Alphabet Surges, Microsoft Drops; Fed Rate Hike Expected

Good morning.

I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.

We begin with the tale of two high tech behemoths. Shares of Alphabet are surging nearly seven percent in early training. The Google owner reported revenue that beat estimates thanks to advertising on the company's flagship search business, which is fending off competition from artificial intelligence. Mandeep Singh covers Alphabet for Bloomberg Intelligence.

You know, it comes down to the core search business. That is what drives the profit and free cash flow, and I think it eliits some of the investor concerns around chat, GPT, and you know what it could do to search. I mean in this environment, if they're able to grow revenue five percent, I think that just goes to show how strong the mode is.

Bloomberg Intelligence senior analyst Mandeep Singh says Alphabet is also making management moves. Chief financial Officer Ruth Parratt will fill in a newly created role of president and chief investment Officer starting in September.

Well, it's a different picture when it comes to earnings at Microsoft. Nathan shares are down more than four percent this morning. MAT's do any concerns about a slowdown in its cloud business, and we get the details from Bloomberg's John Tucker.

Microsoft investors may have their head in the cloud for now. They latch down to the company forecast for a slowdown in the cloud business that's been a growth engine for the last decade. Revenue growth there slipped to twenty seven percent from thirty one percent of the previous quarter. Microsoft says that may go even lower, so that focus may be obscuring the company's optimism over its artificial intelligence tools.

All right, John, thanks for also watching shares of Snap this morning. They're down nearly ninety teen percent. The social media company gave a revenue outlook that was weaker than expected. Analysts say improvements to Snap's digital advertising business are taking longer than expected to pay off.

Well. Nathan, We also have a slew of earnings overseas, including some prominent names in banking, and let's head to London and get the latest of the Bloomberg's You and Potts, You and good morning.

Good morning, Karen Nathan. Many of Europe's biggest banks in focus today. But before the earnings dropped, we got the unexpected news that that West Group's CEO, Allison Rose, is to step down. The one am announcement came after heavy criticism over the closure of the bank accounts of a prominent British ex politician. On the earnings front, Deutsche Bank whether the trading slowed down better than expected, but expenses

Daybreak, marry you and thank you. Staying with banks this morning, we're watching shows of wealth. Els Fargo rise nearly three percent in early trading. That's after the lender announced plans to repurchase as much as thirty billion dollars in shares. The Bank is also boosting its dividend well.

The earnings continue to roll in today, Nathan. With almost fifty companies in the SNP five hundred reporting, Meta Platforms is the big name to watch. We get results from the owner of Facebook and Instagram and Threads after the closing bill and Bloomberg Stown Buzzby has more.

The big focus for investors is whether the expected recovery in Meta's digital advertising business, its main source of income, actually took place. Also of note, any word on its artificial intelligence initiatives, what kind of traction it's seeing on its new Threads app aimed at taking on Twitter, also at its Instagram reels, a competitor to TikTok. Forecast call for adjusted earnings at two dollars ninety two cents a

Okay, Tom, thank you. Meta is also in the news for another reason. We're learning Republicans on the House Judiciary Committee or preparing a contempt citation against the CEO Mark Zuckerberg Bloomberg Zeed Baxter has that story.

It involves a probe and the complaints that META has censored conservative speech. Committee chair Jim Jordan has accused META of working with a Biden administration. The recommendation asserts META has largely ignored demands for internal documents covered by a subpoena that was issued in February, and has only furnished communications with the US government. META says it has operated in good faith and seeking to comply with a sweeping

Right, and thanks well.

Turning the economy Now, let's get today's big event for the markets. A Federal Reserve issues its latest policy decision today. The central Bank is expected to raise interest rates, but will that be the end of this tightening cycle? Big an analysis from Bloomberg Economics correspondent Michael McKee.

A divided Fed is expected to come together on the need for US interest rates to go up another quarter percentage point. What's not clear is how divided they will be going forward. Some members, including Dallas FED President Lourie Logan and Governor Michelle Bowman, wanted to raise rates at their June meeting, which was the first pause in eleven meetings. Their argument is monetary policy lags are shorter now the weight of previous tightening has already hit the economy, but

And with that, look at other stories making news in New York and around the world. Here's Bloomberg's Michael Barr.

Michael, thank you very much, Nathan. Authorities on New York's Long Island have wrapped up their search at the home of suspected serial killer Rex Human. He's charged in the deaths of three women, their bodies found on Gilgo Beach in the past decade. Suffolk County District Attorney Raymond Turney I.

Would say that we have obtained a massive amount of material, which all of which has to be cataloged and analyzed, and it's going to take quite some time.

Suffolk DA District attorney also says that a large number of items, including about two hundred and eighty weapons, were taken from the home. A microburst hammer to Brooklyn neighborhood, leaving streets covered in broken tree branches. It had an estimated wind speed of between sixty and seventy miles per hour. It left homeowners shocked.

I've never seen anything like this in my life.

This is nuts.

It was very scary for a minute.

I'll say that surveillance video shows cars driving along in moderate rain on Bay Ridge Parkway and Benson Erst when seconds later a white out as seventy mile per hour winds raged down the block. It's a win for immigration advocates. A federal judge is blocking strict new rules for asylum seekers. However, White House Press Secretary Karine Jean Pierre as the Biden administration's border enforcement remains in full effect, citing the stay currently in place.

The Department of Justice will appeal the decision and seek and extend to extend the stay. And as we have said multiple times, our border enforcement plan works is deterrence, a diplomacy and enforcement. We have seen that plan working. Unlawful border crossing have come down to the lowest that we have seen in the past two years.

The requirements that have been in place since Title forty two and in are that asylum seekers must try to get asylum in a country through which they've passed first, and anyone entering illegally cannot legally apply for asylum for five years. Some big names joined picket lines for striking SAG after members in Times Square Breaking bads Brian Cranston.

We are not in the same business model that we were even ten years ago.

Actors are calling for fair pay, revenue sharing, health care, retirement funding, and a protection and fair compensation. While the sack strike is in about two weeks now, the riders strike began nearly three months ago. Global News twenty four hours a day, powered by more than twenty seven hundred journalist analyst over one hundred twenty countries. I'm Michael Barrt. This is Bloomberg, Nathan.

Thank you Michael, timing out for the Bloomberg Sports update. Here's John stash Out.

Thanks Naythin.

Peter Alonzo had been mired in a deep slump, seemed to come out of it last weekend in Boston with five hits and at the stadium. Alonzo almost single handedly powered the Mets the.

One drilled in the air to deep center Bayer going back at the truck at the wall.

He can't get it.

It's gone. Hold on.

Peter Alonzo hits it off the screen in front of the batter's.

Eye, right out at Monument Park.

It's straight away center field. Alonzo's second home run of the.

Game on WCBS. At that point sixth inning, it was Alonzo five and the Yankees nothing, as he had earlier had an RBI single and a three run homer. The next battle was Daniel Vogelbach he homer. Jeff McNeil drove in the next three runs, all Mets nine to three. Justin Verlanders six scorreless sittings for career win number two forty nine Domingo Herman since that perfect game is zero

We're Bloomberg Sports.

From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on SYRIASXAM, the Bloomberg Business app, and Bloomberg dot Com. This is Bloomberg Daybreak.

Good morning. I'm Nathan Hager with the focus this morning on big tech earnings. We have heard from Microsoft and Google parent Alphabet. Both companies came in with beats on the quarter and earnings and revenue, but it's a projected slowdown in Microsoft's cloud business seems to be overshadowing a lot of the excitement around artificial intelligence that has driven the market rally this year. So let's dive into these results.

Yeah, exactly, Nathan.

So I mean, if we start with with Alphabet, I think what's really telling in their numbers is that they are still completely dominant when it comes to search advertising, and Google Search is still the core of their business.

And there was a lot of noise in Silicon Valley and also on Wall Street.

About how they may lose share of that online search to the likes of Microsoft spaying because of AI applications.

But in the interim, while this is all very much like.

Something that will come potentially in the future, that could they could be at risk. Firstly, Google is also still investing in their own artificial intelligence products. And also when it comes to where advertisers are looking to spend, there's really no better reternal investment for them than the classic Google search, which is where people are putting that money.

Is that part of what's behind some of the disappointment we're seeing in the share price for Microsoft. There had been this big increase in prices for some of the AI products it was putting out there, and now we're getting this sort of tep it out look, a disappointing outlook when it comes to the cloud business that has been so much of a driver of growth for all these big tech names.

Yes, so the cloud business is still where a lot of the energy for Microsoft is going. And when they originally made that initial investment in open Ai, their cloud business was a core part of that. They wanted to see how AI could be integrated into the suite of tools on Azure.

But the thing is is that.

Is something that Microsoft is very much billing as a longer term strategy. And our people of Bloomberg Intelligence also believed that Microsoft is currently better positioned than other cloud providers, than Google, than Amazon when it comes to monetizing new AI investments because they're really the initial players here. But the problem is is in the interim they're making a bet for something that may not come to bear out

Well, if we are seeing cloud growth slow for Microsoft, at least in the interim, what does that say about the potential demand picture for AI.

I think it's.

Difficult to say. At the moment, I'm not entirely sure. When it comes to for instance, they seem to be pretty positive about the longer term outlook at Microsoft. But also when you're talking about AI, especially for enterprise applications, so much of that is also part of a broader

Still a lot more convincing that needs to be done.

Just about thirty seconds left here, Aggie, we're waiting for results from Meta Platforms later on this afternoon. Is AI going to be the big focus there as well?

Yes, AI is going to be a big part of Meta's conversation as well. Of course, they recently announced their own suite there, and I'm expecting that analysts will meant to know a lot more about that from them. I'm also curious to see how their advertising spend does well, because we saw, for instance, contradictory to Google managing to

This is Bloomberg Daybreak Today, Your morning brief on the stories making news from Wall Street to Washington and beyond.

Look for us on your podcast feed at six am Eastern each morning, on Apple, Spotify, and anywhere else you get your podcasts.

You can also listen live each morning starting at five am Wall Street Time, on Bloomberg eleven three to zero in New York, Bloomberg ninety nine to one in Washington, Bloomberg one six to one in Boston, and Bloomberg nine sixty in San Francisco.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty plus.

Listen coast to coast on the Bloomberg Business app, serious XM Channel one nineteen, the iHeartRadio app, and on Bloomberg dot Com.

I'm Nathan Hager and.

I'm Karen Moscow. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak