Good morning.
I'm Brian Curtis and I'm Doug Prisner. Here are the stories we're following today.
US officials have agreed on a plan to retaliate against an earlier militant attack in Jordan. At Baxter has that story more from San Francisco ed.
Yeah, that's right, Brion and Brian, and President Biden says he has agreed to the plan.
The whole response women responsible in the sense of the.
Supplying the weapons to the people who given'.
I don't think we need a wider war in the Middle East. That's not what I'm looking for.
And former NATO Supreme Commander James Trevitia says that Biden administration's approach to Iran has not been working.
We've been trying to curtain this by pinprick attacks, by tit for tad small beer. At the other end of that spectrum is whistling jets overhead Teyran. I don't think we're there yet. We need to be in the middle. That Goldilocks place on.
The White House says it could be what they're calling tiered attacks, not all. At the same time, Iran's Foreign ministry is dismissing the US accusations that it was behind the Jordan drone attack. It's asking for diplomacy to try and reach understandings. The Israeli military says it's engaged in his fiercest fighting since yet since Jimas, but it's indicating
that the fight is far from over. Bloomberg's Israel Beer chief Ethan Bronner in Tel Aviv says Israel says there's much more work needed before it's all done.
There are five Hamas brigades. Two of them have been kind of taken down in the North by Israel, one in Hanyunis is in the process of that. But there are two.
More, yeah, he says. In the briefing, at least through the end of the year. They say US and Chinese officials have held their first working group to set plans to counter narcotics, particularly fentanyl now. NSC official John Kirby says China's made promises.
He committed to cooperate on increased LAFEW enforcement coordination to tackle the distribution an export of precursor chemicals for the oak wheelings that are taking so.
Many lives, Specifically to fight the distribution of chemicals to make opioids like fentanyl and House Speaker Mike Johnson again urging President Biden to take executive action to resolve the border crisis. He says he's spoken with Donald Trump.
I have talked to form President Trump about this issue at length, and he understands that he understands that we have a responsibility to do here the president, of course, President Trump wants to secure the country.
He says congressional bill does not due enough. New York City Council over riding Mayor Eric Adams veto of a controversial bill that will require police officers to document their low level encounters with civilians. It will require officers requord the race, ethnicity, gender, age of anyone they talk to, along with a reason for the encounter and the basis for stopping the person. The vote forty two to nine. Hong Kong has officially decided to pass its own security ledgeisation.
This in addition to the laws handed down from Beijing. The wording says foreign agents and advocates of Hong Kong independence are still lurking in the city as well. It has provisions a warning of external interference, citing similar laws in the UK and Canada as reference points. This comes as Hong Kong tries to ramp up efforts to reopen as an international financial leader. Global News twenty four hours a day and whenever you want it with Bloomberg Nziele
in San Francisco. I'm Ed Baxter and this is Bloomberg. All right, back to Hong Kong, Brian.
Thanks very much. Six and a half minutes past the hour. Now, let's take a look at some of the top business stories of the hour. Well, some of Wall Street's top performing companies reported earnings today, Microsoft topping sales estimates, posting revenue growth up eighteen percent. That growth was driven by interest in new artificial intelligence products. This in turn drove
renewed spending on cloud computing. Investors have bid up the shares in recent months on a bet that Microsoft will turn into an artificial intelligence powerhouse by partnering with startup open Ai. Now, the shares initially traded sharply lower, but they finished up the after hour session less than a half a percent lower.
So.
Alphabet, on the other hand, reported revenue from its core search ad business a bit below estimates for the fourth quarter. Now that may overshadow an otherwise strong end of the year for Alphabet. We got reaction earlier from Bloomberg's a Man Deep Things intelligence tech analyst.
Search had a slight miss when you look at the top line number, but it was sort of expected given you know, everyone was talking about how the competition from chat GPT will have an impact on the volume, and I feel on the cost side, there are puts in takes. Clearly they have brought down the cost through the layoffs, but when you look at the cloud numbers that have actually done better than expected.
Man Deep sing there Bloombergatel and senior tech analysts. Now, these disappointing results from Alphabet come at a time of broader uncertainty, especially where the Google Search engine is concerned. Search is now the subject of a major anti trust case. Brian Well.
Chip maker Advanced micro Devices also gave a week revenue forecast after the bell. The forecast suggests that consumers are holding off on purchases in AMDs, core markets, PCs servers, game consoles, and programmable processors, and we saw the stock trade down about six percent in late trading. A couple of other quick stories. Ups is delivering some pink slips
to as many as twelve thousand of its workers. PayPal reducing its workforce by about nine percent, and Nasdaq announcing it plans to cut hundreds of jobs as it integrates software provider Adenza.
All right, let's take a closer look now at what we learned after the bell. Jackie Devallis, Bloomberg News Tech reporter. Jackie, thanks for being with us. First, Microsoft, what do you think is the most most important takeaway?
Its Azure cloud business is still strong and growing. Its growth rate was thirty percent, that beat Wall Street's expectations of twenty eight percent, and it actually saw about a six percentage point boost from AI services, which was key for investors that were looking for some evidence that it's AI bets and investments in startup like open Ai are paying off. Some other bright spots in the report included
its Xbox revenue, which was up sixty one percent. As you remember, that Activision deal went through in October that contributed significantly to that to those sales, and overall, Satya Nadella and CFO Amy Wood were very adamant on the conference call that they're moving from just talking about AI to actually applying AI in their tools, and they're seeing
some of that bear fruit. But as you saw some of those even some of those bright spots in the report were enough to satisfy and which we're looking for, you know, a little bit more, especially when you have other companies like Nvidia showing these like crazy numbers. Microsoft analysts say, is going to take a little bit more time to see that materialize.
Yeah, that's the thing. And expectations were very high, and the valuations are quite high, and both companies Microsoft and Alphabet actually had very solid numbers. Stocks traded down. Let's focus a little bit on Alphabet for the moment. We highlighted that the search business was disappointing. Well, it came in at forty eight billion the estimate forty eight point one five billion, so not really much of a miss.
Shares traded down six percent. But I wonder whether investors are worried about search at Google being supplanted by AI. That could be one thing, or is it perhaps the anti trust issues that are looming.
You know, search has always been the reliable financial engine for Google. To see even a slight miss is worrisome, especially when you have a player like Microsoft that has made it clear they want to be a bigger player in search. Now Bing is nowhere near the ninety plus percent in market share that Google still has. But even just to see a little bit of weakness showing up
in those sales figures is spooking investors AI. As you know, they've been a little bit slower to integrate features into their search engine because they don't want to kind of really like, they don't want to damage the reputation and kind of that brand trust that they've gotten from consumers. So until they really start to show that they're in this AI game within search alongside Microsoft, those sales are going to be a little bit more sensitive to investor sentiment.
So to that point, where is Alphabet when it comes to investing putting more capital to work in artificial intelligence?
The place you can see it in action is through one of its most powerful large language models that it released in December Gemini. The company made it clear that this is something they want to incorporate in some of those experiments it's running for its search business. It's not widely available yet, but they know that Gemini is going to play a very big part in not just search, but also in Barred that Chat bought that competes with Chat GPT. You're also starting to see more expectations being
put on YouTube revenues. That is one of its most prized assets. It really competes with kind of the other social media giants for some of that ad spend. And again, it's really high margin revenue that at a time when Google is investing so much money, it really needs that high margin cash.
And what was quite positive for Google was its cloud sales operating profit there eight hundred and sixty four million. That was more than double the estimate of four hundred and twenty seven million. And while Google trails Microsoft and Amazon, they are making some progress. And you would think that that that's an area that I mean, that's another big product for Google that it can work forward on, you know, going forward exactly.
And I'm glad you brought it up because they don't get a whole ton of credit for getting, you know, incorporating AI into the business. But you're absolutely right. Cloud is one of the areas in which you can start to see some of that actually bear fruit. AI startups are turning to players like Google to be their provider as opposed to going to some of the cloud giants, so they're seeing some of that AI wave actually pan
out in that cloud business. But it's still lagging. I mean, it's going to take much more for that to see kind of the bigger contributions that investors are expecting. It's supposed to be kind of the main financial driver for few for growth search as it sees more competition for Microsoft isn't going to be this engine forever, and so they need to see more coming from Cloud to feel a little bit more confident that Google kind of has, you know, it's banking on the right thing for future revenue.
You mentioned YouTube a moment ago, Jackie, and I'm curious to wonder about how that unit has been performing. We talk a lot on this show about TikTok because of obviously the ByteDance connection in China. How is YouTube doing?
You know, they exceeded expectations for revenue. They brought in about nine point two billion this quarter, and it was really in line with investor expectations, which is kind of a win given it's somewhat have been a little bit of a weaker spot in past quarters, and that's kind
of been social media broadly. You saw a lot of that ad spend come down from the pandemic highs, and it's also seeing a lot of challenge from these short form video players like TikTok, but also Meta, who's also been trying to develop their own reals product, and YouTube has been trying to find their footing. Thankfully, AdSpend was pretty healthy this time around and they were able to capture some of that.
Jackie, let's go back to Microsoft, because there's this relationship with open ai that is very much under the spotlight. I mean, let's face it, for both companies, Alphabet and Microsoft AI hopes, so it's really driving a lot of investor attention. How can we characterize the partnership with open ai for Microsoft?
At the moment, it's an integral part of Microsoft's future. The company has been very forthcoming with the fact that this technology that it's licensing exclusively from open ai is responsible for the advances that it's made, and it's a productivity suite Office three sixty five, that co pilot product that is available to enterprises but also to small businesses to consumers. That's supposed to be kind of the next chapter for Microsoft. Now, the company doesn't hold a voting seat,
it's only an observer on the board. But that's sort of a new development that came out of that Ouster than the rehiring of Sam Altman, that drama from November, so it certainly has an influential relationship and kind of say at open Ai. But of course it's treading a very fine line because it is under the microscope of various regulators in the UK, in the European Union, and of course most recently with the FTC here in the US.
So before we let you go, Jackie, you mentioned the regulatory aspect of both of these stories. So you've got the AI story on Microsoft and the search story where alphabet is concerned. What type of year is twenty twenty four going to be for these companies When regulators or where the regulatory story is concerned.
For Microsoft, an outcome is expected to kind of yield some kind of resolution, probably sooner than Google because these inquiries actually started at the end of last year. They seem to be wanting to move a bit quicker. That antitrust trial, as we've seen like has taken so long, and I think for Google the question will be how
do you start to untangle this? But for Microsoft, you know, those short term impacts will be pretty hefty because their relationship and their products are so dependent on Opening Eyes Technology.
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