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This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight Ahead on the program, look ahead to earnings from chip giant Nvidia, along with some of the biggest US retailers. I'm John Tucker in New York.
I'm Caroline Hebge here in London, where we're looking at the upcoming earnings test for Europe's low cost airlines.
I'm Dog Krisner looking at whether Japan's economy will show improvement in the first quarter.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syrias XM one twenty one, and around the world on Bloomberg Radio dot Com and the Bloomberg Business app.
And good day to everybody. I'm John Tucker. Let's start today's program with the company founded in a Denny's restaurant in East San Jose, California, Wednesday, after the close of regular trading. The biggest company, in Vidia opening its books to investors. It's going to preview and walk you through all the details. We're joined by Bloomberg Technology co anchor Ed Ludlow. Ed, I got to start with a China question. Which of Nvidia's future results are going to reflect purchases from China?
Nobody knows.
That is the great That's why we bring you on board, Ed, That.
Is the great mystery and mystique of Nvidia, because you know, for all the headlines and the discussion of what Nvidia can or cannot sell to Chinese companies, you know, with Jensen Wang alongside President Trump in China, there's a big misunderstanding of how it actually works. So like the US government will say we have approved Nvidia to sell a
certain generation of chip to a certain group of Chinese companies. Great, fantastic, and Jensen one will go on stage as he's done many times in twenty twenty six so far, and say good news, guys, like we have orders from Chinese companies for the H two hundred, which is the generation of chip they're permitted to sell, really good like real orders. And so as a result of those orders, we're going to ramp up. We're going to go to our suppliers
make sure that we have those chips. But nobody actually knows if China's okay with this. And you know, it's really interesting because to his credit, Gensmong has always been really consistent with me when I've discussed it with him. When they negotiate this stuff, they don't actually themselves negotiate with the Chinese government. If Chinese tech companies are allowed to buy their chips, they will, they'll place orders, and that we should infer from that means that the Chinese
government said it was okay. And so the only way of knowing is if it shows up on the income statement. That's the joy of covering earnings and public companies, it's either there in black and white or it's not.
Yeah, you know, it's it's kind of hard for me when I go home in the afternoon, said to pass someplace that doesn't have a data center under construction. What's the where's the growth going to come from? For in video? Is it those data centers that are popping up seemingly everywhere.
Well, look, I really want to have some fun and make this like just digestible for the audience. All you need to know is that wherever it's coming from, the video numbers are really big. You know this story. You mentioned Denny's right in April nineteen ninety three. When this company was found in Denny's, I was less than a year and for most of the company's initial history it made chips that powered video games consoles and no one.
Really can the GPUs work, right, Yeah, gpu.
The origin of the GPPU, the graphics processing unit, is that it's very good at running multiple computations at the same time, which for the layman means when you're playing a video game, all those pixels appear on the screen. You know, that's what its origin was. Now fast forward to present day. You know they are still growing revenues at near to eighty percent year on year. You know, actually, what we'll see is revenue growth accelerate into this quarter.
Their margins are at seventy five percent. Like margins at seventy five percent for a company that sells chips, it's just bonkers. It's just nuts, That's all you need to know. And they do it with massive profits and cash generation, and so in this quarter that's not changing. But here's the to answer your actual question, where does it all come from it's still the big cloud computing companies what we call hyperscalers, that account for more than fifty percent
of those revenues. But that's why the timing of earnings is really interesting. You know, if you're a real nerd like me, you look at the calendar and you're like, oh wow, in video reports earnings mad twentieth. But the reason that I stress that is that all of nvda's biggest customers have already done earnings and they've told us how much they're going to spend on chips this year. So it always kind of logical, and it all results in video winning.
Frankly, it's still safe to say in video pretty much as a near monopoly in this film.
Yeah, well, just to make sure that we're covered and I adhere to my own and Bloomberg's high standards. A technical monopoly is where you have more than seventy percent market share. And what's happening in AI right now is a very big shift from a period of time where all of the computers, and we're talking about computers right GPUs, clusters, data centers, what you're talking about is absolutely ginormous computers.
Until this point, what those computers were largely doing was training the models, taking really vast volumes of data and training models on that data. Now people are using them. They're running the models either through prompts that generate a text response, it can be an image response. That's what we call inference. And when we get to that in Prince phase and video looks over its shoulder a little bit more because there are more custom silicon. Different car
companies have their own chips. There are other chips on the market that would claim to be better than in videos in that sense, but there's not yet any evidence that they've sort of had their market dominance chipped away at by any of these would bees.
You're going to pour over those earnings as they come across Wednesday after the close of regular trading. All right, thanks to Bloomberg Technology co anchor Ed Ludlow, Let's take a look now at some of the stocks making news in the week ahead. I'm John Tucker along with Isabel Lee, the Bloomberg Cross Asset reporter. The parade of earnings continues, and we're going to start with the biggest retailer in the world, Walmart. What's the expectation there?
Walmart ticker WMT earnings will be on May twenty. First, that's a Thursday, which I checked right before we came on because you said we had to know the day.
It's Thursday, seven am.
ET earnings call is eight am, so early wake up if you really want to know more about Walmart revenue expected. The consensus estimates is seven hundred and forty eight billion dollars. Adjust the diluted EPs two dollars and niney three cents and deluted EPs two dollars and ninety three cents. So I could bore you with the numbers, but key themes
to watch definitely market share gains. We know Walmart is positioned to benefit from its value and convenience proposition with sustained e commerce momentum.
Maybe not in New York. I really can't relate whenever, Yeah, you.
Know, I would love to go to I've never been to one.
Oh my gosh, they're not around here.
I think I may have been to one, or maybe.
I'm making it up, but which makes us more than qualified to talk about.
It's a once in a lifetime thing for me. I would love to go to. You and I can go on a field trip there we.
Go, We can expense. It Now, when I talk about Walmart, I said that the world's largest retailer, but it's also the world's largest grocery chain too.
Is a lot of people shop there.
So according to Jennifer bartist Huss of Bloomberg Intelligence, she's going to be looking at online profitability. They're going to see whether e commerce margins have improved. Same Star sales Ana wealet revenue gains of four to five percent are anticipated, And of course you're going to see consumer health.
I mean we have all heard this.
Yeah, this is kind of a bell weather in terms of economic performance for do I dare say the lower end consumer.
Yes, so you're going to see that. And we've heard time and again and all the radio shows the K shaped economy. I just read again a note today that travel is going to see heightened K shape economy. And I thought, obviously, I mean, the higher income will be in private jets and I will be in economy.
You know, So.
Okay, let's move on. This is one store I have been in, actually put an Anderson window there. It's expensive, but I'm talking home depot. One of the things I'm seeing more and more at home depot, more and more like professionals, carpenters, whatever, show up and it's not just you know, people bozos like me.
So okay, Home Depot ticker is HD. You are not a bozo.
But I think home Depot is the kind of place that you're welcome on. I think it's the kind of place that you just have what you If you need something, it's there Because I go to Home Depot guess for what plans?
Really?
Yeah, they have you see, you never noticed because that's not what you need. I never noticed the carpentry because I live in the tiny New York apartment. But Home Depot is also going to report earnings May nineteen. That's a Tuesday. Oh, this is even earlier. The release will be at six am ET earning is called will be nine am, so you can have breakfast in between. Revenue
expected is one hundred and seventy eight billion dollars. Adjusted diluted EPs is sixteen dollars and thirty one cents, gap diluted EPs fifteen dollars and ninety eight cents, and that's earning sixteen billions. So again key themes to watch your also, consumer confidence, I mean uncertainty, inflation and job security has really. I guess the hed people from making large home improvements. Why will you remodel your kitchen when you think you're well.
The other thing is the mortgage rates and what the ten year going out, the thirty year the long bond that was hovering right around five percent with the latest economic figures, that feeds through mortgage rates home expenses one hundred percent.
That's a great point.
And I think another key theme to watch is we have management indicating they've learned to manage tariff, so we'll see how that plays out. I feel like tariff we kind of forgot about it. When I say forgot, like new headlines have kind of dominated the market, but it's still very alive and well.
Okay, let's finish up with the last stock on your list. And I'm just hoping there's some intersection between artificial intelligence and John Deere. I mean, they're building all these data centers everywhere they are, and Deer makes stuff that you can build data with, like tractors and stuff like that.
I guess, yeah, that's actually no tickers. The they have earnings also made twenty one Thursday six am. Earnings call is ten am, so you get a longer breakfast in between. Net sales is estimated to be forty one billion, total revenue forty seven billion dollars net come four point eight billion dollars, et cetera. So they're expected to post a
better than expected fullier twenty twenty six results. Again, to your point, it's driven by maybe agricultural equipment makers and the and the momentum in building construction.
Well, you know the farmer, you know, we call it farm again, and what's happening on next ye right now? Well, yeah, no, it's been a very difficult time, especially with the tariffs and the planting season. So you know, again dear something of a bill weather for the Yuba's economy.
Yeah, tarriff.
Also, you're right is a key risk and used inventory overhang because there's an elevated use tractor inventories which can continue to weigh a new equipment demand in pricing. I guess where do you store these things? They're so gigantic and.
They're trust me, they're expensive too. I can imagine I know from firsthand experience. Wow, Isabelle, thank you for showing up today. Appreciate it. Isabelle Lee is our Bloomberg Cross asset reporter. Coming up on Bloomberg day Break weekend, we're going to take a look at the upcoming earnings test for Europe's low cost airlines. I'm John Tucker, and this is Bloomberg. This is Bloomberg day Break weekend to our global look ahead at the top stories for investors in
the coming week. I'm John Tucker in New York. Up later in the program, we're going to look ahead to some key economic data in Japan. But first, Europe's largest low cost airlines report earnings in the coming days. And this comes against a backdrop of rising ut certainly jet fuel costs driven by the war in Iran. Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepger.
John, we will get into an uncertain airline business as we approach peak travel season here in Europe. Willie Walsh, the industry veteran of the Director General of the International Air Transport Association, has worn recently that airlines can't keep absorbing the additional costs that they're seeing. The war in Iran,
which began in February, has upended the industry. London's Teithow Airport, one of the major hubs in Europe reported a drop in passenger numbers in April of five point three percent from a year earlier, and that's down to six point seven million passengers. As the Middle East war has disrupted global air travel. The airport's CEO called it though a
short term disruption now. Bloomberg Intelligence forecasts that the big European carriers like IAG and Air France CARELM are going to see their fuel costs go up by twenty seven percent for LIFTANND so that figure is twenty two percent for twenty twenty six, so creating a big challenge for profitability. Others cast doubt on the risk of jet fuel shortages, seeing them as an excuse to cut unprofitable flights of the low cost carriers reporting in the next week or so.
Ryanair is relatively well protected by fuel hedging, but it remains exposed to potential supply disruptions and pressure on consumer spending. Easy Jet meanwhile has warned that the war in the Middle East will widen its first half loss and weigh on summer demand. Overall, investors will be watching very closely for further cuts to full year guidance for both of these airlines.
Well.
Joining us now is Danny Lee, Aviation and transport reporter based in Asia. Danny good to speak to you how much is air travel currently being affected by the impact of wars Well Caroline.
The airline industry is grappling with a more than doubling in fuel costs and the counting of that cost is resulting in multiples of billions and higher fuel bills. And right now we've only seen a fraction of that be reported by the airline industry through at least one month
of earnings that has filtered through. But it's now into the second and the third quarter where we are seeing the volatility and the surge and jet fuel costs which is absolutely wrecking airline balance sheets across the piece, and in particular, when you see airlines grappling with higher fuel costs, they are now thinking about how they can mitigate those losses, in particular having to cut the number of flights they operate because simply there are flights out there which are
just not profitable. So there is a balance to be brought between operating profitably and being being generally conserved. Even how they approach this, this ongoing war we have seen stretching into almost three months now, and this is a challenge for aliens. How do they grapple with a surge and fuel costs and when they have to pass on the alans have to pass on the costs onto customers.
How much are passengers willing to bear? And this is a challenge for airlines to figure out, and particularly if your low cost carrier, where you are trying to stimulate demand with lower prices, all of a sudden those prices become a lot higher.
Yeah, So then what do we expect to hear from Ryan Air an easy Jet in terms of their results, because they are obviously the big low cost carriers in Europe.
Yeah, easy Jet has already braced investors for bad news. So the UK low cost carrier expects a headline loss of between five hundred and forty to five hundred and sixty million pounds. It tends to be the weaker period, those first six months of the year, and it's the earnings period which captures only a month of the year round war. But so far the airline says it has
added twenty five million pounds to its fuel bill. So as volatility in Jeff does settle down a little bit, it's still going to be more than counting the costs. That doubling of costs of pressure is only going to
be felt in the later quarters. And I think it's that kind of clarity from CEO Kent and Javis which we'll be able to understand just what impact the Iran war is having on the likes of the locals Carricer and easy Jet in particular, because they just cannot pass on the full amount of higher jet field costs on
to price sensitive passengers. So I think the key question is how much is that down arrow story going to extend into its kind of forecasts in future and how will it be able to recoup as much of the fares as it can pay airlines and not able to do it so much in the near term, but it's towards the later end of view that they will be
able to. As for Ryan, it will post its for year earnings and it has already guided towards very healthy profit architects of two point three billion euro But Riina has been cautious in the large about its full year targets and whether its fiscal year ahead will change materially in terms of how it's thinking about demand, the amount of flight to operate and even being able to carry
as mess and many passengers that can. However, just like with easy Jet Rhine, they may well be beneficiaries from the war in as much as the fact that passengers may not choose to fly long haul because of the costs and because of various other risk factors and may stick to Europe. So this could still be an upside momentum when people think about booking their travels this summer and beyond.
Yes, I think that's really interesting. I mean, consumers in many parts of the world are under a lot of pressure, aren't they. So what do you think the airlines are going to say about summer bookings? As you know, consumers are facing her petrol prices inflation affecting lots of goods that they might be buying, including holidays.
Well, the airline industry by and large has seen that level of demand keep up with pace, and so airlines are seeing booking levels largely about the same. However, easy Jet has worn that the conflict situation has resulted in a kind of denting of booking's momentum, So they are seeing a little bit of a hit easy Jet, And I think the question is does that continue, so that would be very key for the CEO Kenson Javis to
spell out. But also that kind of elasticity really the ability for customers to be willing to pay more off for airfas because ultimately the higher oil prices doesn't just affect airfares, It affects a whole facet of the economy and for households from goods to services, particularly into the shopping baskets, So that extra cost is coming everywhere, and I think people will be thinking about what do they prioritize in spending in the near term.
What is the state of jet fuel supplies? Are the shortages real? Are they particularly affecting Europe? I know where you are in Asia, it's been a very pointed issue.
Yeah, the jet fuel shortage is still a live and real issue. We've heard a lot from airlines talking about being covered in jet fuel needs for March, April, May into June, but there is limited visibility and given the Straits of hor Moos is still largely blocked to an extent a pre key critical waterway. You know, there's been a lot of scrambling to find all terms of sources,
particularly from the US. We haven't really heard too much more in terms of deep concerns that airlines have we already have seen out and start to cut schedules just to make sure that where they're there are more challenged airports where fuel supply maybe a question, they will focus on a higher priority bookings and airports where there is
bigger business. I don't think we've seen too much more in terms of shortage concerns out there, but as we get into the peak summer season that dynamic may start to change a little bit more. But the Europe and Asia are the big areas to watch when it comes to fuel availability because of the reliance of the imports of jet fuel.
What about the cost of flying? We know that consumers are thinking about this. If you look at surveys of consumers, what are we actually seeing in terms of ticket prices?
Well, ticket prices are going up by and large, and some industry surveys point to a doubling of airfares and even in the recent months so into May and June that fair airfare is about fifty sent higher then from then last year. Because of what we have seen with the around more impact on jet fuel prices, on the disruption in demand, because of the impact in the Middle East, so there is seeming a tendency that airfares will stay
higher for longer. Not great, but at the same time, airlines still feel fairly optimistic in the near to longer term about or midterm about passengers still wanting to travel, that level of demand out there, and so therefore we are still seeing airlines looking at expansion, and so therefore
that level of expansion will feed into stimulating more bookings. However, there is still that challenge of filling those flights at those relatively higher prices, and I think airlines are still going to be grappling with that level of price sensitivity overall, because at some point and passengers will say we're not going to be paying this price, and whether they try to look for a cheaper alternative or just not fly at all or delay their travel. It remains a big question.
As we move into the latter part of a year.
What do you think might come out of this energy kind of impact. Do you think there'll be fewer airlines, fewer routes or is that too simplistic.
There may well be a consolidation. We are already seeing consolidation that has been the case pre war, particularly in Europe, Asia and in the US. But as the cost of offline becomes more expensive for airlines, we have already seen the likes of Spirit airlines go down. Will there be others.
It's still too early to tell to see which airlines may not survive at this stage, but there is a very much concerted effort to see airlines which have a better war chest, who are better capitalized, are looking at taking advantage of weaker airlines, and as result we may see consolidation, we may see some trimming as a result.
But I think airlines overall, where they have the opportunity to make money and it still does and they can have that overall connectivity within their network of flights, they will all stick around and overall that level of competition will become even more intense as their stronger airlines look to become even stronger.
Danny, very interesting, Thank you so much for your time. Danly Lee is aviation and transport reporter here at Bloomberg base in Asia. My thanks to him, and of course we'll have more coverage of Ryanair's results to you on the eighteenth of May and Easyjets earnings on the twenty first of May. On Bloomberg Radio and across our platforms. I'm Caroline Hebger here in London. You can catch us every weekday morning for Bloomberg Daybreak you at beginning at
six am in London. That's one am on Wall Street.
John all right, thanks Caroline, and coming up on Bloomberg Daybreak Weekend. I'll look it here into a GDP reading for Japan. I'm John Tucker, and this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead of the top stories for investors in the coming week. I'm John Tucker in New York. We go to Japan next, where the economy is expected a rebound of the first quarter, and for more, let's go to Bloomberg's Doug Krisner, the host of the Daybreak Asia podcast.
Thanks John. The Japanese economy is expected to have grown at an annual rate of around one point eight percent in the first quarter. Now, this will be a preliminary reading, and if it were to hold, that would make for a second consecutive quarter of economic expansion in Japan. To help us understand the dynamics at play, let's bring in Bloomberg's Paul Jackson. Paul is ECO GOV for Japan and Korea. He is the team leader joining from the Japanese capital.
Thank you, sir for joining us. One of the things that we have to touch and I think to begin with, is the fact that the war in Iran is having a great deal of impact on the Japanese economy right now. Now we know that it began in late February, so the impact on Q one will be limited only felt for the month of March. Obviously, this is very much as oil story, which leads us to inflation even before
the war. Can we agree, Paul, that Japan was dealing with much higher inflation and a stubbornly weak currency is a big reason why.
I think the inflation story in Japan that's been taking place over the last three or four years has been a generational change for the nation. And then you have another war emerging starting. Obviously we had the Ukraine War few years, but the start of that launched a wave of inflation, and the latest war is going to do the same. And you know, those higher oil prices, we're already seeing the impact of that on like producer prices.
We recently had data showing four point nine percent increase there has been the highest in like three or four years there, So that means inflation is going to be heating up, and the Bank of Japan has already revised up its forecasts on that expectation.
So to go back to the GDP report, private consumption accounts for roughly fifty five percent of domestic output in Japan. When you talk about higher prices, do you think it's going to have held back private consumption?
I think this is really one of the key points of you know, examining Japan's economy at the moment. It's it's this new concept of inflation, prices going up, and can consumers adjust to that. And we have seen gradual strengthening of consumption and as people get used to the idea that prices can go up, you don't have to put everything on hold because of a bit of inflation. But Doug, the overall picture is that that consumption part
of the economy is still on the weak side. It's still on the limp side, and we're expecting probably one of the weakest readings in recent quarters on the consumption side. Still positive, but this is not the kind of figure that's showing that Japanese consumers are totally on board with inflation. They've got it and they're spending again. That is not the case at the moment.
So give me a sense of how the export economy performed in Q one. Obviously, we have the US tearuffs, the auto related industries in Japan have been affected by that, and then there has been can we call it a deterioration of diplomatic relations between Tokyo and Beijing, and that may have weighed on the tourism industry.
Bit.
Yeah, that's right. We've got all those issues weighing on trade. So you would expect that the figures don't look too good, but actually the figures have been looking pretty good, pretty strong, and the reason for that is this global surge in demand related to AI. And I think if you look at like exports out of Japan in March, they're up nearly twelve percent and largely fueled by thirty percent growth
in chip exports. And we're saying in countries all through Asia this trend, I mean, especially over in South Korea, just you know, large gains in the tech sector and chips as economies look to feed this incredible surge of demand, which you could say is kind of masking you know, larger problems lurking in the global economy and in Japan too.
So what was the role that the government may have played in Q one when we think of public investment. Was there a lot of government a lot of fiscal spending.
Well, I think we've got in terms of reacting to the inflation story, which is now we're going to see elevated energy prices through this war, that the government is taking action to subsidize energy, and this is going to lead to more spending. So I think, really, rather than looking at Q one, it's kind of looking ahead. This is a big question mark hanging over Takchi primary Takhi's administration because she's kind of put a marker out there saying we're not going to run Japan in the same
way as before. We're not going to have extra budget after extra budget. As she tries to reassure markets that her kind of expansionary approach to fiscal policy isn't going to buckle yields, buckle the bond markets and scare everyone. The problem she's going to have is that if you subsidize energy, you are going to run out of reserve funds, which mean at some point she may have to have an early extra budget and that's going to be a very bad look for her and could spoop markets going ahead.
But so far their standing firm saying no extra budget is needed. But that is a point to be watching over the coming month.
So as we're looking ahead just a bit. I know that a lot of our conversation has focused on Q one GDP, but let's look ahead. Given the fact that you mentioned PPI in the latest reading was the highest I think since twenty twenty three, so that obviously everything fueling this inflation narrative. Does that necessarily mean that the Bank of Japan is at risk of being behind the curve in terms of tightening and will we necessarily see a rate hike in June.
Well, we've just had Treasury Secretary at Scott Besant in Tokyo, and he's one of the leading voices out there saying that the Bank of Japan certainly is at risk of falling behind the curve. And I think the takeaway from his meeting with officials here is he kept re emphasizing the message that the fundamentals of Japan's economy are strong. So what's the takeaway from that Doug, Well, if you've got a pretty positive GDP reading, you've got American officials
honing in on Japan's strong at the moment. All this points to the idea that, hey, you should raise your interest rates and you should get on with it. And I think if you look at market expectations, you will see that there's more than seventy five percent chance of a rate hike coming in June. And just recently we saw one of the more sent trist board members on the Bankagapan board saying that we should raise rates as soon as possible as long as there's no clear sign of weakness in the economy.
So has that been discounted? Do you think by the currency with a end right around one point fifty eight against the green back, does the foreign exchange anticipate a move in June? And I'm wondering if the market is already adjusting to that notion, maybe more is necessary to strengthen the currency a bit.
I think you're right, Doug, to point out this vulnerability. In the end, as we know, Japan has intervened, and this could be multiple times. We're looking at over sixty billion dollars worth of intervention so far. By our estimates, so they have been trying to prop up the end. So the hope would be that if you raise the interest rates in June and you give a hawky signal about potential further rates to come, that the yen bears
might start to back off at that point. But I think there is a big question mark hanging over how convince investors will be that that's the direction we're heading in.
Paul will leave it there, Thank you so very much, Bloomberg's Paul Jackson, team leader for Eco gov coverage for Japan and the Koreas we go to earnings news next in China, where last week twin tech leaders Ali Baba and ten Cent reported revenue well below estimate. Baba recorded its first operating law since twenty twenty one, and ten Cent reported its slowest pace of revenue growth in over a year. Even so, Ali Baba's cloud revenue growth accelerated
and margins expanded. This helped a fuel optimism for returns from Baba's investments in AI. And that's where we begin our conversation with Eleanor Leung. Eleanor is head of Asia Teleco and Internet Research at CLSAY. She spoke with Bloomberg, zivonn Man, and David in Glaze.
I think my first question is comparing it to market. Seems to be happier with Alibab, whether it is with ten Cent.
Relatively quest for much of this year, right, yes, correct, We are entering a very exciting moment of the AI eras that moving away from model training and to actual application and to p monetization is a lot easier compared to see. That's why what get people excited is that AI cloud, which Barba, is better position for the A cloud compared to ten Cent. So I think the last port of result on Alibaba, the management given a very
bullish guidance on their cloud growth. So the external cloud revenue already as to forty percent year neargirl in the last quarter. They expect that we're further a salt rate with noticeable margin expansion. They're so bullish is because they think that AI revenue is going to be able to grow at a triple digit and contribute more than fifty
percent of the cloud revenue in one year's time. That is driven by MS model as a service, which ramping up very quickly in China, which including agentic applications such as coding, productivity, generative video tools for the enterprises, and they're willing to pay, and they have a chance to raise prices now because we are not just model training, which is a commoditized service, but now we are able to differentiate in capability that we're able to raise prices there.
So that is driving the cloud growth. And the company expect to achieve one hundred billion USD revenue with twenty percent monjor in five years time.
Run us for some of those numbers, right, I was looking through that, so they said ten billion REVENBEE in terms of AI intelligence services revenue, right, so that's by June thirty billion by the end of the year. Are those tall orders you think or do you think they'll be easy? Easily they can surpass these numbers.
I think they can surpass the numbers because the demand in China is very high. The bottom actual is the chip supplies right now, is that the supply is demand is far greater compareditor. Surprise, as you know that China has a chip constraint because we cannot buy a lot
of the Nvidia chip. But luckily, starting this year, the domestic chip supplies start picking up, so we expect the token in China is going to are full times this year in China, but all of a seventy percent is inference chip demand, and China is going to go one hundred percent self sufficient in domestic infance chip, so that
will help to support the growth. And you're also saying that China doesn't really have a SaaS industry in the past, meaning that when these agentic applications come through, people jump onto it.
That was Eleanor Leung, head of Asia Telecom and Internet Research at CLSA. I'm Doug Krissner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast, John.
And that does it for this additional Bloomberg Daybreak weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm John Tucker, and stay with us top stories, global business headlines coming up right now.