Bloomberg Audio Studios, podcasts, radio news. The headlines third quarter revenue x tax seventy point fifty five billion. That's a beat. Seventy two point eighty eight was the estimate. Third quarter Google Cloud revenue also beat over eleven billion dollars. The street estimate was about ten point eight ten.
All right, let's I think we should bring in Man Deep.
So I think we should definitely bring He's.
Been watching these numbers very closely. He joins us here in the Bloomberg Interactive Brokers studio. A beat pretty much across the board, Man Deep, you cover this company and many others. We're going to get to some of the others in just a second. For Bloomberg Intelligence. What's really sticks out to you?
I mean, the Google Cloud beat is quite impressive because the thirty five percent growth rate is a nice acceleration. I mean, we are talking about thirty percent being the bogie. They really hit it out of the park when it comes to the Google Cloud.
So what does that tell you about their client.
That the clients are deploying their AI workloads on Google Cloud. Remember, Google Cloud is the third when it comes to the cloud ranking.
You've got Aws, Azure.
Azure and Google Cloud has an und rate of forty four billion. Now with this print, Azure is about eighty billion and AWS is one hundred and five billion. So I think what you will see is Google Cloud growing much faster than the other two. Most likely Microsoft will
be around thirty percent. AWS is more twenty percent. So clearly that thirty five percent growth rate is very impressive, and the cloud profitability actually was much better than expected, which is why you see the operating margin bead here.
How low was the bar going into this report for Alphabet.
It was I think low in the sense that the overall top line road of thirteen percent was quite low, and they beat on. You know, the certain numbers were in line. The YouTube ad numbers were in line. The YouTube subscriptions continues to be the standout. They keep delivering quarter after quarter, and now YouTube plus cloud is one hundred billion dollar rundread business. They guide it to that and they are showing it in the in the sprint.
And YouTube alone is a fifty billion dollar business over the last four quarters, according to the release from the company.
I would say if you add the subscriptions, yeah, to the ads, it's closer to sixty simply because they bundle YouTube subscriptions in the other segment and they've got some other revenue in there as well. So that's why that subscription number continues to be very impressive, the YouTube premium and the YouTube TV. Yeah, and most likely it is margin increased.
A quick reminder, Google bought YouTube back in two thousand and six for one point sixty five billion dollars.
Which is pretty amazing. Listen, we watch a lot of YouTube, two different programs.
We're on YouTube right now.
We are on YouTube.
You want everybody she's not watching you tube.
I'm not watching it. You know, it's interesting. We did some reporting kicked off our broadcast couple of hours ago about the overhang, the anti trust action scrutiny over where their alphabet's dominant market share and Internet search is at a risk as other players in AI come in. How do you kind of factor those overhanging elements in.
Yeah, Look, there is no doubt if you're a regulator right now and looking at the search market, there's more competition this chat GPT, there are other large anguage players and Tropic even Meta is talking about getting into search. So there is definitely perplexity being another one there is more competition for sure. Now, the thing that's impressed me
this quarter was they continue to execute on search. So even though the search volumes are going down, they still had an inline forty nine point one.
Is very amazing.
Why are search volumes going down?
Because if chat GPT is taking some of your traffic for informational queries, that Google search volume, I would say, is going down. But the ROI on their ad spend is so high that they can make it up on the ad pricing site. So even involves are going down, ad pricing continues to be stronger.
Why because they're the dominant player.
They are the dominant player, and they have the best kind of mode when it comes to the ads stack around keyword searches. There's no better a platform for you know, navigational searches or transactional searches. If you're an e commerce player, you have to advertise YouTube. There's no way out of it.
So what's the question that you would want to know from them on the earnings call? I mean, the stacks know up four point two percent in the aftermarket, so the momentum just building.
They give you so little in terms of guidance that I almost want to, you know, plead the management to give us more details around their CAPEX plans like every other company gives us so much more.
Well, this is the thing that going into this week right with all of these guys reporting, and what it would tell us about the AI spend. What did you what so far have you heard about or are you feeling like you're going I mean.
If the cloud number was a blowout, which it looks like in this print, then clearly you know the spend on AI is translated into cloud revenue, and so to my mind, I think that AI Kapex investment is showing up in the cloud revenue. And that's why I want to know the Capex guide. Are they overspending because at this pace, you know, with the fifty billion dollar capex, they're way lower than Microsoft at around eighty billion. So that's why that Capex guide is very important.
Is it apples to apples when it comes to the way these companies are investing. Can we can we really say, okay, the Microsoft AI spend or Microsoft capex we can compare it directly to Alphabet.
You can, and Alphabet has got a different set of businesses along with AI and cloud. They've got weimo that's a big investment. I mean that that's a big call option on the company overall. That revenue line could be huge, and they are investing on the Vemo side. But look, when it comes to Capex, it's all about training of large angwid models. Can you maintain the lead when it comes to you know, Microsoft OpenAI partnership and where stacks up against them?
Where are we in the race? You said can If they can maintain the lead, it has me where are we in the race?
I mean, some would argue the open ai model is still better for some of the large angrid model.
Use and open Ai is using Microsoft Azer.
They are using Microsoft Azor. So from that perspective, Google is playing catch up. But they have been releasing a lot more products lately than they were before. And that's where I think owning the chips. Remember Google has their own chips when it comes to training these models. They're not even reliant on Nvidia for a large portion of training. They do that in house, and that could the reason why their Capex spend could be much lower than Microsoft.
Can we ask you? We've got Reddit? While we've got you. Reddit is surging in the aftermarket. It's up about seventeen percent. Also out with their earnings, c's signal strong holiday quarter to come fourth quarter revenue three hundred and eighty five to four hundred million. The street estimate was three fifty six point two. So the outlook is upbeat. What do we need to know here?
I mean, this just ipeoed at the perfect time. And look when it comes to Reddit, all that timing. They are one of the beneficiaries of llms, you know, implementing search, because where do you drive that traffic when you show a result in an LLLM. A lot of that traffic goes to Reddit. And that's why a lot of the Google traffic is now going to Reddit, A lot of the chat che.
I guess say, when I search in different things, like a lot of things goes.
Back go back to it. I also like, I spend more time on Reddit than any other single you know, quote unquote social media site like it's and I was such a late adopter.
To Yeah, yeah, right, I mean, think of what these lllms are trained on. They're trained on. Reddit data is one of the corpus that is common across all the lllms, and that's why when you search for something, it takes you back to one of the Reddit posts, which is.
Kind of what they said right when they were ipoing, right that this was going to be what was so valuable about it, And it's playing out that way.
It is they ipeoed at the perfect time. I mean, that acceleration is just amazing.
Can we ask you about Snap too? Snap is up about ten eleven percent here in the aftermarket, So another one that's surging. Let's go to the.
Outlook, thirty six percent so far this year.
Yeah, okay, so perspective. Sorry about that. I was getting a little exciting fourth quarter revenue one in one point five to one point five to one to one point five six billion. The estimate on the street is one point five six billion, so it sounds like that's a little bit of a range. So they projecting slower holiday advertising sales. Why are they up well?
In the case of Snap, like Tim said, you know, they are up twenty percent one quarter, then down twenty and in this case, I think overall what you're seeing is the lower interest rates now I mean we have obviously, Yeah, it's it helps the add companies.
There are buying back I should say, up to half a billion.
Yeah, I don't know what to make of it, because for a company of Snap size, doing a buyback right now is not the best use of their cash. But maybe the investors like that.
What should they be doing with their cash?
They should be deploying generative AI. Every platform right now should be looking to add more feess that helps you know their engagement. And generative AI is what every social media platform is doing. Look at Meta, They're using it at scale.
What an interesting kind of drop of earnings and we're focusing on a lot of these kind of I feel like high tech interesting. Google Alphabet up still three point four percent in the aftermarket. Does it tell you anything potentially about what's to come from Meta? From Amazon, from Microsoft? Is there anything that we can infer here or now?
Yeah? I think Meta. For Meta, the bar is slightly higher twenty percent growth rates, so I think they will beat and raised, but clearly the bar is higher. And for Microsoft, the Cloud number will blow out. I mean, if Google Cloud did so well, I wouldn't be surprised if Microsoft's growth is around that thirty four to thirty five percent as well.
All right, Reddit shares up seventeen and a half percent right now, I know I know, I know. I mean, look we're talking, you know, and hundreds of millions of dollars, not billions of dollars. Here, last question, what dos What does all of this mean? Man Deep? For what we get tomorrow and Thursday when we hear Amazon and Apple?
I mean for Amazon and Apple, I think.
They're meta platforms too.
Yeah, Look, meta I think should do well. I mean, ads continue to be strong, and they should probably beat and raise and their large angrid model LAMA is a big strategic advantage. So in the case of Apple or Amazon, they're very different. I think with Amazon, the AWS business is growing slower than Microsoft and Google, so that may weigh on them. And for Apple it's about China. I mean, if they can counter that China risk, I think they are a well position.
All right, We're gonna leave it on that note, Man Deep saying the best Bloomberg intelligence breaking down those alphabet earnings. Do you want to mention too a couple of others that have crossed. AMD is down more than five percent here in the aftermarket. They're forecast falling short, suggesting a slower pace of AI growth advanced micro devices, giving a lackluster revenue forecast for the current period, so there is some concerns that it's aises are growing more slowly than anticipated.
And then Chippotle also at with results.
All right, shares of Chipotle ticker CMG in the after hours right now, I'm just waiting for the.
Turn down about seven percent liter the after market. Their sales falling short of investor expectations as well.
Yeah, for sales, look at this. The measure of locations open for at least thirteen months rose six percent, was below the average analyst estimate of six point four percent. The stocks advanced so far thirty two percent this year, so it's done better than the S and P five hundred. The company did maintain its full year view that same store sales will rise in the mid to high single digit range.
All right, let's go back to though alphabet obviously the big one and the one that we've been really focusing on again, up about four percent here in the after market. Caroline Hyde is here with us in studio, co host of Bloomberg Technology on Bloomberg TV eleven am Wall Street Time.
Every day.
You're welcome, You're welcome. You guys are going to be talking a lot about this.
What do you make oh, the cloud. Cloud revenue up thirty five percent. I had you call it out when they broke after the closing bell. And really that is where the metal roots the road, really, doesn't it, Because this is where the investment, the capex of over thirteen billion dollars is vindicated. Because they're able to grow revenue to such a significant extent. Why are they winning new clients?
Why are they getting the startups that are ex Google is coming to them for their compute power, for their services and their software, because they've got AI prowess that's able to win yet more customers, more money, and more revenue.
Better AI prowess than Microsoft, who's in second place when it comes to the cloud, or AWS who has the crown for first place.
Many would say that the need for computers so vast that you go wherever you can take it. But ultimately, I think it's about whether they've got this suppliability and whether they are able to cater to it. I think people aren't. People do feel that even though from a narrative perspective, in the consumer's mindset, maybe we suddenly thought that open AI had run away with artificial intelligence generative
AI and leading the charge I'm sorry. DeepMind has been there since twenty ten with Google as an an extraordinary lab that has sophisticated AI prowess, and I think therefore they're able to start showing that even if the narrative moved on them, the actual reality is they're locking in customers and they're able to generate their own revenue from this, and that's why they're able to also drive up profitability. They're managing to be cost focused at the same time as driving up revenue.
You know, we talk about you know that they're advertising business, right, it's a massive one. It's a big one, but there's a maturation aspect of it, right, and so it's important to see the cloud business continue to grow or the YouTube business continue to grow. I mean, these are important to see these aspects.
It is, and actually we manage to live up to expectations when it came to the juggernaut that is the ad business YouTube considerable addition there. And look, this is where people have been worried about generative AI encroaching on that part of the business model too. Would suddenly I not go to Google, Would I instead go to chatchypt? Would I be using perplexity people aren't, and my way,
I love Google AI overviews. I think it's really easy and it keeps me using what I'm used to using right exactly.
This is so remarkable to me. YouTube's total ads and subscription revenues surpass fifty billion dollars over the past four quarters for the first time. I was marveling thinking back to two thousand and six when YouTube was, yeah, an independent company. Google bought it for what one point six billion dollars or something.
And now they can move from freemium to premium and suddenly we're all still completely using addicted it. They've got live sports, and no wonder that we're returning to YouTube time and time again. I mean, they own market share when it comes to our eyeballs, and they can start charging us for it. So they're able to contribute more than eight billion dollars in terms of overall revenue for the business. And it's more about us paying for it as consumers than it is about advertising. At the moment.
People will worry that might run a little very light, but they're able to get us to pay.
Caroline, I think about you and ed and your coverage, you know, going into tomorrow, what's kind of top of mind for you when it comes to Alphabet and what it maybe says to us about some of the other big megacaps to report, which it's a massive week.
What does it signal for Avatar housing resilience for the likes of Meta, for the likes of other players, But what does it mean in terms of Nvidia? We don't we have to wait until November.
To get in video amazing.
All of the hyperscales are going to be coming this week, and we want to know that that thirteen billion dollars is still there. What willston our pitch I'd talk about in terms of future capex spend, but also he's got to take questions on anti anti competitive, anti trust issues.
That's the overhang on the stock. We can see that the numbers are there, but what about the future business model and how he has to basically pivot and change to be able to take the pressure off himself from the DOJ here in the United States, the FTC and over in Europe too.
Yeah, it's kind of how we started off a couple of hours ago. Like the overhang of this one.
I'm looking at chairs of Meta Platforms. They were hired today in the trade, but also hired by eight tenths of one percent in the after hours that company reporting tomorrow aftermarket.
All Right, grit steffis always thank you, Thank you, Joe Day for you really appreciate it. Caroline Hyde, of course, co host of Blueberg Technology on Bloomberg TV with Ed Ludlows. So catch them at eleven am Wall Street Time everyday, Monday through Friday.