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Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals.
On today's Bloomberg Intelligence Show, we dig inside the big business story is impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries are analysts cover worldwide today?
Well, look at why you turnaround at the footwear giant Nike is beginning to take hold in North America.
Plus a look at why Amazon cloud sales may get a push from AI in twenty twenty six.
But first recently on Bloomberg Intelligence, we discussed HBO show Industry.
Industry is a high six drama following young graduates competing for careers in a prestigious London investment bank.
Now in season four, this year the bank has folded and some of these junior bankers have become power players in finance, business and politics.
For more on the show, we sat down with Mickey Down and Conrad k co creators, writers and executive producers of the HBO show Industry. We began by asking Mickey Down about the theme for season four.
Wow, what a big question. I think the theme season four is as you said, you know, these kindacters didn't have power, and it was about the recruing power. Now they have power, what do they decide to do with it? And how does it corrupt them? How does it mutate them? And is there a way out of this institution, this life, this industry.
You know, I spent thirty five years on Wall Street, you and the many years on a trading desk. You guys get it. I mean you got it. I don't know how you guys did that. Did you guys work on in the financial services before?
Conrade? I did?
Yeah?
After I graduated college. I was. I was a US equity sales guy Morgan Stanley for three years and I was famously when my boss let me go, he said I was the worst salesman he'd.
Ever met Wall Street.
So it was like, go and do something else because you're pretty useless of this.
Well that's a true Wall Street career, yet kind of Wall Street career until you've been fired from Wall Street. That's what I've been there myself. You guys, what's the state of the industry in London these states? I mean, how are people how are the young people feeling in the industry, Because you guys reflect that with your show very well.
Well, I think I'll show is a reflection of almost like ten years ago when we were in it, and I feel like people like me and Cornell would never have been all out in the industry.
Now.
I think it's become a lot more technocratic. We both did art subjects.
It's so underqualified you don't believe we were.
I'm not a great mathematician, but you speaking to a literature graduate and a theologian.
So derivetis exalted.
Derivatives were not strong in England? Is that allowed?
So there's no room for the arts majors on Global Wall Street anymore. And what's apparent is the show has become less about banking and more about wealth and resources and the leveraging of that.
So, sure, Comrad, what are you saying about.
Capitalism and how it interacts with politics with media?
I don't know. I mean the thing is that as we've written the show, we've realized that more and more we're writing really about the class system in the UK. Who has power, who doesn't have power, who's born into power, and the sort of relative different class ceilings people face. Like I think season one was a kind of experiment because they were the main characters were from such different socioeconomic backgrounds that they were always bumping up against different
different ceilings. And then in terms of like me and Mickey never set out every season to say something, did I take about capitalism? Like I think the show is, the show has something to say if you're looking underneath it. It has like a very strong subtext. But like we set out to make eight hours and the most entertaining thing we can, like nine pm on HBO really means something. Still, all we care about is entertaining an audience.
Really, how was it getting a show on the air. Of these days, there's so many different platforms to be pitched to a handful of networks and hope for the best. Now you can go anywhere on these streaming platforms. How does that impact from the creator's perspective.
Well, I think there's there are fewer options than there were at least five years ago. I think there's been a massive contraction in the industry. I think it's actually much harder to get something on TV than it was when we started. You know, we were two guys x financiers, grandiose term who were given an opportunity to make something on a relatively small budget by the biggest network, most prestigious network. I just think that wouldn't happen now. I
think we were No, it's an original show. It's it's not IP driven. We don't have any fat fans to surface, it's not a comic book. That kind of show is just they're few in part between now and there are lots of different training platforms and not different outlets. But I think actually we're just making a lot less stuff.
We were really in the right place at the right time when we started developing the show about ten years ago, because it was the real goal rush of team Yeah in terms of the amount of content getting created.
Netflix came in.
Disrupted the whole model by flooding, flooding the zone with cash and quantity, and we were just in the right place at the right time.
Someone you know, Season four is rolling out right when HBO's parent company, Warner Brothers, is in the middle of a drawn out bidding war, something that Paul and I have joked about would make a really worthy Sunday Night series of its own. Were you ever tempted to draw any parallels between the show and the real life drama that's going on to your corporate parent I.
Think another HBO show what he did?
Yeah, very successful one more emmy than us.
Will leave it to them.
Yeah, but you know, you could have made it really matter.
For instance, for sure, surprisingly they don't consult on something in the other maybe I should.
The other thing that I noticed is that you introduced a lot of new characters this season played by American actors Kieran and Shipka, formerly of Mad Men maximin Gilla. He's English, but he plays an American character. Why do you put so much of a focus on Americans? In London, given that you're both British, I mean, and it takes place in London.
It's interesting, Well, finance.
Is a global industry. I think obviously there's a lot of you know, international people who finance was my experience working in the financial services industry. And the show was originally conceived as a kind of outside the status show. It was about someone coming into an inside world, and you know, that was encapsulated by Harper, who's a black American woman from coming into the UK, which is obviously
rigidly class based, and that felt really interesting. We just like to I know, we like a mishmash of voices. I mean, there was some people complain about the show and his accents and an amount of different accents that are in the show, but we just love.
I think I'm just thinking of giving an American audience and access point to the show because, as Mickey said, it's very jarg and heavy show. It's loaded with Britishism, slag, British slang, British codes of conduct. We wanted to give Americans a bit of a foothold into what we're trying to do.
Just real quickly, who's your audience like what's a typical viewer of your show.
I'm talking very wide, very wide in terms of demographically, in terms of age. I mean, i'd say Casus to everyone from eighteen to eighty.
Really really does.
My ninety four year old grandmother loves it.
You guys, email you guys all the time. What's the number one feedback?
You're getting us wrong?
Or ride or you're getting your ride I could do better. Or it's really become a bit of a recruitment tool. If people was saying that that's the reason they go into wool Street reach, Oh my gosh, that's actually what I wanted.
My mine was Wall Street with Michael Douglas.
That was mine as well.
Our thanks to Mickey Down and Conrad k co creators, writers, and executive producers of the HBO show industry.
We move next to the world of sports. With the Super Bowl less than five weeks away, the run up to the Big Game on February eighth could be a key window for sports spreading companies like Draft Kings and FanDuel.
According to Bloomberg Intelligence, this time period could allow the companies to expand distribution of the new prediction markets apps available in seventeen States.
We're joined by Brian Egger, Bloomberg Intelligence senior gaming and lodging analysts.
We first asked Brian about how DraftKings and Fandel have been positioning themselves for the NFL playoffs.
Yeah.
So, DraftKings and FanDuel, among other things, recently rolled out these prediction market apps which are separate from their sports books. And this is really to could peep our head on against kle Shee and Robinhood and other of these financial firms that offer these event contracts in a number of states.
How big is I'm hearing more and more about this prediction market market. How big is this thing?
I mean, this is potentially really large. I don't have numbers in front of me, But the key thing is that call she and Robin ad are trying to do this in all fifty states. They're about a dozen states that either told them cease and desist because they effectively are engaging in illegal sports betting according to the states, or a couple of states have warned DraftKings, fandle don't do the same thing if you've got a sports book license.
So what DraftKings of Fandal did was try to go into states with this product where they don't operate sports books, they can do prediction markets on politics or entertainment events in any state, but the real issue is with respective sports. That's where they limit themselves.
Let me ask you dumb question, and maybe we don't know the answer to this yet. Who is the target audience for a contract and in production market setting versus you know, just a regular parlay or some bet in.
Resources of the type of person in terms of the type of area or territory.
Uh huh.
Think about the fact that you've got mobile sports books in almost thirty states, thirty some odd states, draftings Fandel and twenty five of them other states, big states like Texas and California, they don't have legal sports books and sports betting. That's a logical market for call She and Robinhood to go in there and say you can do these prediction markets and engage in that even though sports betting isn't active and legal in the state. That's really the big.
So what Texas and Florida say about that?
Right?
So, without going through every state, they're about a dozen states that either specifically told cal She and poly Market or Robinhood season Assist don't do this a few others have issued Wetter's warning. Draftings of Fandel do not offer a sports prediction market in a state where you've got a sports bet license. So what Fando and Draftings did is you know, seventeen states for Draftings five or Fandel.
They're offering this product in states where they don't have sports books and where sports betting isn't quote legal.
Who regulates the sports markets? So it's confused.
It's very confusing because the sports book are regulated by state gaming regulatory authorities. The prediction markets are regulated by the CFTC, so it's state versus federal And that's been the argument of Kolch that you know, we're a financial futures contract, we're not sports betting. We are federally regulated. The states have pushed back and said no, this is a form of effectively on licened sports betting, and ultimately
I think this heads to the Supreme Court. That's certainly in the view of Elia Steine or litigation analyst.
So what are the casino companies say these days are what do they say? Does that impact their sports book and their sports betting and.
On the margin to the extent that MGM and Caesars have mobile products. It's very possible to look into this type of product as well. Again in those states where sports betting is at legal, so everyone's going to be thick about it. And the real other other wrinkle is Texas and California once they realize we may not have sports betting. What we have effectively sports betters. If you believe that's what prediction markets are, we might as well
legalize it. And so there's a whole bunch of ram of cations to this.
What about Native American tribes in states like California in Connecticut, where do they fit it?
I mean in California, although sports betting isn't legal in California, the tribes have themselves challenged and through legally the Whites of call She and Robin Hood I don't remember which one. So you know to the extent that tribes have opportunities to operate sports books, which effectively Florida has the Seminole Tribe operating operating hard rock betting site even though draftings
and or are not involved. So the tribes very much will care to the extent that this is effectively a competing product as consumers might perceive it.
So is betting just going crazy the total dollar amount. I see kids, high school kids having conversations in detail, showing a level of expertise which really blows me away. Kids high school kids, and I don't know, it just doesn't feel it's surprising.
And it's also gets very problem at when you have college.
Kids college games.
Yep, college players. So but yeah, there's a big national draw to that draw to this, and I think the real I don't think draftings of find will get as affected as some might fear in states where they've got a sports book, but in states where they can't operate a sports book. But Kyle she and Robinhood and Polymarket others whore offering prediction markets. That's where I think they see risk as well as opportunity.
Are Thanks to Brian Egger, bi's senior Gaming and Lodging analyst, coming up a look at Bloomberg Intelligence's outlook for North American airlines in twenty twenty six.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via BI go on the terminal. I'm Scarlett Foo and.
I'm Paul Sweeney and this is Bloomberg.
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio.
We move next to research Bloomberg Intelligence recently put out on the floor Giant Nike.
According to BI, Nike's turnaround is beginning to take hold, notably in North America, but China remains a challenge for more.
We were joined by Punam Goyle, senior US e Commerce and retail analyst at Bloomberg Intelligence.
We began by asking Poonam to break down Bei's most recent research.
Basically, we think that Nike turnaround is possible. We see finally some light at the end of the tunnel. Their North America business has improved and is going to improve as they rationalize inventories. The issue still is China and the struggle in China we don't think will end anytime soon. In my mind, it's a one to two year turnaround.
But that said, if they can get everything else right, which I think they are doing, and we'll get to I do think that Nike's turnaround as well under way and investors will begin to appreciate it.
So let's dig into the struggles in China. I mean, you're talking about a long time frame here for things to turn around. Is it just that Nike has lost its appeal to the Chinese consumer? Is it competition that's really stepped up in the last couple of years.
So it's a few things. Number One, Nike in the US and other parts of the world is perceived as a more affluent at leisure brand. In China, it is not. What's been happening in China is that Nike has been selling at a discount to clear inventory as the vicious cycle of weaker sales has led to more discounting. So it's more seen as an off price brand that needs to change. They know that needs to change. I think
that's the first step in solving the problem. And I think what they will do now and what they've said that they do, and I do believe they will because they did it in the US, is they will clean out that aged inventory. But as we know, that will take time. In the US alone, in the last year, we've seen that it takes anywhere from twelve to eighteen months. The US is finally in a place where in the next three to six months they should be clean. So
which is why we think you'll take eighteen months. Once they can do that, the new pipeline of products that they're building, I do think will resonate with shoppers and it will sell at full price. But once again, it's an eighteen to twenty four month turnaround in China in my.
View, talk to us about you know, new product development and new product introduction. Are there certain verticals that they're targeting, whether it's running or lifestyle or you know, other types of activities.
So running is a core category that they're focused on. They have launched a new innovation in running. Running actually with their new pipeline, has done very well in the US. We saw that running was up nicely, whereas the rest of the business was down slightly to up slightly depending on the quarter that you look at over the last twelve months. We also think that they're focused on sport.
So when you think about Nike and if you compare it to audiit US, you know, I think there's a big difference in the way that they're approaching their businesses, which allows both of them to succeed. Nike is focused solely and most importantly on sports and performance, whereas Adidas has owned for the last few years the lifestyle category, and I do think that Nike's focus on sports is the right one and that is where they should be to drive this turnaround.
What about TARIFFSNA terrafts is certainly something that affects Nike. I know that Vietnam and the US is research trade deal. Most of the footwear in this country is manufactured in Vietnam. But how is Nike managing through this headwind?
So the headwind is here and it's here to stay. Nike has to selectively increased prices to combat the tariff impact. It's also negotiated supply relationships and found efficiencies internal. Just like the rest of the space, Nike isn't alone in the tariff situation. We do think that you know, tariffs will continue to impact margin in twenty twenty six, as
well as the shift from DTC to wholesale. The wholesale business is doing better and Nike is more focused on it today because it had lost focus years ago, So that mixshift is negative. That said, as more full price selling takes hold, as we see signs of China improving over the next twelve to eighteen months, those are both areas where they can help to recover lost margin. Twenty twenty six calendar is not a margin story for Nike,
It's a top line story. I think twenty twenty seven is where we can start to talk about margin expansion.
Put on your discussions with Nike and other consumer products makers and peril makers. What's the consensus today about the consumer?
The consumer is mixed. The luxury or the affluent consumer is clearly doing better than the low income consumer. And we do think the consumer will continue to make choices and where they shop. But we think the consumer is looking for fashion, it's looking for newness, it's looking for what's hot in the market. And as long as brands and retailers can be on trend, they will drive sales of those products because that is where the consumer is shopping. On trend product.
How much rope Oar investors willing to give Elliott Hill.
I mean, I think, like you do need to give him another year. We need to give him six to twelve months to start to see China inventory moderating and the situation beginning to unfold for the rest of the world. I think he's proven that things are becoming stable and that they are on the uptick in twenty twenty six, especially later in twenty twenty six our.
Thanks to Punamgoyle, senior US e Commerce and retail analyst at Bloomberg Intelligence.
We move next to research that BI recently put out on North American airlines in twenty twenty six.
According to BI, slowing capacity growth in the first quarter, including cuts from some low cost carriers, looks set to moderate airfare declines, but weaker economies of scale will likely then gain any benefits to profits.
For more, we brought in George Ferguson, our senior Aerospace, defense and airlines analyst.
We first asked George about how healthy the airline industry is and what the outlook looks like for twenty twenty six.
Look, I think you know, as we get into twenty twenty six, we're looking at schedules. We're seeing a lot of the growth coming from the big full service carriers. United especially continues to sort of pour on the gas here and put a lot of capacity in the marketplace. Delta a bit less than them, America even a bit less than them. We're going to have a Southwest starting to sell premium seats, and everybody's got a plan for bringing more premium seats to the marketplace.
So you know, when we just look at the full service.
Carriers, we're going to see like three four percent seat growth in the first half from those big full service carriers. I think that means there's probably a risk premium seats are going to start to feel some pressure on fares, and that's been you know, the really big driver of this business, especially for those big full service carriers, has been driving their profitability on the on the you know,
economy end. We're seeing spirit airlines there sort of between this world and that world a little bit, which to figure out if they're going to survive, might get bought by frontier. They've dropped a bunch of airplanes. We're seeing some of these carriers cut capacity because of weakness in those seat prices. So I think we'll start to see at least some you know firming up of that of that basic economy as the market tries to get that back in balance.
So I think that's what we're going to see in first half of the new year.
So it sounds like there's gonna be a surplus of those premium seats and then that leaves big empty hole here for the frontiers.
And the spirits.
Are they going to be forced to offer also some kind of premium version of what they currently have unoffer.
I don't know.
I mean, I think everybody's trying to figure out a way to get more premium in their airplane. They're they're not you know, they're not forced, but they want they want that premium travel that's gonna just keep flying through, you know, through good and bad economic times and not have the challenges of inflation on their budget and things
like that. So I don't know if they're forced, but we're we're definitely seeing all of them look at ways to increase the price they can get the customer to pay for a seat, whether it's block a middle seat, you know, so it might be three by three kind of airplane.
They might block the middle seat.
Some of them are talking about putting, you know, more reclined and nicer seats in the front of the airplane.
So everybody, I think everybody.
Has a plan for how to get more premium in their airplane. And again that's going to mean like everything in the airline business will get off sides on premium before it's all done. I think it begins in the first half. I don't think premium seat prices are going to create Unfortunately, we're not gonna be able to go anywhere really super cheap fly in front of the airplane in the first half of but I don't think it'd be as good as.
It was in twenty twenty five.
Wages, that's a big cost component for these airlines. I want my pilots happy. I want them feeling like they're well paid. Talk to those about the wage the dynamic in the industry.
Yeah, I mean, look, you know, we still see you know, I don't know that I want to call it a shortage, but you know, it's a difficult balance between the number of pilots out there and what's needed by the airlines and the you know, the number of people coming into the industry and getting air transport licenses and things like that, and so the pilots are still decently paid. You know, they came off years decades ago. They just had many, many bad years.
There was a surplus of them.
So they've been catching up and they got these twenty percent increases in the last couple of contracts. And in the last contract we saw a twenty percent increase and then a four percent, five percent so actually it was a couple, it was a five and a couple of fours. But four percent salary gains increases, they're pretty nice in this economy. And the airlines really can't afford that kind
of inflation in their cost base. The pilots are a big part of it, and so they keep rolling out bigger airplanes.
And that's another challenge in the marketplace.
Right as you put a bigger airplane behind the pilot so you could defray their costs over more seats, you got to fly all those seats into these markets, and sometimes you're discounting more to fill the airplane. So that's a challenge and continues in the new year. We think the airlines would be managing cost inflation there and maintenance and gates everywhere.
So wagers a big part of the airlines. Costs the biggest part, but then fuel is the second biggest, or it can be. And Jeff, fuel has actually come down in twenty twenty five. Is that going to continue to be a tailwind in twenty twenty six.
So you know, we kind of we looked at it recently, put it out on the Bloomberg Terminal BI Space AI RLN. We did some scenario analysis on this look. I have a hard time seeing fuel prices dip significantly lower than here.
But I am no oil man. Right. If I was, i'd own a football team, But.
I'm not oil man. I don't necessarily where those prices are going. All I can tell you is if they stick around two dollars, the airlines will get.
Airlines had a nice tailwind.
From fuel are as fuel prices fell, it buffered their margins. If they stick around two dollars, they probably get a bit of a tailwind in the first core, but they're not going to get a lot of gains from fuel that's not going to buffer their margins.
Did the airlines hedge their fuel exposure, because boy, I think I'd be hedging right here if I were CFO.
Not anymore.
I think every so often they surprise you and so I hear what you're saying, Like, you know, you could see one of those crazy CFOs out there, going, hey, we might as well edge here, could be as good as we get. We saw Southwest do that a number of times in their history and win big. But for the most part recently, what we've seen is almost the
entire field does not hedge fuel prices anymore. If you think about it, they kind of sell tickets out six eight weeks, so they have sort of a future commitment for fuel prices out that far. If fuel prices rise dramatically, I think everybody in the marketplace adjusts fares fairly quickly because they're not edged.
And so I think you know, when they look.
At the pack that they're flying in, maybe the airlines, they think no one else hedging fuel.
I'm not going to run the risk to be wrong in a hedge.
Stay onhead our thanks to George Ferguson, our in house senior aerospace, defense and Airlines analyst. Coming up, we continue with travel and look at how cruise lines may fare against theme parks next year.
You're listening to Bloomberg Intelligence on Bloomberg Radio for riding in depth research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence through Bigo on the terminal. I'm Scarlett Foo and.
I'm Paul Sweeney, and this is Bloomberg.
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio.
Move next to research Bloomberg Intelligence recently put out on cruise lines versus them parks in twenty twenty six.
According to BI six Flags and United parks may see more customer visits this year, but this may not equate to in park spending.
Cruise line customers, by comparison, are booking longer trips. Further in advance for more on all of this, we were joined by Jody Lorie Bloomberg, intelligence credit analyst.
We began by asking Jody to give us an analysis on how cruises are performing.
So, the cruise lines always have a dedicated base, but cruising is sort of interesting because it's only two percent of the travel industry. It really is such a small portion of it. Where we've been watching is for those new Dow cruisers, which I don't know if I'm necessarily convinced that they're going as often or they're attracting the new cruisers, but the cruisers are still very much cruising and they're spending more than the average consumer.
They're also spending more than the people who go to theme parks, according to your research, and partly that might be because the cruise line industry attracts a different kind of customer than the theme park industry, theme.
Parks, skews younger cruises, skew.
Older easy, Which would you prefer if you are an operator?
Which would you prefer if you're an investor.
So we don't make full recommendations, but I will tell you a couple of things based on our research findings.
So first of.
All, you have to think about how people book cruising versus how they book theme parks.
When you're talking about cruises.
They book far in advance, they book a year or two well in advance. And what the cruise lines have been doing, particularly post pandemic, is they've been locking people in on the drink packages, on the experiences. They've been giving these steal of deals excursion ideas, and when you get on the boat, it's more expensive. So people say, Okay, I'm going to book my cruise, but I'm also going to book the snorkeling and I'm gonna book this. I'm going to book that, the ones that I definitely want
to do. They also book the drink packages, which you know, I think you can go either way on that personally, because I don't think I drink enough, but maybe other people do, and it really sort of just helps their cash flows Now theme parks people book much later. They are younger, they are lower income than the US median household. And the key for them is they can get people in the door. They can get them with season passes, or they can just get them for the one day pass.
But they're not necessarily convincing them to spend in park the same way.
But there's higher volume in theme park.
Right, there's pretty high volume in theme parks. But if they're just paying for the admission, it might not necessarily cover the costs per se. Right, They'll get in the door, but they have high capex. They have high just high costs in general, and they have all the employees that they're paying for.
Six Flags, that's a theme park that got some local Jersey flavor. Here six lags Great Adventure. How's the capital structure for these theme parks?
They are high capex, so high capital intensive companies.
They have high level right, exactly.
And similar to cruise lines. So where we sort of see it interesting is theme parks and cruise lines are constantly they have to get the new experience in, right, so they have to spend not just on maintaining their products, so not not just maintaining the ship or maintaining the ride. They also have to get new ones in so people say, I want to go to a Great Adventure because I want to ride Superman, right, So they they do this to get people excited, draw them in so that they're going.
I mean, you know, the biggest example that we don't cover. I don't cover Universal or Comcast, but you know, Universal's new theme park was a big drive to Florida. It wasn't as big as expected necessarily, but it's still pretty big. Now if you're talking about the regional theme parks is a little bit more difficult because people aren't necessarily planning these long term vacations around Great Adventure.
Do the theme parks attract more domestic consumers than the cruises? I mean, I'm just curious in terms of the sustainability and the stability of your customer base.
So it depends on the brand. Because if you look pre pandemic and now going into a few years post pandemic, the cruise lines they segment so Norwegian most of their customer bases US their US customers. When you get to Royal Caribbean, it's a little bit less. It's about so I think it's about eighty percent for Norwegian. I'm doing this off the top of my head memory, but eighty
percent Norwegian. You get to about it's like seventy or sixty five for Royal, and then you get to Carnival and it's even less than that.
It's closer to half.
It's not quite half that are US versus international. They have a much larger international presence. Brian Egger and I my Equit account park. We were on the Aida, which is one of the one of their brands that they market to international customers, specifically in Germany, and it was a one hundred and thirty three round.
The world cruise.
Nice they were stopping in New York for the day, and they brought a bunch of US on, a bunch of US equity and credit nerds, and took us around the ship and everything was in German, as expected because most of their customers were German. So that's Carnival has a much more diversified customer base if you talk about theme parks, SeaWorld or United Parks as they go by now. Their Florida parks, which make up about half their revenue,
is international about ten twenty percent. But when you get to six flags.
It's much more domestic.
We were off the Amafi coast last fall, oh fancy, and I saw this big yacht thats like either navy blue or black, and I said, what is who owns that? It's the rich Carlton Ritz Carlton. Yes, actually on it just parked.
In those are though, I mean in terms of the five hundred people, Yeah, I mean that looked pretty cool.
Yeah, that's for the people who want to be on a luxury yacht but don't want to actually own a luxury yacht.
Right.
The joke about boats is.
Bring on another thousand, Right. My mother in law likes to always say that, and that's why it's called boat. So but the uh, you know, the thing about cruising is that there's a perception about who the typical cruiser is. Right, it's the you know, older people who are retired, who likes who like to bring basically the cat skills on the water. But really, I mean it's changed over time. And what's interesting about our credit research and our travel survey that we do every half a year is we're
seeing that it's actually really really spread out. If you look into the buckets that we've segmented, it's really, you know, it's one third of each, so it's one third eighteen to thirty four year old one third that like middle aged group and fifty five and older one third, So it's really not specifically the old yea our.
Thanks to Jerdy Lourie Bloomberg Intelligence Credit Analysts.
We move next to research that Bloomberg Intelligence recently published on the cloud computing platform Amazon Web Services.
According to BIAWS, sales can improve in twenty twenty six by twenty two point five percent in constant currency or two hundred basis points above consensus.
This would be aided by widening enterprise AI adoption and more data center capacity coming online. A potential ten billion dollars investment in open AI could also be another sales catalyst, assuming it comes with more cloud infrastructure commitments for.
More and all. This I was joined by anurag Rana, Bloomberg Intelligence technology analyst. First asked ONNAROG where we are in the growth trajectory of AWS.
When you look at DAWs, you know one of the narratives of what the law studios has been that they have been laggered in AI and large portion of data is beco's chagpt before the contract changed with Microsoft was only hosted on Microsoft azured. As the capacity constraints started, Microsoft farmed outside some of that business to COVI even then Auticle and so fourth. But in the most recent agreement, you know, you can see that chat GPD can be
hosted in other cloud providers. So that's one area to focus on. But the big thing for AWS is it's an enterprise business. It's not so much a consumer chat operate. So this is the year where we think that thing kicks off. And what we are thinking is the growth rate for AWS improves successively every quarter going into the the end of the year.
Has Amazon invested in open ai or any of that type of thing? Is that are they part of those what people refer to as circular deals.
So Amazon is not directly invested in open Ai. They have a new contract with them right now. They have invested in Anthropic, So that's an area where you know, when you are partnering with the second largest LM provider. I mean, I'm not counting Google because that's it's part of a big conglomerate, but a pure play you know, vendor, which is Anthropic. So they have invested in that, They partnered with them and we think that actually workloads also
go up. We recently did an AI survey and part of what we've found out was software companies are using anthropic more and more, mostly for the coding reasons. And I think if that ACCEL rates, that actually helps out Amazon as well because some of those workloads do get up to AWS. The big part of the AWS story is it is the largest cloud provider. So the successive growth rate or to see a big number jump over there, unlike a Google, you know that has the delta is
huge or the growth rates are not the same. But what we think this year some of those enterprise workloads start to flow in as more their capacity comes online. They have invested heavily in data centers and some of that actually shows up this year and that we think is going to help us help them improve their growth rates.
So from a competitive landscape position, how do you think of AWS in the AI space?
Yeah, so when you look at the traditional space, there quick clear leader. But when you look at the AI infrastructure space, that lead is starting with Microsoft because they got chat cheap to begin with, so that's one. Then you have Google doing very well with their TPU stuff, you know, Oracle and core Vi also getting into that. But Amazon still has a very large portfolio over there. And what we think is going to happen this year is going they have been spending a lot of money
to expand that data centers. They're going to get more and more AI infrastructure orders because you know, at the end of the day, they have the capital, they also get the same chips from Nvidia, they have the luxury or they know how to build those data centers and plug these things together. So I think this is the air where they kind of break through from a lot of this narrative of being an AI laggard.
And that that's kind of reflected in the stockown rock. I'm just looking at over the trailing twelve months, you know, only up about five percent is the reason because they just haven't necessarily got the full AI you know, kind of win in their sale.
No, because they the kind of work that doing is very different. The first phase of AI boom that we have seen is in the consumer app It's in the Chat, GPT and the Gemini. What we have seen they're not enterprises.
They're not large banks that are adding more AI capabilities, but we are in that phase of enterprising adding more AI capabilities, and when that happens, you know, they have the large infrastructure, plus they have a lot of the data that these big companies reside in the Amazon ecosystem. I think that's where they benefit the most.
I mean it's not very often in the last I don't know, fifteen years where we could say Amazon is cheap or Amazon looks like a good buy relative to its peer set. But I mean, if you have a certain time horizon, is that what the bulls are saying here?
Yeah, I think that's where it is that. You know, so far, the narrative has only been about OpenAI and JAGGPT and Microsoft. I think that narrative starts to change this year with more and more enterprise adoption. And you know, you and I talked about it just a few weeks ago that we did in AI survey where enterprises are really looking forward to deploy some of these AI tools internally,
and that's not going to happen in isolation. They have to build that on some data framework, some kind of AI framework, and that's where AWS comes.
In our thanks to anor Agrana, bloom Intelligence Technology Analyst.
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