Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence
Speaker 1: with Alex Steinhl and Paul'sweenye.
Speaker 2: The real app performance has been in US corporate high yield.
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
Speaker 2: The semiconductor business is a really cyclical business.
Speaker 1: Breaking market headlines and corporate news from across the globe.
Speaker 3: Do investors like the M and A that we've seen?
Speaker 2: These are two big time blue chip companies.
Speaker 3: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 3: Each and every week, we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll discuss why UPS suffered its worst stock decline
Speaker 2: in twenty five years.
Speaker 3: Last, we break down Astrazeneco's quarterly earnings in a conversation
Speaker 3: with its chief financial officer.
Speaker 2: But first we dive into politics and the aftermath of
Speaker 2: President Joe Biden dropping out of the presidential race.
Speaker 3: Many people are now wondering whether Vice President Kamala Harris
Speaker 3: could defeat Republican nominee and former President Donald Trump in November.
Speaker 2: And this week Bloomberg Intelligence took a deep dive into
Speaker 2: how a potential Harris presidency could impact different sectors and
Speaker 2: policies in the US.
Speaker 3: For more, we are joined by Nathan Dean, Bloomberg Intelligence
Speaker 3: senior policy analyst, and we first asked Nathan what life
Speaker 3: would look like if Kamala Harris were to win in November.
Speaker 4: It's a lot of status quo for banks, evs, big
Speaker 4: tech and so forth like that. The one caveat is
Speaker 4: on taxes, and Kamala Harris's record in her tax aspect
Speaker 4: of it has been a little bit more, you know,
Speaker 4: i'd say progressive than what President Biden has said. But
Speaker 4: ultimately we've viewed President Biden as moving more towards Kamala
Speaker 4: Harris's policies when he became president, rather than Kamala Harris
Speaker 4: moving towards Biden's policies. So a lot of this if
Speaker 4: she becomes president will be status quo.
Speaker 3: Oh that's really interesting. So I was going to ask,
Speaker 3: where is Vice President Harris farther left than President Biden.
Speaker 3: Where is that biggest daylight?
Speaker 4: So the one thing that we actually hung down on
Speaker 4: was her record as Attorney General, and you know, just
Speaker 4: indicative of one of her actions as she joined about
Speaker 4: forty seven other states, including the District of Columbia, on
Speaker 4: a twenty five billion dollar settlement on home foreclosure practices,
Speaker 4: and a lot of her campaign speeches when she was
Speaker 4: running president in twenty twenty was talking about how she
Speaker 4: took on big banks. Now, you know, to us, that
Speaker 4: means there's a lot more consumer protection coming in the cards,
Speaker 4: whether it's the Consumer for Financial Protection Bureau, or whether
Speaker 4: it comes through acts of Congress, or maybe it's even
Speaker 4: executive orders like continuing President Biden's student debt relief pans.
Speaker 4: But I think there's going to be a lot of
Speaker 4: focus on this idea of load to middle income consumers,
Speaker 4: protections against big corporations, and a lot more in terms
Speaker 4: of disclosures and so forth like that. Now, is this
Speaker 4: a material impact on big tech or on the big banks.
Speaker 4: Probably not. A lot of it has to get passed
Speaker 4: through Congress, but ultimately it certainly headline risk that I
Speaker 4: would keep in mind for those sectors is in particular,
Speaker 4: is just to keep in mind, you know that if
Speaker 4: she were to focus on this and specifically it's just
Speaker 4: pick on anti trust. If she were to focus on
Speaker 4: anti trust, there's a lot of you know, intense scrutiny,
Speaker 4: more scrutiny than she could put there than a Biden
Speaker 4: administration could.
Speaker 2: All right, a lot of my M and A banker
Speaker 2: buddies are wondering what would a Harris administration mean for
Speaker 2: antitrust because Biden's been nobody into the M and A world.
Speaker 2: What's the is a feeling statisquo there as well?
Speaker 4: You know, this is one of those situations where I think,
Speaker 4: whoever wins as president's probably not going to be helpful
Speaker 4: to your M and A banker buddies, because on one hand,
Speaker 4: you have the continuation of the Biden presidency with Lena
Speaker 4: Khan at the FTC and taking a very skeptical look
Speaker 4: at mergers. I mean just in the financial space alone.
Speaker 4: You know, some of these merger reviews go over a year,
Speaker 4: if not longer, and you know we saw it certainly
Speaker 4: with the TD Financial merger they pulled out as a
Speaker 4: result of this. But then on the flip side, you
Speaker 4: have Senator Advance and President Trump. And remember this idea
Speaker 4: of economic popularism is rampted through that. You know that
Speaker 4: RNC agenda at the moment, So you know, Senator Vance
Speaker 4: even came down to a Bloomberg event here in Washington
Speaker 4: and called Lena Kahan, the FTC chairwoman Biden's best picked
Speaker 4: and insinuated that President Trump should even keep around. Now,
Speaker 4: I don't think that's going to happen, but for unfortunately, Paul,
Speaker 4: for your M and A banker buddies, I don't think
Speaker 4: any other way this gets around, whether it's Harris or Trump,
Speaker 4: it's going to be a very skeptical world for anti
Speaker 4: trust in M and A.
Speaker 3: So Paul's talking to his MENA buddies, I'm thinking about
Speaker 3: my energy buddies, because one area where it feels like
Speaker 3: President Harris could be farther left, of course, his energy.
Speaker 3: I was telling Paul earlier that she's been kind of
Speaker 3: anti fracking, she's been anti offshore. California is notoriously not
Speaker 3: loving any fossil fuels. How much of that do you
Speaker 3: think we have to really start considering.
Speaker 4: I think it's important to consider it. In fact, our
Speaker 4: colleague Rob Barnett put out a note talking about this
Speaker 4: in the importance it has on the renewable sector. So
Speaker 4: Vice President Harris, you know, certainly has pursued a clean
Speaker 4: energy agenda, and one of the things we see in
Speaker 4: you know, her presidency is a boosting of the Inflation
Speaker 4: Reduction Act. I don't want to say going back to
Speaker 4: the build back Better three point zero, you know, some
Speaker 4: of the ideas that will float around. She'll have her
Speaker 4: own ideas here, but this idea of the Inflation Reduction
Speaker 4: Act needs to be protected and enhanced. So if you're
Speaker 4: in the renewable sector, a solar sector, it certainly could
Speaker 4: be a boon idea. If Vice President Harris wins, you know,
Speaker 4: I would also just offer this that a lot of
Speaker 4: it also depends on who takes up Congress, because if
Speaker 4: Vice President Harris wins and the Republicans take one, if
Speaker 4: not two, chambers of the House, then a lot of
Speaker 4: those initiatives are going to be scaled down and actually
Speaker 4: dramatically lowered and so forth like that.
Speaker 2: All Right, we know Elon Musk is a big supporter
Speaker 2: of Trump, But what would a democratic Harris administration mean
Speaker 2: for the Elon Mussel of the world and the evs.
Speaker 4: So, you know, for the EV side, I think it's
Speaker 4: actually a continuation of the Inflation Reduction Act tax credit,
Speaker 4: if not an enhancement of that. You know, look, tax
Speaker 4: reform is going to have to happen next year no
Speaker 4: matter what, because the Trump era tax cuts for individuals
Speaker 4: expires at the tail end of twenty twenty five. And
Speaker 4: whether it's Vice President Harris or Trump, neither of them
Speaker 4: are going to want to increase taxes for low and
Speaker 4: middle and income you know, Americans. So for the EV's
Speaker 4: of the world, I would say, under a Harris presidency,
Speaker 4: you'll certainly have protection from that tax credit in the IRA,
Speaker 4: You potentially could have an enhancement of that. You certainly
Speaker 4: will have regulatory policies trying to boost EV usage and
Speaker 4: so forth like that. Comparing it against the President Trump presidency,
Speaker 4: where you know, he has said that he doesn't like
Speaker 4: electric vehicles. Obviously he has the Elon Musk whispering in
Speaker 4: his ear and providing forty five million dollars a month
Speaker 4: in PAC funding. But ultimately I think the Republicans you
Speaker 4: probably would see a scaling back of those tax credits.
Speaker 2: Uh maybe you.
Speaker 4: Know, just additional you know, restrictions on EV's and so
Speaker 4: forth like that. But you know, with the Trump presidency,
Speaker 4: we'll have to see if he wins and also if
Speaker 4: the Elon Musk is whispering in his ear income January
Speaker 4: and February taxes.
Speaker 2: If former President Trump were to get a second term,
Speaker 2: is there any consensus in Washington given the makeup of Congress.
Speaker 2: I guess we have to see how Congress shakes out.
Speaker 2: But what if anything, could Trump ad been tration get
Speaker 2: done on taxes?
Speaker 5: Yeah.
Speaker 4: So, you know, the way I think about the tax
Speaker 4: debate with my colleague Andrew Silverman is really print some timing.
Speaker 2: So the first thing you'll note is the election.
Speaker 4: If the Republicans take the House and the Senate and
Speaker 4: the presidency, then they have this opportunity for a reconciliation.
Speaker 4: This is how they got the Trump Ara tax cuts
Speaker 4: through in twenty seventeen. It allows them to actually move
Speaker 4: forth and enhance or you know, essentially conduct tax reform
Speaker 4: and they can bypass the Democrats. So if the Republicans
Speaker 4: win the House and the Senate and the presidency, then
Speaker 4: this President Trump's idea of lowering corporate tax rates is
Speaker 4: certainly in the carts now I have seen statements from
Speaker 4: House Republicans saying, eh, maybe we don't want to do
Speaker 4: that so much, but I do think that this would
Speaker 4: be President Trump driving this. Now, if you get more
Speaker 4: of a gridlock Congress, well, then the power of Congress
Speaker 4: is going to come out, and the House in ways
Speaker 4: and means Committee, whoever controls it, is certainly going to
Speaker 4: want to play here and tell the Presidency this is
Speaker 4: what we think. And so if you get a gridlock Congress,
Speaker 4: a lot of the tax reform or tax relief ideas
Speaker 4: that are out there are going to be scaled down
Speaker 4: or narrowed, but with one objective not to increase the
Speaker 4: individual tax relief or tax cuts for that individual. If
Speaker 4: you get President Harris, you may see tax increases for
Speaker 4: individuals who make greater than four hundred thousand dollars, but
Speaker 4: I think most individuals in the United States at the
Speaker 4: end of twenty twenty five probably won't have their taxes.
Speaker 2: Altered all that much. Our thanks to Nathan Dean Bloomberg
Speaker 2: Intelligence senior policy analyst.
Speaker 3: We moved out of corporate earnings and begin with the
Speaker 3: ev giant Tesla. Tesla reporting another quarter of disappointing profit
Speaker 3: and postponed a highly anticipated unveiling of autonomous taxis.
Speaker 2: For more and all this, we were joined by Steve Mann,
Speaker 2: Bloomberg Intelligence, Global Autos and Industrials Research Channels.
Speaker 3: We first asked for his key takeaways from Tesla's results.
Speaker 6: I still like their long term medium term outlook on
Speaker 6: AI in our view, were not including eight billion optimist robots.
Speaker 6: I think that's a little bit out there. But AI
Speaker 6: will continue to drive the stock. But I think people
Speaker 6: are focused on their auto business. It's a little bit worrying.
Speaker 6: I think investors were expecting their automotive gross margin to
Speaker 6: flatten out in the second quarter versus the first, but
Speaker 6: it did decline about one hundred and fifty basis points
Speaker 6: to thirteen point nine percent, which is in line with
Speaker 6: you know, the legacy automaker's automotive growth marginal fourteen percent.
Speaker 6: So there is some concerns with the investors. Is you know,
Speaker 6: are there any more upside on margin? Are they you know,
Speaker 6: are they really that good with cost?
Speaker 3: But I guess the question is how do we value
Speaker 3: the stock? So I hear you that the auto part
Speaker 3: of their business is very much maybe in line with
Speaker 3: what other auto companies are talking about but they trade
Speaker 3: an estimated pe of like ninety times, Like is it
Speaker 3: worth it for that if it's also being valued as
Speaker 3: an AI company.
Speaker 6: I think there's a couple of things that the investors
Speaker 6: are focused on beyond this second quarter. You know, they
Speaker 6: did pull ahead the start of production for a more
Speaker 6: affordable EV from like the second half of next year
Speaker 6: to the first half, which is critical. I think the
Speaker 6: EV market today globally is actually consumers in the EV
Speaker 6: market actually looking for a more affordable EV, something that's
Speaker 6: you know, less than fifty thousand US dollars. You know,
Speaker 6: most of the EV's offered today are above fifty thousand dollars. So,
Speaker 6: you know, I think the investors are hoping that, you know,
Speaker 6: into twenty twenty five and into twenty twenty six, we're
Speaker 6: going to get a rebound in EV sales because there's
Speaker 6: going to be more affordable EV's, budget friendly EV's for
Speaker 6: the mass market.
Speaker 2: Steve Tesla right now is an auto company and it's
Speaker 2: an other company. Elon wants you to focus on the
Speaker 2: other Can you define what's in that other bucket and
Speaker 2: when investors believe it will be material to their revenution profits?
Speaker 6: Yeah, you know, He talks about AI quite a bit,
Speaker 6: you know, robo taxi, optimist robot. But if you think
Speaker 6: of AI, I think there's you know, potentially even more
Speaker 6: ways to generate revenues from AI. One of the things
Speaker 6: that I think the market is also focused on other
Speaker 6: than robotaxi, taking a passenger from point A to point
Speaker 6: B is for example. You know, these cars have huge
Speaker 6: battery storage capacity, right, and these things, if they can
Speaker 6: move about on its own, you can really help out
Speaker 6: the utilities in terms of, you know, redistributing power across
Speaker 6: the grid.
Speaker 3: Well to that point, I mean, their energy business was
Speaker 3: actually quite impressive. It had its highest installation of batteries
Speaker 3: and revenue ever, and energy accounted for just twelve percent
Speaker 3: and sixteen percent of Tesla's revenue and gross profit respectively.
Speaker 3: I mean, yeah, it's going to fluctuate, but that's pretty strong.
Speaker 6: Yeah, it's a good, good sign. I think those tend
Speaker 6: to be a little bit lumpy because the orders are big,
Speaker 6: and so whenever they deliver the order and when they
Speaker 6: ever they book it, that tends to be lumpy. I
Speaker 6: think we'll have to see if it's going to be consistent.
Speaker 6: But I think the investors are very focused on business.
Speaker 6: Are they going to be on time in rolling out
Speaker 6: the new EV, the affordable EV? And then longer term,
Speaker 6: it's really you know AI. Is he going to deliver
Speaker 6: What is he going to say in October the AI
Speaker 6: event that he's hosting. There were a lot of questions
Speaker 6: about that during the call, but they were pretty tight lip.
Speaker 2: Our thanks to Steve Man. Bloomberg Intelligence, Global, Autos and
Speaker 2: Industrials research channels.
Speaker 3: Coming up, We're going to break down how demand for
Speaker 3: cloud computing services and advertising impacted Alphabet's quarterly earnings.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
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Speaker 3: I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.
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Speaker 3: We move next to earning. It's from Logistic company UPS.
Speaker 2: This week, YOUPS suffered it's worst stock decline it's twenty
Speaker 2: five years after reporting profit than missed Anamal's estimates for
Speaker 2: the quarter.
Speaker 3: The company also trimmed its forecast for the year, and
Speaker 3: this comes as UPS has failed to deliver fast enough
Speaker 3: on a turnaround plan to cut costs and increase volumes.
Speaker 2: For more on this, we were joined by Lee Classical
Speaker 2: Bloomberg Intelligence Senior Transport, Logistics and Shipping Antals.
Speaker 3: We first asked Lee why it was another tough quarter
Speaker 3: for UPS.
Speaker 7: I think it's a lot of things. You know, they
Speaker 7: are seeing vuyume growth, which is good, but that mix
Speaker 7: of growth is not good. What they're seeing is their
Speaker 7: shippers trading down. So if you were going to maybe
Speaker 7: send something via air, maybe you decide you go on
Speaker 7: the ground, which is you know, cheaper and lower margin.
Speaker 7: And then if you're using ground, maybe you're going to
Speaker 7: use one of their products like sure Posts, which is
Speaker 7: like an economy product which is cheaper and again lower
Speaker 7: margin business. So you're also seeing the mix of B
Speaker 7: two C outpacing growth of B to B. B two
Speaker 7: C growth was around four percent and B to B
Speaker 7: growth was down four percent and B to B. So
Speaker 7: think like a lawyer sending documents to another lawyer's office.
Speaker 7: That business tends to have better margins because of the
Speaker 7: inherent density that follows that business, and density is really
Speaker 7: good for acid intensive networks like ups is. And then
Speaker 7: you also, you know, have another negative mixed impact you
Speaker 7: had too. You know, they called out on their call
Speaker 7: to large e commerce companies. I'm assuming that you know,
Speaker 7: these are companies out of China that are you know,
Speaker 7: are kind of using more economy services, so you're seeing
Speaker 7: a surge in that demand from from there as well.
Speaker 3: Is this the trough? Is this sort of the worst
Speaker 3: it's going to get?
Speaker 7: It's a great question. I mean, you know, I think so,
Speaker 7: you know, I think it feels like it's this is
Speaker 7: the worst. I mean, you know, the company has done
Speaker 7: pretty well in terms of eating expectations or beating expectations.
Speaker 7: This is the first miss since I believe the first
Speaker 7: quarter of twenty twenty, so you know, Carol to May
Speaker 7: and her team have been on quite a role. They
Speaker 7: also have some easier comparisons going into the second half.
Speaker 7: You know, some of your listeners might have remembered they
Speaker 7: had a new contract that was really you know, heavily
Speaker 7: weighted in the first year that gets anniversaried in August first,
Speaker 7: So therefore, you know, those higher labor costs, the comparables
Speaker 7: will ease significantly, you know, after August first, so that
Speaker 7: should provide a better cost for them in a third
Speaker 7: quarter and going forward. Also, you know peak seasons here, right,
Speaker 7: You know, a lot of the companies that we cover
Speaker 7: are talking about we you know, most of them are
Speaker 7: expecting a real peak season and we're not talking about,
Speaker 7: you know, the peak seasons that maybe we've seen the
Speaker 7: nineteen nineties or early two thousand, but you're definitely going
Speaker 7: to see seasonal increase in demand. And that peak season
Speaker 7: is one of the shortest on record. You know, it's
Speaker 7: around seventeen days between Thanksgiving and Christmas, and that will
Speaker 7: allow ups to implement surve charges because they're going to
Speaker 7: have to you know, get those resources in a short
Speaker 7: amount of time or a short amount of time to
Speaker 7: make sure that you know, they're able to deliver at
Speaker 7: high service levels. So you should see probably some good
Speaker 7: revenue growth in the fourth quarter from those sur charges.
Speaker 7: So you know, that coupled with a lot of their
Speaker 7: cost cutting measurements, they've they've they've reduced a lot of heads.
Speaker 7: You know, I think a lot of things are going
Speaker 7: to turn for this company once you're going to see
Speaker 7: you know that B two B volume return and the
Speaker 7: company is doing a lot of things I think to
Speaker 7: position itself longer term, you know, whether that's you know,
Speaker 7: focusing on the healthcare logistics. Healthcare logistics obviously there's a
Speaker 7: lot of value add there and those margins are pretty
Speaker 7: high relative to you know, someone throwing a package on
Speaker 7: your porch, and so you know, they're really looking to
Speaker 7: grow that business and they want to be a leader
Speaker 7: in that business. Uh And and to be frank, it's
Speaker 7: it's it's a fantastic uh business to be in if
Speaker 7: you're a logistics provider. And then you know they're also
Speaker 7: trying to do new things with or more things, I
Speaker 7: should say, with with what we call SMBs, which are
Speaker 7: small and medium sized businesses. You know that tends to
Speaker 7: have better margins than you know, dealing with these super
Speaker 7: large companies like Amazon, which you know the business is good,
Speaker 7: but the margins could be better.
Speaker 2: I have actually no loyalty between these two services, I
Speaker 2: mean the FedEx store and the UPS store kind of
Speaker 2: right next to each other in my little strip malls.
Speaker 2: So whichever's got the shorter line, that's kind of where
Speaker 2: I go. But from an investment perspective, you know, you
Speaker 2: got thirty seconds here. What's the difference between these two
Speaker 2: companies From an investor perspective.
Speaker 7: Well, it's interesting. So like on FedEx, I think they're
Speaker 7: dealing with more structural issues because that was a company
Speaker 7: that I would say was extremely bloated, you know, over
Speaker 7: the last decade, and they're kind of right sizing there network.
Speaker 7: They're both making changes to their networks to kind of
Speaker 7: meet the new demands, you know, that change of increase
Speaker 7: in the home delivery versus you know, delivering to lawyers
Speaker 7: or doctors' offices or corporations.
Speaker 6: You know.
Speaker 7: I think the biggest difference is, you know, there might
Speaker 7: be more margin expansion opportunity at FedEx, just because they're
Speaker 7: starting from a lower base than new ps.
Speaker 1: You know.
Speaker 7: But you know, these are two what I would consider
Speaker 7: blue chip companies that are you know, should benefit with
Speaker 7: the economy and they should probably be able to grow
Speaker 7: top line well passed Global GDP just given some of
Speaker 7: the self help things that they have in front of them.
Speaker 2: Are thanks to Lee Clasicow, Bloomberg Intelligence, Senior Transport, Logistics
Speaker 2: and Shipping Annals.
Speaker 3: We moved now to big tech and Google parent Alphabet,
Speaker 3: the company reporting second quarter revenue that beat analyst expectations.
Speaker 2: Alphabet's results for boosted by demand for cloud, computing services
Speaker 2: and advertising on a search engine.
Speaker 3: Despite this, investors weren't pleased the capital spending rows more
Speaker 3: than expected to support Google's AI programs and computing power needs.
Speaker 2: For more, we were joined by man Deep Singh, Bloomberg
Speaker 2: Intelligence Senior Tech industry analysts.
Speaker 3: We first asked man Deep for his take on Alphabet's
Speaker 3: results this quarter.
Speaker 8: Companies are not getting a pass on boosting capex. That
Speaker 8: wasn't the case last quarter. But clearly, I think investors
Speaker 8: vary about how much CAPEX these companies are going to
Speaker 8: throw on AI. And look, in the case of Alphabet,
Speaker 8: there is revenue in the cloud segment, so they quantified
Speaker 8: the AI impact on cloud, which was high single digit
Speaker 8: contribution to cloud segment, and cloud segment actually saw on
Speaker 8: acceleration in top line growth. But YouTube miss, I think
Speaker 8: I attribute that more to software spending outside of financial
Speaker 8: services and retail sectors like automotive. They're not spending on
Speaker 8: digital ads right now because the sector is going through
Speaker 8: a cyclical downturn. So there is that cyclical element to
Speaker 8: YouTube's business. But I think there are a lot of positives.
Speaker 8: Course search growing at fourteen percent. I mean, think about
Speaker 8: the scale of search and the fact that they are
Speaker 8: able to grow double digits. That's quite impressive, and that
Speaker 8: too at a very healthy margin. I mean, the biggest
Speaker 8: fear for this company was margins are going to get
Speaker 8: degraded because of you know, AI and whatnot. That we
Speaker 8: haven't seen that. So a lot of positives, but clearly
Speaker 8: kapex was an overhang.
Speaker 2: All right, I've been making a point if any team
Speaker 2: deserves benefit of the doubt of higher CAPEX, it's Sundarprinchai
Speaker 2: and all the folks at Google. Stop whining about capex.
Speaker 2: Have they ever not generated to return on their spending?
Speaker 8: I mean, the problem with Google's management team is they
Speaker 8: say very little on their earnings call Like even when
Speaker 8: you answer them like ask a question, they would answer
Speaker 8: it with as little words as possible, So you know,
Speaker 8: it sounded like they are bullish on their AI opportunity
Speaker 8: and it's actually monetized Uh, some of that capex is
Speaker 8: going towards Wemo. If you think about you know, robotaxis
Speaker 8: and what Tesla had to go through there called Wemo
Speaker 8: actually did two million rides here to date and these
Speaker 8: are all autonomous rides and they're expanding to other cities.
Speaker 8: So think about, you know, the scale in that business
Speaker 8: if they're able to do actually autonomous driving successfully. So
Speaker 8: I do think their capex as well spent, but they
Speaker 8: just don't explain it that well to the street, you know,
Speaker 8: to get the credit.
Speaker 3: So when it comes to then the AI spend, what
Speaker 3: other companies are going to get judged in the same
Speaker 3: harsh light and what's Google's wan up on them?
Speaker 8: If any Meta I mean you saw a negative reaction
Speaker 8: with Alphabet, I mean think about what happened to be worse.
Speaker 8: Meta is going to be worse. Even last quarter when
Speaker 8: they raise their capex, Meta had a negative stock reaction
Speaker 8: simply because investors are concerned about how much this company
Speaker 8: is going to spend on metaverse versus AI. And so
Speaker 8: in the case of Meta, they're losing eighteen billion dollars
Speaker 8: a year on reality labs. They're spending capex in addition
Speaker 8: to the AI Capex, which they launched a new large
Speaker 8: anglid model, And to my mind, any company right now
Speaker 8: with their own large anglid model, whether it's Alphabet, Meta
Speaker 8: or a Microsoft Open AI, they have an advantage. They
Speaker 8: have the best reasoning capability when it comes to the
Speaker 8: AI spend and it's actually a future driver of revenue.
Speaker 8: So it all comes down to how they are going
Speaker 8: to monetize it, and I think with Microsoft and Google
Speaker 8: they have an advantage because it shows up in the
Speaker 8: cloud revenue. In the case of Meta, they have to
Speaker 8: monetize the AI spend through ad revenue or a subscription
Speaker 8: based you know, chat pot offering, which nobody knows when
Speaker 8: that will come.
Speaker 2: What is Gemini that should I be using it?
Speaker 8: Well, it's a better way to search for certain type
Speaker 8: of queries. So whenever you want you know something with
Speaker 8: a detailed answer as opposed to going through ten blue
Speaker 8: links to find that answer, Gemini is great. The one
Speaker 8: good thing about Gemini is when you search for a query,
Speaker 8: it's going to show you the relevant YouTube link, whereas
Speaker 8: if you search that on Chatchypt or Claude, it's not
Speaker 8: going to have that YouTube link. So it's going to
Speaker 8: generate the text, it's going to generate a summary, it's
Speaker 8: going to answer your query, but it won't have that
Speaker 8: appropriate YouTube link. And that's Google's biggest advantage with the
Speaker 8: large anglid models.
Speaker 2: It's going to have to pay for that.
Speaker 8: Yeah, it's a twenty dollars subscription for the advanced version.
Speaker 3: But some people will that that's kind of.
Speaker 8: And that's where I mean you are, you don't think
Speaker 8: it's a big deal, But I think Google owning maps
Speaker 8: and YouTube is such a big deal in this arena
Speaker 8: of large anglid models, because it's one thing to generate
Speaker 8: a text based response, it's another thing to have a
Speaker 8: blue link with the you know, YouTube video that they
Speaker 8: want you to see or the map link that they
Speaker 8: want you to click on inside that response. And other
Speaker 8: large anguid models can't do it because they don't own
Speaker 8: these assets.
Speaker 3: So well, before we go, if these companies, though, don't spend,
Speaker 3: then at some point when all this is monetizable in
Speaker 3: a big, big way, all of a sudden, them's gonna
Speaker 3: complain that then metas super far behind. So what's the
Speaker 3: chicken in the egg here?
Speaker 8: I mean, I still think nobody wants to be the
Speaker 8: first one to pull back on capex. So it really
Speaker 8: is a question of when do we have sufficient supply
Speaker 8: of GPUs. And because the market is supply constrained when
Speaker 8: it comes to the chip side of the equation, nobody
Speaker 8: wants to come across and say, oh, I have enough
Speaker 8: and I don't need to spend on capex anymore. And
Speaker 8: I think right now, these companies generate so much cash
Speaker 8: every year, like Alphabet will generate over one hundred billion
Speaker 8: in free cash flow, so they can afford to spend
Speaker 8: sixty billion in capex. And they're looking to make our
Speaker 8: twenty three billion dollar acquisition that fell through, but clearly
Speaker 8: they want to spend their free cash flow.
Speaker 2: Thanks to Mandeep singeing Bloomberg Intelligence, senior tech industry analysts.
Speaker 3: Coming up on the program, I'll look at why the
Speaker 3: audio streaming giant Spotify reported record profit last quarter.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing indifferent
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries. We can access Bloomberg Intelligence via Bigo
Speaker 2: on the terminal. I'm Paul Sweeney, m.
Speaker 3: Alex Steele, and this is.
Speaker 1: Bloomberg you're listening to the Bloomberg Intelligence Podcast. Catch us
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 3: We move next to corporate earnings from Comcast and Spotify.
Speaker 3: This week, Comcast reported second quarter revenue that missed analysts expectations.
Speaker 3: The global media and tech company was dragged down by
Speaker 3: a slower season and its movie studio and theme parks.
Speaker 2: On the other hand, Spotify reported a record profit in
Speaker 2: the second quarter and strong growth in paying subscribers. This
Speaker 2: comes as Spotify has significantly trim costs over the last
Speaker 2: year to boost profitability for more.
Speaker 3: We were joined by Githa rong Ganathan, Bloomberg Intelligence analyst
Speaker 3: on US Media.
Speaker 2: First ask Etha for her takeaways from Spotify's results.
Speaker 9: Really, the number here for Spotify and the main story
Speaker 9: has not just been great subscriber growth. So they've been
Speaker 9: adding a solid five six seven million premium subscribers every quarter.
Speaker 9: But for them, what it really has been over the
Speaker 9: past few quarters has been this inflection and profitability. Remember
Speaker 9: what we're now looking for streamers across the board, and
Speaker 9: this goes to Netflix and everybody else in video streaming,
Speaker 9: as well as Spotify, which is, you know, the main
Speaker 9: audio streamer with a thirty five percent market share. The
Speaker 9: narrative has really shifted now to profitability, and they absolutely
Speaker 9: blew it out of the park. So the gross margin
Speaker 9: guidance that they had given was twenty eight percent. They
Speaker 9: came in at twenty nine percent. But even better was
Speaker 9: the outlook. So for the longest time Spotify was stuck
Speaker 9: at like a twenty five percent gross margin. They were
Speaker 9: pointing to like longer term margins of thirty percent. But
Speaker 9: looks like they're going to be able to hit it
Speaker 9: right in the third quarter.
Speaker 3: So did it take anyone else's lunch or this was
Speaker 3: just a really good sort of management cost issue.
Speaker 9: Yeah, it's excellent management. More importantly, it's also price increases.
Speaker 9: They hadn't taken any price increase alex for more than
Speaker 9: ten years, and then in a span of two years,
Speaker 9: they've raised prices by twenty percent. And that's just because
Speaker 9: they know that people love Spotify. Nobody's going to churn
Speaker 9: from Spotify to let's say Apple Music or YouTube Music.
Speaker 9: They have a thirty six thirty seven percent share of
Speaker 9: the global audio market, and they're just adding so many
Speaker 9: features and so many new verticals that they're able to
Speaker 9: take those price increases. But of course, apart from that,
Speaker 9: you know, it's also been a very good story when
Speaker 9: it comes to cost cuts. So they were investing heavily
Speaker 9: in their podcasting business, you know, like with the Joe
Speaker 9: Rogan Show and adding all these other exclusive podcasts. They're
Speaker 9: being much more prudent now on that front, and those
Speaker 9: again have really driven profitability.
Speaker 2: How much of their revenue is subscription versus advertising versus
Speaker 2: other These days.
Speaker 9: Almost all of their revenue, Paul, is subscriptions, so it's
Speaker 9: a very Yeah, it's a very very heavy subscription based business.
Speaker 9: They are trying to build the advertising business, but as
Speaker 9: you know, again that takes time. You know, that will
Speaker 9: drive the longer term margin story. But as of right now,
Speaker 9: the mixshift is really subscriptions.
Speaker 3: That's pretty impressive. Hey, can I ask you about Comcast
Speaker 3: and what you made of their earnings that came out
Speaker 3: earlier reported second quarter revenue that misdanalyst estimates they had.
Speaker 3: It was the movie season, you got theme parks, the
Speaker 3: whole thing.
Speaker 9: Yeah, So Comcast is an interesting story. So Comcast is actually,
Speaker 9: you know, your typical media conglomerate. They own both video
Speaker 9: distribution broadband connectivity as well as the media side of
Speaker 9: the business with NBC. Eighty percent of their EBITDA actually
Speaker 9: is related to just broadband subscriptions. And so what happened
Speaker 9: this quarter. We were expecting a little bit of softness
Speaker 9: in broadband and as expected, yes, they did lou subscribers. Remember,
Speaker 9: the whole cable industry is really in a slump because
Speaker 9: of a very very intense competition from some of the
Speaker 9: telecom offerings, both with fiber and fixed wireless access. So
Speaker 9: we're kind of seeing that slump and it looks like
Speaker 9: Comcast is really not going to be able to get
Speaker 9: out of that slump. More interestingly, however, for both Comcasts
Speaker 9: as well as Disney, is that the theme park attendance
Speaker 9: is actually flailing and you know, a twenty four percent
Speaker 9: decline in their theme park ibadah. Yeah, and that's really
Speaker 9: because huge pull forward, or what they're saying was a
Speaker 9: huge pull forward post COVID and now we're kind of
Speaker 9: seeing normalization. So that was a little bit of a disappointment,
Speaker 9: but I think overall the business is fine, but we
Speaker 9: are going to see some extended softness over the next
Speaker 9: few quarters.
Speaker 2: And when you look at Comcasts, you know, great collection
Speaker 2: of assets, but they're all facing serious headwinds. What's the
Speaker 2: feeling among analysts and investors you talk to, like, what
Speaker 2: can a Comcast actually do to become, you know, an
Speaker 2: attractive stock.
Speaker 9: So of course, Paul, as you well know, it's always
Speaker 9: kind of been saddled by this conglomerate discount, I mean,
Speaker 9: the big question. And we know Brian Roberts has always
Speaker 9: been hungry for some kind of deals, so they're obviously
Speaker 9: a wildcard when it comes to M and A. I
Speaker 9: guess once if the administration changes and if it's more
Speaker 9: favorable for deals, I think Comcast will be a major player.
Speaker 9: I mean, we don't know whether they'll look to do
Speaker 9: some kind of joint venture with Warner Brothers or Fox.
Speaker 9: It remains to be seen, but of course they will
Speaker 9: be a major player in the space. You know, again,
Speaker 9: in terms of what would move their stock, maybe they
Speaker 9: spin off their NBC business. I mean, Brian Roberts has
Speaker 9: not indicated any such thing, but I think over the
Speaker 9: near term. What really needs to happen to kind of
Speaker 9: move the sentiment on the stock is they have to
Speaker 9: show positive broadband subscriber growth.
Speaker 3: All right, Thanks to gith Rongganathan, Bloomberg Intelligence analyst on
Speaker 3: US Media.
Speaker 2: We move next to earnings from the pharmaceutical company. Asked
Speaker 2: for Zeneca. The company raised its profit and sales forecast
Speaker 2: for the year.
Speaker 3: The results were boosted by demand for blockbuster cancer drugs
Speaker 3: and for more. Joined by AstraZeneca chief financial officer Radna Sarin.
Speaker 2: Your first asker for her take on this week's earnings.
Speaker 5: All the upgrade is being driven by product revenue. This
Speaker 5: quarter was actually a record quarter twelve point nine billion
Speaker 5: in revenue, and it was driven across the board with
Speaker 5: record revenues in all our therapeutic areas. So oncology which
Speaker 5: is about forty one percent of our business five point
Speaker 5: three billion in revenue, growing nineteen percent, cardiovascular medicines growing
Speaker 5: twenty two percent, Respiratory and immunology growing twenty six percent,
Speaker 5: and a rare disease business which is about a two
Speaker 5: point one billion dollar business growing fourteen percent. And same geographically,
Speaker 5: you know, we're seeing very strong growth in the US
Speaker 5: double digital growth also in emerging markets and in China
Speaker 5: both growing around eighteen percent, Europe twenty four percent. So
Speaker 5: it's really demand for all our innovative medicines across different
Speaker 5: geography and across different therapeutic areas. So we raised our
Speaker 5: guidance for the year both on revenue and EPs to
Speaker 5: now mid teams and it's almost in some ways you
Speaker 5: could consider a double raise because we also said that
Speaker 5: we would meet these guidance without any increase in collaboration
Speaker 5: revenue that we were anticipating.
Speaker 8: Earlier in the year.
Speaker 5: So it's really driven by fundamental underlying growth.
Speaker 2: So doctor, I know, I'm just looking at the Bloomberg
Speaker 2: terminal here. So you have a run right revenue of
Speaker 2: about fifty billion right now. You guys have said that
Speaker 2: you're targeting eighty billion in sales in twenty thirty. What's
Speaker 2: going to bridge the gap? What's going to get you there?
Speaker 2: What should we be keeping an eye on?
Speaker 5: You know, there's a lot going on in the pipeline.
Speaker 5: What's the ambition that we set for twenty thirty of
Speaker 5: eighty billion is driven by I would say three different elements.
Speaker 5: The first element is the products that we have today
Speaker 5: and the indications we have today and growth in those,
Speaker 5: and that's sort of what you see in the quarterly performance.
Speaker 5: The second element is the current products that are on
Speaker 5: the market, but what we call life cycle extension, so
Speaker 5: entering into for example, additional indications or expanding indications and
Speaker 5: other tumor types, etc. That's a second element. And then
Speaker 5: the third element is new molecular entities. So these are
Speaker 5: brand new molecules which we've discovered, we're working on that
Speaker 5: are in phase two or phase three clinical studies and
Speaker 5: hope that will be successful in them and will launch
Speaker 5: them by twenty thirty. We have set an ambition of
Speaker 5: achieving this revenue but also launching twenty new molecular entities
Speaker 5: by twenty thirty, having twenty five blockbusters, so that's products
Speaker 5: over a billion dollars in revenues in the year by
Speaker 5: twenty three. And you know what's going to bridge the gap.
Speaker 5: If you look at the studies we have ongoing, we
Speaker 5: will have probably about forty studies in the next eighteen months,
Speaker 5: so I end up twenty twenty five that we hope
Speaker 5: to read out and that will give us more confidence
Speaker 5: or the trajectory that we're on on achieving that twenty
Speaker 5: thirty ambition. So you know, this is a it's a
Speaker 5: risk business. Obviously, we take risk every day. We invest
Speaker 5: twenty two percent of our R and D of our
Speaker 5: revenue in R and D, so it's a very R
Speaker 5: and D heavy business. And you know, we hope that
Speaker 5: you know, our studies are successful to achieve those goals.
Speaker 3: Our governments your friend or foe right now in terms
Speaker 3: of the UK being an unfavorable or favorable environment. There's
Speaker 3: also the threats of IRA potentially being rolled back under
Speaker 3: President Trump. How do you guys sort of think about
Speaker 3: government interaction with your company?
Speaker 5: You know, governments are a very important state colder for us.
Speaker 5: You know, in the US as well as outside the US,
Speaker 5: many systems healthcare systems are single payer systems, so we
Speaker 5: do work very closely with governments.
Speaker 8: You know.
Speaker 5: The most important thing for us is, you know, once
Speaker 5: we've spent the money and developed innovative medicines, whether it's
Speaker 5: for cardiovastlar disease or oncology, that patients actually get access
Speaker 5: to those medicines, you know, and we can make an
Speaker 5: impact in their lives, and you know from from diseases
Speaker 5: they're suffering from and in that way, we need to
Speaker 5: be able to demonstrate that these drugs have value and
Speaker 5: are bringing value to the patients and to the healthcare system.
Speaker 5: And we work very closely with governments and with systems
Speaker 5: to make sure we get access to those medicines.
Speaker 2: Doctor Saron, you know, I always joke on the show
Speaker 2: that when I come back in the next life, I
Speaker 2: want to be a healthcare m and a banker, because
Speaker 2: it seems every Monday we come in and there's another
Speaker 2: deal out there. How do you and your company think
Speaker 2: about M and A to kind of drive top line
Speaker 2: growth versus the R and D that you've already talked about.
Speaker 5: So the ambition that we set for twenty thirty, the
Speaker 5: eighty billion does not include any major M and A.
Speaker 5: You know, we are always looking from a scientific standpoint,
Speaker 5: not only within our own labs and identifying what could
Speaker 5: be the next most promising molecule, but also looking outside
Speaker 5: and science that is happening in universities and biotech companies
Speaker 5: and so forth. Over the last year and a half,
Speaker 5: we've invested close to seven billion in doing licensing transactions
Speaker 5: and partnerships and smaller M and A transactions that help
Speaker 5: to build our pipeline and really fit very well strategically
Speaker 5: with us in terms of the ambition that we have
Speaker 5: and particularly in new therapy areas where you know we've
Speaker 5: made some investment, but it can help us leap frog
Speaker 5: into the field, for example in the case of cell
Speaker 5: therapies or in the case of radio pharmaceuticals and accelerate
Speaker 5: the investments that we're already making. So you know, we're
Speaker 5: always looking for those types of partnerships.
Speaker 3: So this is a really uncfo question to ask you
Speaker 3: what's the coolest drug that you guys are working on
Speaker 3: right now, the one thing that you're most excited about
Speaker 3: and a potential breakthrough there.
Speaker 5: I don't know if it's an un pool or maybe
Speaker 5: it's unfair. You know, it's hard to pick from brick
Speaker 5: from your children, right so there are just so many
Speaker 5: exciting things happening. You know, every few weeks we get
Speaker 5: some new data that makes us excited. So it's really
Speaker 5: hard to pick a favorite child. But you know, there's
Speaker 5: a there's a lot going on, and and you know,
Speaker 5: we live in very exciting times where not only is
Speaker 5: you know, what we do in astrosenca is important, and
Speaker 5: but science is evolving so quickly, and technology is evolving quickly,
Speaker 5: and you know we're we're sort of at the forefront
Speaker 5: of that innovation.
Speaker 3: Thanks to ask Resenika chief financial officer Radna Saran, they see.
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