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Oracle taking it on the chin today. You know, they put us a big revenue numbers. I thought, I mean thirty percent here, sixty percent here, but not enough for the street. And same time with Jack up your capex, and I think the street gets a little bit nervous about that. So this dock is trading down pretty big. Second with anarag Rana, he covers all the technology spased in your technis for Bloomberg Intelligence. So on our why do you think Oracle's selling offs so much today?
So there are a few things to keep in mind. You know, the number one thing is cloud infrastructure growth. Consensus was sixty nine percent, decame at sixty six. I know it's a very big number. However, in the cloud world, missing by even one percentage point is not good. So that's first thing. But you know, there's a very logical reason about it. Everybody can see the backlock, so it's not as if they don't have a business there, but
converting that backlog into sales is an issue. Everybody knows that there is a capacity constraints out there, whether it's data center, whether it's networking, et cetera. Power is a very big issue, for example. So that's one area of it. But although I would say the management did not harp on it as much as we would wanted them to be, that to explain why the growth can improve going forward. So that's one factor. But I think the biggest question
is something that we had discussed earlier. Also is everybody is questioning that out of their big backlock, which is over five hundred billion right now, three hundred plus billion of that comes from open ai. Now open ai currently or the order book is from open Ai. By the end of this year, open ai will have a revenue round it off about twenty billion. So everybody is saying that, okay, well tell me, if you have revenue of twenty billion, how are you going to spend three hundred billion just
with Oracle. So there's a big question mark. But then your question is, well, why didn't this happened when they first announced it? Well, their bottle was at the top at that point, and right now Google's Gemini has caught up, so people don't know what will Openaize future look like two years from now, three years from now, and so forth. So there are multiple factors that are going into this equation.
And not to mention something, you just remarked that capex is going to go up by fifteen billion, So thirty five billion going to fifty billion. So it's a big, big, you know, change across four or five different vectors that are having an impact on the stock.
So the cloud strategy of Oracle continues to evolve. What is the next major inflection point for you when you see these cloud companies really move towards more AI driven efforts.
So the big thing is that five hundred billion a backlock needs to bleed into revenue. For that, they need to open new data center. But even to open new data center, they need more cash. So the big catalyst
for them is they need go out. Most likely they need to create a special purpose vehicle where they can raise funds with the help of private equity investors, private credit and basically you know, keep that off Oracles balance sheet and that will help pacify the fears that they actually have the way, a way to finance this big order book that they have.
All right, look, well you mentioned open Ai. Can you refresh my memory? Because I have no idea where do they get their money that they like? Where are they getting the money? I don't do all this stuff.
So the single biggest is the consumer app right now, That's where most of the money is coming in because you know, if you want the best model, you're going to pay twenty dollars a month. I mean, you can get the free version of it. But that's one area. They have over nine hundred million users right now, but only a small portion of them are paying customers. So
that's one. Second is if you as a company, let's say you're you know, let's call a hypothetical bank, and you're creating a chat pot which needs intelligence or a large language model, You're going to use APIs from open Ai, and that gets embedded intelligence into whatever system that you're creating, your chatboard that becomes smarter. They get paid from that. So those are the two I think big elements or
the big sources of revenue for them. And there is a huge you could say, looking ahead, all the enterprises around the world will have some intelligence into their core applications, and they're going to use model from somebody, whether it's Google, whether it's Anthropic, whether it's open AI.
How are you thinking of the leadership in this company? How will the company's direction be affected down the line.
I think they really need to talk a little bit about their expansion plans. I think this concept of you know, he went out and talked about I'm going to spend a trillion dollars in data centers. Then he went to the government and say, well, is there a backstop to this needs a little bit more clear on its expansion strategy, because if he goes out and say, you know what, I don't, I'm not spending a trillion dollars maybe one hundred two hundred million or so. I think they needs
to tone down that rhetoric a little bit. But I mean otherwise or he has to show a lot of revenue growth over the next one years to one year to pacify this particular uncertainty that has cropped up.
Right now and around thirty seconds left, this is Oracle News kind of highlight the risk of some of these circular deals.
See, I think it's not so much the circular deal when it comes to the entire space. But there is a question mark between what Opening is doing along with Oracle and an Nvidia. So it's this three people for this particular aspect of it that people are questioning whether this is going to lead any issues. Whether it's Microsoft and AWS and Google. I'm not concerned about those three.
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Isabelle sitting in for Scarlet Fu and Paul Sweeney Life here on our Bloomberg Interactive Brokers Studio streaming live on YouTube.
We're still waiting to see what's going to happen.
With Warner Brothers Discovery. We're talking about a ninety billion dollar enterprise value m and a trade going to hit the tape. But we've got two suitors out there, and I'm not sure what the sello wants to do.
Here.
Ethan Roung and Nathan joints that she's a US media analyst for Bloomberg Intelligence. I guess the only new thing I saw was President Donald Trump kind of weighing in here, and he says, hey, whoever buys this thing, you got to sell CNN or something like that.
What do you make of that?
I mean, CNN is like not even really relevant to the entire company, is it not?
Really? But I think obviously Donald Trump has a huge history with CNN, has despised the network always, so you know, naturally he's kind of laying down this condition. But what we think is it obviously complicates the deal a little
bit for Netflix. Remember Netflix is only buying the streaming and studio portion of Warner Brothers Discovery, So obviously if they are going to go with Netflix, you know, the WBD team will have to find some way of offloading CNN, which I'm not so sure how it's going to do that. It obviously complicates the process with Paramount. That's not going to be a problem because Paramount is buying the whole company that includes the studio, the streaming platform, as well as the TV network's business.
Talk to us why this deal is so polarizing. To Paul's point, the President made a comment. Actress Jane Fonda spoke out against a Netflix deal. Y. Both policymakers from both aisles are also making comments. We will discuss that comment later. I'm also interested, But Giza, why is it so divisive?
It is divisive because this really will change or reshape the whole media landscape. Isabelle, So, I think majority of the content community, you know, writers, actors, talent, they're really worried that if Netflix gets a hold of Warner Brothers Discovery Studio, it kind of totally changes things, right, It could potentially disrupt the theatrical model as we know it. You know, all of the legacy media revenue streams are
at risk. It could potentially reduce output. Licensing from one of the studios could be completely folded into Netflix's operation. So there are obviously a lot of very many different risks, very tangible risks that you know, could materialize in case Netflix goes after or they're already after, in case they win the Warner Brothers Studio asset. Now with paramount, I think people generally see that more of a status quore, just a continuation there. You know, they've obviously committed to
keeping the studio. We know David Ellison loves movies. He's made a huge commitment to increase theatrical output. So I don't think people necessarily view that deal as that much more disruptive than the Netflix deal. The other political you know issue there is obviously with CNN again, that's definitely very polarizing considering you know, it's it's always kind of been a little bit of an anti Trump kind of platform. Again, everybody has a view on this deal from many different angles.
I would say it's about.
Hey, Keith, I've been reading some of the research from your colleague Stephen Flynn is a credit analyst for Bloomberg Intelligence looking at the media companies from the credit perspective. Man if Paramount Wincessing, they're going to have a lot of debt on their balance sheet, like a lot is the equity folks, are they concerned about that?
So the way that Paramount has really framed this whole argument, Paul is they're talking about a lot of synergies. Okay, so they're talking about sixteen billion dollars in EBITDA. So remember next year, paramounts Guida and standalone is going to generate about three to three and a half billion dollars in IBADA. If they do succeed in getting oneer Brothers Discovery, they are promising about sixteen billion dollars in EBITDA, so we're we're talking almost, you know, taking this fivefold, which
is why this DAL is so transformative. So yes, they might have about eighty to ninety billion dollars in debt, but their whole argument is that we can support it just kind of given the amount of EBITDAD that we're going to be generating free cash flow generator conversion from ibadah is going to also be robust, So that's their whole argument. Of course, I'm not so sure the street is necessarily convinced because those synergy targets could be pretty aggressive.
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One of the stock story's been following today's Eli Lilly some Morgan news on some of their obesity work there. The stocks up three point four percent today of thirty three percent year to date.
I forgot.
This thing's got a monster market caply nine hundred and seventy billion dollar market kept, so just extraordinary. There a big winner.
Madison Muller, she is Bloomberg News reporter.
She's been following this space, Madison joints us here in our studio, Madison, what's going on with Lily? Here? They got some more good news today.
More good news for Lily. That's sort of been the theme of the last year. I mean, Lily has really surpassed its rival Novo Nordisk in terms of developing these next generation weight loss drugs that can be potentially easier to take, easier to manufacture, elicit more weight loss than Wigovi and Zepbound, which are the shots that are currently on the market. And so Lily has a shot or a pill potentially coming next year. And then this shot
read a true Tide, which is a triple agonist. It relies on three different hormones rather than just two or one like GLP ones that we all know so well, and so great results this morning for them, up to twenty three percent weight loss in a study, which is the most of really any of the shots that we've seen yet.
I'm doing the math here twenty three. Wow, you make John skinny again?
Yes, exactly right, I gues it's like it's a quarter of someone's body weight almost.
It's pretty incredible.
Just give me unintended consequences there. I just feel like it.
I don't know it does.
In Madison story, it's said that participants on the highest dose experience of more than sixty two percent reduction in knee pain. And I feel like when people think of weight, most of them associated with vanity or just looks, but for others it could really mean health changes and lifestyle improvements, and.
Totally that's a really important part of this.
And the market.
In your story, also you say that it's expected to hit one hundred billion dollars by twenty thirty.
Right, And a lot of that is exactly what you were saying, that this is more than just I mean, for some people, they are going out there and looking to lose a couple of hoss. But in terms of you know, reasons for why insurers should cover these drugs and reasons why these drugs are expected to be such a big market is because they are helping people with other, you know, important health issues like heart disease, knee pain.
Lily's studying this drug in liver disease or kidney disease and heart disease and all of these things that are linked to weight loss. But there is also potentially some weight loss independent reduction of inflammation and things like that. So these drugs are working in pretty incredible ways. They're also setting them now in addiction and things like alcohol use disorder. So there's just so much here, and that is a really important piece of this.
So I guess the end all be off for these pharmaceutical companies asn't relate to this particular area. Is I guess to get it into a form that more people can use ipill, maybe reduce side effects, but most importantly at an affordable cost. Is there an expectation that those three things can happen at some point over the next several years.
Yeah, and I mean they are starting to happen. That's one of the things that Trump administration actually struck a deal with Novo and Lily to lower the cost of some of these medications beginning next year. There's also efforts from the pharmaceutical companies themselves to lower the direct to consumer cash pay prices so that people who don't have insurance coverage for these drugs, which is still a lot
of people can get them metamore affordable price. So that's brought down the costs from over one thousand dollars a month to more like two hundred three hundred dollars a month, and so there are some of those efforts. Part of the Trump administration deal was also that the lowest dose of the pills, which are expected to start rolling out within the next couple of months next year, they'll start
at one hundred and fifty dollars a month. So that's also pretty steep reduction from where the prices are at currently.
We see investors really cheer this move today. But how high are the stakes is if they fail? Because it's experimental and I'm not the expert on this, but it's still.
Experimental exactly, and the stakes are high.
And we've seen because the drugs that are currently on the market with Goovi and Zebound are so good and they work so well, that the stakes for developing next generation drugs are higher. I mean, you have to get more weight loss than the drugs that are currently on the market. And at the same time, the safety risks are really real. We don't want drugs that are going
to give someone even more health problems. I mean, of course always, but the sort of risk benefit analysis with weight loss drugs are different, and that's one of the things that we begin to see too with some of these next generation compounds. Amjin, for example, has a drug that had really high rates of side effects. It's supposed to be a once monthly drug, but investors haven't loved that one because of the high rates of side effects. In Lily's trial today, there were pretty high rates of
side effects as well. People were having some weird like nerve pain tingling sensations and then the classic nausea, vomiting, constipation that are seene with these drugs, and so that's a really important piece to watch as well.
Thirty seconds and asking for a friend hair loss drugs once that that's gonna be the next week.
I mean, they're kind of starting to be out there already. A lot of these companies too, like Hymns and Hers and a lot of these telehealth companies are really going hard on the hair loss drugs.
Wow.
I mean I went to like had at dinner with some of my high school buddies recently. It was grim.
It was grim. I mean, I'm just laying it out there.
They can go to Turkey, yes, or the hair loss drugs they are gender neutral. Is that the right fra?
Yeah?
Yeah, yeah.
And there are some I mean Hymns and Hers has some products that they've developed specifically for women and they have different formulations like shampoo, whatever. So people are, you know, more comfortable with different products.
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Let's take a look.
One of the questions that I think the FED has, I think investors have is how's the US consumer doing out there?
And there's a lot of ways we try to get to that.
We talked to Michael Halean he covers all the restaurants for Bloomberg Intelligence to talk to analysts who cover different parts of the economy and see how their companies are
kind of talking about the consumer. One of the folks we like to talk to is Lindsay, Dutch consumer Hardlinei's senior analysts for Bloomberg Intelligence think, you know, I think companies like Best Buy, Dixboarding Goods, that kind of thing, the hard lines, lindsay, talk to us about how your stocks performed in twenty twenty five and what's the expectation for twenty twenty six for some of those hardline rekillers.
Hi, Paul, thanks for having me. I think if you look at, you know, the guidance for the rest of the year, I think a lot of these big hardline companies are baking in a lot of uncertainty with the consumer. But the reality is that if we look back, you know, to performance to date and results to date, results have you know, largely been better than expected. And and a lot of these retailers are sort of tracking to the upper half of their guidance range for the year because
that consumer has stayed pretty pretty resilient. You know, we see strength you know, continuing to come from that higher income consumer, while the lower income might be you know, continuing to pull back a little bit. And if you think about companies like best Buy, All, Tom Williams, Sonoma, Dick Spoarding Goods, you know they are bringing you know, premium products, new products, exclusive products to that consumer, and the consumers are willing to pay up for that.
What was the one trend that shocked you this year? Now that you look.
Back, I think a lot of the trends have been a continuation of what we've been seeing. I think, you know, if we go back to late twenty twenty two, that is when the first pullback in that discretionary spend has been. But this is the first year that we've seen more newness, and newness is really a key driver to getting consumers in the store and to fueling transactions. So the best
retailers are getting both transaction and ticket growth. But I think those innovation pipelines that maybe we're you know, settled down a bit during COVID, they've picked up again and bringing more newness is driving those transactions.
How promotional do you think retailers will be in twenty twenty six to kind of drive the consumer to the store or to the mouse to click.
So promotions are very important to bring shoppers to the store, you know, especially for someone like a best Buy. You know, promotions are very key, especially around holiday. We have seen that promotions are about flat, you know, in twenty five versus twenty four, and I would sort of expect a continuation of that in twenty six unless we see a huge spike in demand, in which case the retailers might be able to pull back on that promotional lever a
little bit. But this year so far it's been about flat. You do see companies like a William's Sonoma very select promotions. This has been a strategy coming out of COVID. They sort of have stuck with it. They're even sticking with it, you know, through this season going into next year. Pottery Barn was a big focus for them. You know, they need a rebound in that brand and growth is slowly coming back, but they are staying steadfast and keeping those promotions very limited.
I was going through your notes and then I read that many retailers are resuming or accelerating brick and mortar expansion plants because this leads to installing online sales. And that's just kind of the reverse trend that I was expecting. But you made a point that gen Z shows a strong preference for in person shopping. Can you talk to us more about that and how each generation is different.
Sure, Yeah, in store shopping is definitely back and just meeting the consumer where they are. So retailers, I think are more focused on all channels, whether it's said whether they have an app, they're online site, their brick and mortar stores, but brick and mortar as a whole. You know, we are seeing more openings than closings, and that has
been a trend for the past couple of years. But when we think about sort of the retail real estate market, the demand has been solid coming out of COVID and so vacancy is starting to get low and there's really no new properties being built. So these retailer was looking to expand, which is great for their businesses. You know, they really have to work hard to do so and find good space to open stores because there's just not
that much of it. But best Buy has talked about gen Z's preference for in store shopping, so has Alta Beauty and and so we're definitely seeing that across the board, but especially that younger generation.
There's plenty of retail space on Lexinton Avenue and fifty eighth streetment. Lindsay John from The Highlands rights in and you want to ask about the beauty segment Atlantic Islands.
Atlantic stones confuse the two the Atlantic Islands, Alta Beauty, ELF Beauty. So for how how does that category look for.
Twenty twenty six.
So demand has showed a strengthening sort of in the back half of twenty five. I think that momentum can continue into twenty six. I think for Alta in particular, they have done a great job, you know, bringing elevating their assortment and bringing on exclusives and that has really helped them. Comps are going to get tougher next year and they need to continue to drive growth and I think for them, you know, leaning into their salon services could be a key way to do that. Leaning into
wellness is a key way to do that. There's multiple levers that they can pull. The categories that are showing the most strength is really fragrance and skincare, and we would expect that demand to continue into next year.
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