13: this year. So we feel like the streaming business is
Speaker 13: going to be one of the big drivers for our
Speaker 13: company going going forward.
Speaker 9: Here.
Speaker 14: You know how much I love Showgun and Les so
Speaker 14: I can say love Mowana two as well. So the
Speaker 14: content slen is looking pretty good so far. I did
Speaker 14: want to talk about the cost issue though, and clearly
Speaker 14: not an issue from you, so I appreciate the explanation.
Speaker 14: Conversation we've had over the last few days or so,
Speaker 14: is if we get tariffs, can companies pass on the costs?
Speaker 14: I'd like to know from your perspective and for the
Speaker 14: company the additional tariffs that have gone onto China, how
Speaker 14: that could impact your business.
Speaker 2: How are you thinking about things?
Speaker 13: Yeah, right, right now, based on what's been proposed. And
Speaker 13: obviously this is a rapidly evolving environment, so we're going
Speaker 13: to react as we learn things. The impact would be
Speaker 13: in material to us. So from that perspective, really, the
Speaker 13: Walt Disney Company will be fine based on what's on
Speaker 13: the table right now.
Speaker 3: That was Disney CFO Hugh Johnston, and we stay with
Speaker 3: Disney earnings. Joining us now is Ross Gerbert, CEO of
Speaker 3: Gerbert Kawasaki. Ross. One of the things that stood out
Speaker 3: to me in this report is not just that quarterly profits,
Speaker 3: but that positive performance might have a few drivers here,
Speaker 3: And the thing that stood out to me is that
Speaker 3: price hike from the fall. I want to know how
Speaker 3: much of that profit came from that price hike or
Speaker 3: versus you know, organic customer growth.
Speaker 15: What are you saying, Well, we didn't see a huge
Speaker 15: amount of organic growth in customers and that was part
Speaker 15: of the strategy in making streaming profitable by charging the
Speaker 15: right amount for the content. But what they proved is
Speaker 15: that they could jam a pretty you know, big price
Speaker 15: hike into the system and not lose subscribers by any
Speaker 15: meaningful amount. And therefore increased profitability. And when you look
Speaker 15: at exactly what the CFO said, the enormous amount of
Speaker 15: money they've invested in streaming to now see it becoming
Speaker 15: a very profitable business, which double digit margins.
Speaker 8: That was always our hope for Disney.
Speaker 15: Disney's the top holding in my fund GK, and I
Speaker 15: think the stock is just wildly undervalued when you compare
Speaker 15: it to Netflix, which is actually the top holding in
Speaker 15: my fund.
Speaker 8: And Netflix is killing it on all corners.
Speaker 15: But it's really a two horse streaming between you know,
Speaker 15: Disney and Netflix.
Speaker 4: Barbigo is talking on the conference call with investors such
Speaker 4: as yourself, talking about how he's so pleased with the
Speaker 4: subs numbers, the fact that you didn't see more churn,
Speaker 4: But what about the growth story back to the likes
Speaker 4: of entertainment. Yes, you want to see streaming being a
Speaker 4: real pillar for Disney going forward, but we've got broader entertainment.
Speaker 4: We've got TV and cable being difficult for them not
Speaker 4: to mention people getting onto the latest boat or into
Speaker 4: the latest park.
Speaker 15: Well, the big thing about you know, linear TV is
Speaker 15: dying and that's not going to change. But what it
Speaker 15: really is about is good content, and that's the Iigre
Speaker 15: effect is real, and we're seeing the benefits of having
Speaker 15: Aigre back at the Helm because the content has improved
Speaker 15: dramatically from the Japek era and that drives results. It
Speaker 15: drived in in in the theaters with Moana too, and
Speaker 15: then it drives it onto the streamer because I'm just
Speaker 15: waiting for Maana two to drop on Disney Plus. And
Speaker 15: you know, and subscriber numbers will soar because people want
Speaker 15: to watch these really successful movies that they'll pay in
Speaker 15: the theaters, but then they'll watch it again on the streamers,
Speaker 15: probably for the next ten years, you know. So you
Speaker 15: know Disney's Experiences division, you know, the parks, and they
Speaker 15: made a lot of investments, and then they had the
Speaker 15: storm that kind of hurt earnings a little bit. But
Speaker 15: with the new cruise ships coming out too, this business
Speaker 15: is is a goal mine. So if you look at
Speaker 15: Disney's cash flow, it's just a wonderful business at a
Speaker 15: really decent price. So, you know, we're very bullish on
Speaker 15: Disney's future.
Speaker 2: What about the future of the CEO.
Speaker 15: Well, you know, Iiger is a young you know, seventy
Speaker 15: or whatever, and you know, I hope he stays forever.
Speaker 15: And Disney has a long history of having CEOs. They
Speaker 15: keep saying they're going to retire and don't retire, but
Speaker 15: I think ultimately they should drive the industry towards the
Speaker 15: digital part of their business, or maybe a co CEO
Speaker 15: situation where you have experience and a digital you know,
Speaker 15: kind of like what Netflix has done, because the businesses
Speaker 15: are huge and quite different. But we need somebody who
Speaker 15: can really drive creativity because that's what drives Disney's earnings.
Speaker 3: Ross let's pivot shift years to another game or another
Speaker 3: name that you cover Tesla No pun intended there, gerber
Speaker 3: Kowas hockey holdings peaked in twenty eighteen and they've come
Speaker 3: down quite a bit. And what do you make of
Speaker 3: Elon Musk's growing side project with Doge and his role
Speaker 3: in government? At what point do you think you'll really
Speaker 3: start to pair back more or if not completely, if
Speaker 3: his attention continues to be diverted there.
Speaker 8: Well, there's a lot of things so i'd pack with Tesla.
Speaker 15: First of all, his full time job is at the
Speaker 15: government right now, so we all know he doesn't really
Speaker 15: work at Tesla, and that's not so bad. Because many
Speaker 15: of the people at Tesla are actually fine with that
Speaker 15: because it's he's quite disruptive. That said, the goals for
Speaker 15: Tesla are quite immense, and you know, they have very
Speaker 15: little time to achieve them based off the timelines that.
Speaker 8: They've set out.
Speaker 15: Tesla you know, has a lot of issues that they
Speaker 15: have to deal with, especially from a marketing perspective as well,
Speaker 15: because like the numbers in Europe. So you know, we've
Speaker 15: been a seller of Tesla over the years because we
Speaker 15: had such an overweight position because we made so much
Speaker 15: money in Tesla from twenty eighteen to let's say today,
Speaker 15: and so you know, we still owned Tesla because it's
Speaker 15: the most impactful company for climate change in the world,
Speaker 15: and that's a theme that we very much believe in.
Speaker 8: They make the best evs and if.
Speaker 15: They just focused on their core business and really stopped
Speaker 15: all the political noise, I think Tesla would be fine.
Speaker 15: So you know, it's a really difficult stock to own,
Speaker 15: and we still own it, and you know it's not
Speaker 15: a big position, but then it you know, doubled in valued,
Speaker 15: so we've been taking profits.
Speaker 8: Again.
Speaker 3: Ross to your point about the climate change opportunity, does
Speaker 3: that still exist? In a Trump administration where perhaps that's
Speaker 3: not as prioritized as it was previously.
Speaker 8: Well, I can tell.
Speaker 15: You because I just fought the fires myself and the Palisades,
Speaker 15: that when you're looking at seventy foot flames burning up
Speaker 15: an entire city in one night, or hurricanes in Florida,
Speaker 15: or ridiculously cold weather in the North, or whatever you
Speaker 15: want to look at, climate change is not a political issue,
Speaker 15: real issue that all of us in the world are facing,
Speaker 15: whether we like it or not. I've seen her firsthand.
Speaker 15: Mother Nature does not want us here anymore. So we
Speaker 15: need solutions real badly, and Tesla is the best solution
Speaker 15: for climate change between battery storage charging and the ev business.
Speaker 15: So people are going to buy evs because they're better
Speaker 15: cars than gas cars.
Speaker 8: They're a better.
Speaker 15: Value for consumers, and it's good for the environment. And
Speaker 15: this business is growing globally and every car maker is
Speaker 15: making grad evs now and that was the goal of
Speaker 15: Tesla originally. So we've been successful, but this trend towards
Speaker 15: evs is not going away because of politics.
Speaker 4: Thoughts with you with your neighbors for what you've been
Speaker 4: fighting over the course of the month in La ross
Speaker 4: I want to go back to what you said about Europe, because,
Speaker 4: as I mentioned earlier, the numbers out of Germany are
Speaker 4: pretty astonishing, down sixty percent in terms of sales, France
Speaker 4: down sixty percent. Is Europe feeling the impact of Elon
Speaker 4: and the marketing impact more than the US or is
Speaker 4: this just a lack of a lineup.
Speaker 8: No, no, no, this is one hundred percent politics.
Speaker 15: I mean, when you go into Germany and you start
Speaker 15: supporting the right wing almost like Nazi Party of Germany,
Speaker 15: you're going to get a lot of Germans not buying
Speaker 15: your vehicles. Remember, Europeans are very conscious people and they
Speaker 15: pay a lot of attention to things that are important,
Speaker 15: whether it be you know, the quality of their food
Speaker 15: or water, and also they.
Speaker 8: Care about climate.
Speaker 15: But when push comes to shove, Elon's agenda is a
Speaker 15: direct affront to the direction of Europe and Europeans are
Speaker 15: you know, voting with their dollars and they're not going
Speaker 15: to buy Tesla's because they know they can buy other
Speaker 15: evs that are just as good. So you know, we're
Speaker 15: just starting to see this. It's happening in California as well.
Speaker 15: This is a big problem for Tesla long term and
Speaker 15: I'm really concerned they're going to be unable to grow
Speaker 15: sales moving forward with the current I would say anti
Speaker 15: marketing campaign of YEW.
Speaker 4: You mentioned, of course, the IFD, which is that the
Speaker 4: far right party in Germany which in many ways Elon
Speaker 4: Musk has has led to support to us. Bringing it
Speaker 4: back to therefore, what the company needs to do fundamentally, Look,
Speaker 4: it doesn't matter the numbers didn't live up to expectations.
Speaker 4: We've got ultimately following Weimo in terms of robotaxes on
Speaker 4: the ground. But that's right the market, the market still
Speaker 4: posts the stock higher. So is it completely disassociated with
Speaker 4: fundamentals at this point, Well, we.
Speaker 15: Look at it as the fundamentals of the business are
Speaker 15: worth about two hundred dollars and then the rest of
Speaker 15: the stock price is hoe premium based off Robotaxi and
Speaker 15: robotics in AI, which you know are legitimate, you know,
Speaker 15: opportunities for Tesla.
Speaker 8: So I don't want to poop poo them. But I
Speaker 8: live in Santa Monica.
Speaker 15: And every day I drive there's Weaimo's everywhere really doing well.
Speaker 15: They're driving perfectly, they're taking rides from Uber. We sell
Speaker 15: that and we're going to see this in Uber's numbers,
Speaker 15: which we now don't own Uber, because I think Weimo
Speaker 15: is a wonderful opportunity for investors for robotaxi and it's
Speaker 15: way better than driving than Tesla. So I would say
Speaker 15: with the decline in Google today, boy, that's an opportunity
Speaker 15: for investors because that's a reasonably priced stock with thing
Speaker 15: like Weimo that could be worth a ton of money
Speaker 15: in the future. So now they're launching in Austin, right
Speaker 15: in Tesla's backyard, and it's almost like spitting an elon
Speaker 15: space now as he's pitching a robotaxi that basically doesn't work,
Speaker 15: and Weimo is really successfully, you know, rolling out robotaxi.
Speaker 8: So this is a real competitor.
Speaker 4: And certainly we're getting outlines from Alphabet overnight of how
Speaker 4: many rides are being done by Weimo at the moment.
Speaker 4: Ross Gerba of Gerber Kawasaki. Great to catch up with you,
Speaker 4: Thank you. Coming up, we're going to be joined by
Speaker 4: Sarah Glow of Conviction. We're going to be discussing the
Speaker 4: state of AI investing. That's coming up next. This is
Speaker 4: BLUEBG Technology Time now for Talking Tech and first up
Speaker 4: work Day says it's cussing about eight and a half
Speaker 4: percent of its workforce. In the note to employee, CEO
Speaker 4: Carl Escherbucht says about one seven hundred and fifty workers
Speaker 4: will be let go as the company focuses on quote
Speaker 4: durable growth.
Speaker 2: He goes on to.
Speaker 4: Say that the company intends to hire for areas such
Speaker 4: as AI and plans to take on more people overseas. Plus,
Speaker 4: Oklahoma set to become the first Republican state to challenge
Speaker 4: Corporate America's DEI policies as an investor, Oklahoma Treasurer Todd
Speaker 4: Russ plans to submit share holder proxy proposals to six companies,
Speaker 4: including Alphabet and Amazon, in an effort to promote quote
Speaker 4: political neutrality and challenge corporate donations to organiations organizations that
Speaker 4: advocate for LGBTQ rights, for example, and Open A CEO
Speaker 4: Sam Altman called India the most important international market for
Speaker 4: the startup after it saw a tripling in users last year.
Speaker 13: Now.
Speaker 4: The comments come as Altman makes a stop in New
Speaker 4: Delhi meeting with Indian government officials and entrepreneurs. It's the
Speaker 4: latest picture course on Altman's worldwide tour, which also included Japan,
Speaker 4: South Korea, Germany's next Jackie.
Speaker 3: Let's keep talking about the global AI race on today's
Speaker 3: VC Spotlight with Sarah guaB, which is the founder of Conviction,
Speaker 3: a venture firm focused on AI native companies. Sarah, it's
Speaker 3: been over two years since you've founded Conviction, just a
Speaker 3: month before Chad GPT really took the world by Storman
Speaker 3: You've wasted no time in getting to the cap table
Speaker 3: and some of the most promising AI startups from Estrall
Speaker 3: to Harvey. But I want to know what's changed in
Speaker 3: the AI landscape from your perspective as a venture capital
Speaker 3: investor since you launched, because AI has come a long way.
Speaker 8: Yeah.
Speaker 16: When we launched, we had this very strong belief that
Speaker 16: AI would be a a decade plus shift, the most
Speaker 16: important shift in technology we were likely to see in
Speaker 16: our lifetimes. And then we made some early bets that
Speaker 16: application companies and companies that sort of invested vertically up
Speaker 16: and down the stack would create a lot of value.
Speaker 16: I think that is even more true now and the
Speaker 16: myth of the GPT rapper has been brushed away.
Speaker 2: One of the major.
Speaker 16: Developments over the last few weeks that everyone has been
Speaker 16: paying attention to is of course a more and more
Speaker 16: competitive foundation model landscape.
Speaker 3: That's right. I mean you were tweeting about deep seek
Speaker 3: in December before the world freaked out just last month.
Speaker 3: But we also had another venture capital investor on the
Speaker 3: show last week who called it a grave national security threat.
Speaker 3: And I would love to get your thoughts on the
Speaker 3: strength of that model, what it means for AI startups
Speaker 3: competing in this space, and do you agree with that
Speaker 3: statement is it a national security threat?
Speaker 16: Let's take the first part first. So it's an incredibly
Speaker 16: useful model and considered on many capability tests a state
Speaker 16: of the art. And I think what was really interesting
Speaker 16: about it is that deep Seek as a company released
Speaker 16: a base model, which you can think of as just
Speaker 16: pre training than a instruction tuned model, which is a
Speaker 16: set of work that allows the model to be more
Speaker 16: helpful to respond in a sort of chat interface, and
Speaker 16: then a reasoning model, which is parallel to for example,
Speaker 16: opening eyes model. And so right at the frontier, now
Speaker 16: you have an open option. I'll be at one from
Speaker 16: a Chinese hedge fund. I think that was quite surprising
Speaker 16: to the world and quite democratizing two application developers to
Speaker 16: have this force of open source, from meta, from mistral,
Speaker 16: from deep seek. Now, whether it serves as a push
Speaker 16: for the US to get more competitive on this incredibly
Speaker 16: important industry front of you know, being first in the
Speaker 16: race to AI a technology, stronger AI technologies or remains
Speaker 16: to be seen. But I think it's very clear that
Speaker 16: export controls are not leak proof and no country has
Speaker 16: a monopoly on AI talent.
Speaker 4: Sarah, Let's go into how it changes the game in
Speaker 4: terms of the valuation stack because you are in at
Speaker 4: the large language model layer with a smallcasion towards a mistral,
Speaker 4: but you're also in the application layer of these large
Speaker 4: language models. When I think a cognition, for example, how
Speaker 4: do you think the money's going to flow?
Speaker 2: Ultimately?
Speaker 16: Yeah, one of our core beliefs is that AI makes
Speaker 16: the pie bigger, and you can think about it as
Speaker 16: the stack as you describe right, infrastructure tooling model companies,
Speaker 16: application companies, and those that are verticalized. But we're much
Speaker 16: more interested in application companies and verticalized companies to date,
Speaker 16: and part of it is seeing the LM landscape play out.
Speaker 16: It's been a very expensive game to play, despite Deep
Speaker 16: Seeks claims around a six million dollars single training run
Speaker 16: that vastly under prices the cost of experimentation and all
Speaker 16: of the infrastructure that was used in for example, post
Speaker 16: training and inference as well, and so it's still a
Speaker 16: very expensive game to play. I think in terms of
Speaker 16: economic opportunity of sort of you know, the traditional venture
Speaker 16: capital game being capital efficient growth, we think that is
Speaker 16: going to be most concentrated in the application layer.
Speaker 4: And it was at our age Sarah for that, and
Speaker 4: Sierra you're in rettailor leading that business, and that of
Speaker 4: course taking on a sales force of example, is a
Speaker 4: gent ki where the real value.
Speaker 2: Is going to come in the next year or so.
Speaker 16: Yeah, agentic is a really hard thing to define. But
Speaker 16: I think one thing that we're really excited about with
Speaker 16: companies like Sierra and others is the more, like very simply,
Speaker 16: the more that AI does for you, the more people
Speaker 16: will be willing to pay for it, right, And so
Speaker 16: something like Sierra improves the customer experience, especially for people
Speaker 16: with very high value customers. So think of finance, subscription, travel,
Speaker 16: et cetera. And I think as we see AA models
Speaker 16: get more capable beyond answering simple questions to completing tasks,
Speaker 16: which is something that will take a lot of vertical,
Speaker 16: specific and last mile work. We should expect these companies
Speaker 16: to be able to capture a lot of that value too.
Speaker 2: Always great to have you on Seragua.
Speaker 17: We love it from Conviction, Thank you.
Speaker 3: Amazon's efforts to cut out middle management bloat is sending
Speaker 3: ripples throughout the company, with many employees fearing uncertainty and
Speaker 3: a lack of promotions. For more Bloomberg, Spenser Soaper joins
Speaker 3: us now Spenser. Amazon veterans are used to periods of
Speaker 3: bell tightening. What did you glean from employees about how
Speaker 3: Jase's tactics this time around are different?
Speaker 18: Well, a lot of it is a sign of the times.
Speaker 18: You know, employees historically within Amazon, when Jeff Bezos was
Speaker 18: CEO would maybe try to figure out what he was
Speaker 18: excited about because they figured that was going to get
Speaker 18: a lot of money and investment and that would be
Speaker 18: a nice career path for them. And the big difference
Speaker 18: with Jase's CEO, he's a lot more disciplined. He doesn't
Speaker 18: chase as many moonshot projects. The money's a little less
Speaker 18: free flowing, So those career paths paths for advancement are narrower.
Speaker 18: And then you layer on top of that that Amazon's
Speaker 18: trying to kind of out with the old in with
Speaker 18: the new in terms of a reduction in management, you know,
Speaker 18: replace more senior workers with lower level employees. And it's
Speaker 18: just kind of rippling through through.
Speaker 4: A morale, particularly the time where other giants and tech
Speaker 4: a laying off salesforce.
Speaker 2: We see that with work day to day as well. Spencer.
Speaker 4: It's a difficult market, but investors want to see this
Speaker 4: sort of belt tightening. We look at it the earnings
Speaker 4: for share expectations for Thursday.
Speaker 18: Yeah, so they've had the past six quarters I believe,
Speaker 18: of increasing profits and they're expecting the same when they
Speaker 18: report tomorrow. And that's the thing he's been. He's been
Speaker 18: pleasing Wall Street, but making the workforce unhappy. And that's
Speaker 18: a calculated move, right, Like you mentioned with the layoffs,
Speaker 18: you can work your workforce a little higher, make promotions
Speaker 18: a little more scant when they have fewer opportunities with
Speaker 18: other companies elsewhere. And so that's the calculator gamble they
Speaker 18: have right now is you know, we can lean on
Speaker 18: folks a little harder just for the sake that they
Speaker 18: have they have less opportunities.
Speaker 2: To leave us.
Speaker 4: We meg Spencer, SOPA as we build into these earning
Speaker 4: later in the week.
Speaker 17: Thank you.
Speaker 4: Meanwhile, that does it for this edition of Bloomberg Technology.
Speaker 4: Don't forget to check out our podcast you can find
Speaker 4: on the terminal as well as online on Apple, Spotify,
Speaker 4: and iHeart. And don't forget about the earnings coming after
Speaker 4: the bell arm qualcomm The of course shows will be
Speaker 4: across it throughout the afternoon, but from New York from
Speaker 4: San Francisco where it's a little rainy. This is Bloomberg Technology.