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Carol Master along with Tim Steenway getting ready for a big drop. You gotta be ready because they're bax seven Edla Love of course, co host of Bloomberg Tech on Bloomberg Television. He's out there in our San Francisco bureau, also with us as our anaag Rana, Bloomberg Intelligence Senior technolology analyst. He's out there in Chicago, honoreg I want to kick it off with you go where you want. There's a lot coming at US. I want to start with Microsoft.
Yeah, so Microsoft did beat a little bit on the Azure growth, so thirty eight percent goes to thirty nine, So minor inflection up. We're going to hear on the call whether they're going to use the they have used sheep us internally, and what kind of guidance that they give. So that's really Microsoft. But the two biggest shaka are actually Google Cloud growth and AWS growth. Both have accelerated quite a bit. That shows that their cloud strategy right now is doing slightly better than MICROSOFTS.
And Love though, come on in here again. We've got a great Roundtiller Love the Bloomberg Tech co host. That was Honor Rna Bloomberg Intelligence senior analyst who we just heard from. In in a minute, we're going to bring in Ron Westfall Hyperframe Research, Infrastructure and Networking VP and practice leader ed what's on your radar?
How hard it is to follow? Anna rag, I gave you a little time, little time? Yeah, look I go with it. Logical that AWS growth Amazon Web Services is the number one position in cloud computing. Twenty eight percent is the highest rate of growth for about fifteen quarters. That's that's the severity of the performance. So going into this, I'm trying to get a common thread between Alphabet, the
parent of Google AWS, and Microsoft. We looked for the growth rates of cloud because the swing factor in the market has been cap to expect. Investors have been willing to look at the capital expenditures even if those numbers get bigger. But in return, they want to see outperformance in cloud computing growth driven by AI and also they want to see some kind of forward guidance boosted forward guidance, and so in these statements we have the numbers on
growth of cloud. We don't have a capital expenditures figure for AWS that's any different from prior guidance. Meta does have a new capital expenditures figure, and I would just suggest we go to that next.
Well, that's exactly where I want to go. One hundred and twenty five to one hundred and forty five billion dollars increase from a prior range of one hundred and fifteen to one hundred and thirty five billion dollars. As a result, we're seeing shares of Meta platforms carrilled down by six point three percent.
Yeah. Kurt Wagner, a tech reporter on the Metal Live blog. From the release, we anticipate twenty twenty six capex, including those principal payments on finance leases, to be in the range of that one twenty five to one forty five billion, So increase from that range, just to reiterate, So that's a problem in.
Well, let's just do the calculation right, So we know that capex is going up, what is the outlook for growth?
Revenue in the current period?
Second quarter will be fifty eight billion to sixty one billion dollars. Consensus was fifty nine point six billion. That is right in line. And we went into this knowing based on a summary of the cell side and of the buy side that if the CAPEX numbers get higher, they want to see growth also going up. In terms of guidance going forward, and you know this second quarter guide on Meta sales, it's very in line with expectation.
I want to bring in Ron Westfall, Hyperframe Research, Infrastructure and Networking VP and practice leader. I want to stay on what Ed was talking about Ron, and that's Meta Meta's CAPEX estimate. We're also seeing some headlines. Headwinds in the EU and US could significantly impact results. The company
sees scrutiny on youth related issues as well. Shares of Meta platforms right now down about five and a half percent, but it does seem like more important is CAPEX number hen and twenty five hundred and forty five billion increase from that prior range of one hundred and fifteen two one hundred and thirty five billion dollars. What are your thoughts?
Sure, I like to start with looking at the bigger picture. I would see Meta as certainly benefiting overall despite the recent dip from the overall market expectations that is the total addressable market for Meta alongside the other of the major four that are coming out this week, is a total addressable market of up to eleven trillion dollars, and so I think that's going to definitely enable Meta as well as the other players to continue with the upswing
and capex. And yes, that's causing concern, but I think what we're looking at is when you look at the group burnings, they're projected to grow twenty percent year over year, and that is outpacing the overall S and P five
hundred fourteen point five percent growth expectation. And so as a result, I'm anticipating that Meta will definitely be looking pretty solid over the course of the year and further out, because not only is it upping its CAPEX expenditures, however, it's also I think benefiting from trading at a relatively conservative forward pe ratio of the lower to mid twenties, as you know that fluctuates on a daily basis, and they're definitely benefiting from the fact that they're monetizing AI
more rapidly than some of the other Max seven thanks to their social platforms, certainly including Facebook as well as Instagram and so I think that's something that will definitely be something to definitely look at as we find out what Meta is really going to do for the rest of the year.
All right, folks, I want to go over to Amazon. A couple of things also popping up, fifty nine point three billion year year rise and purchase of property and equipment. They say the increase in purchases reflect investment in AI. They also say, ed fred free cash flow fil to one point two billion for trailing twelve months. Come on back in lot though.
Yeah, so this is exactly what I've got on my screen. So the story financially for each company is slightly different. If we focus on Amazon, it's spending so much on AI infrastructure that trailing twelvemonth three cash flow basically falls from twenty six billion dollars to one point two billion dollars. Operating cash flow rises. Amazon's are complicated business, right, you know, AWS largely accounts for most of operating income, but increasingly,
like ADS is important on the e commerce side. And I'm hoping that that Ana Rag will kind of talk a little bit about that this is kind of a classics building cycle signal though, and to this point, and you know, maybe one of the other guys and weigh in on this. I'm just but a journalist, but you know, the market has been really sanguine about negative free cash flow or the prospect of it. You know that it's
not something that everyone's like freaked out over. Basically, that's a very simple way of putting it.
Ron come on back in Ron westfall of hyperframe. How do you see it in terms of what Amazon's up to. I like that idea and this concept of you've got to spend to build for future revenue, But how do you see it?
I think AWS is definitely benefiting Amazon's overall prospects, and I think that's underlined by the fact that the AWSAI revenue run rate has already gone past fifteen billion dollars, and that's linking to the fact that as growth is projected to accelerate toward twenty five point six percent following its landmark one hundred billion dollar infrastructure deal with Anthropic.
So clearly that's something that I think will create not only positive perception, but I think it's giving you know, the hard numbers that AWS needs to continue with these
cap asks expansions. Also, I think it's important to note that AWS capacity is selling out immediately, and so that's supported by a massive two hundred and forty four billion dollar contracted backlog, as well as high margin revenue from its trainium and graviton chips, and these I think are offset of concerns around the large margin pressure from the two hundred billion dollar billion planned and capital expenditures for
the year. And so you take this together, I think net positive is what Amazon is going to bring to the table. It's definitely, I think something that applies to all the hyperscalers, and Amazon I think is definitely positioned to improve on its performance. As a result, we've got.
To go to Alphabet, which is up three and a half percent here in the aftermarket.
Yeah. The company reported quarterly revenue and profited beat projections. It was fueled by strong growth in its cloud computing unit. Its signaled that the Internet Giant's unprecedented investments in AI infrastructure are beginning to pay off. The company said that first quarter revenue excluding those partner payouts, was ninety four point seven billion dollars. That compares to the ninety one
point six billion dollars expected on average by analysts. That's according to data compiled by Bloomberg.
All right, still with us is Ed Lulow, a Bloomberg Tech co host Bloomberg TV, and our Agrana Bloomberg Intelligence Senior technology analyst, Ed. As we continue to go through these numbers and results, where do you want to go?
Yeah?
I think you guys have done a masterful job.
You know, the the cloud growth rate, if we put medatus to one side for a minute, is really interesting because all things are relative. So you know, Ana rag pointed out if you if you focus on Google cloud sixty three percent growth. You know, AI is for them also boosting search, right, and they had this kind of
dual benefit, which is really interesting. They reported a metric that we've kind of not skipped over, but there's so much news it gets buried, which is that Gemini for Enterprise, in other words, their AI tool that businesses pay for saw its active user base grow forty percent quarter on quarter.
So there was a big jump in that. And the reason I flagged.
That as important is that that's the standard to which we hold open ai right and andthropic. You know, but the markets of earlier this week were spooked by the Wall Street Journal report of Open AI missing its own internal metrics. One of them was the active user base of chat GPT, which isn't universally an enterprise product, it's consumer. But I find that to be really interesting, and you know, it shows tangible growth on the other side of people
actually using this. This the Gemini tool in the real world, you know, right, which.
We all keep talking about. We need to see, right to kind of justify the spend. All right, We're going to continue with Ed Ludlow and of course Ron Westfall in just a moment. As we mentioned, Alphabet is now up about five point eight percent here in the aftermarket. We're looking at Amazon down about two point four percent, Meta a decline of five point three percent, and then we've also got Microsoft out with its results and we're
seeing this one. It's been under pressure in the aftermarket right now, Tim about one point eight percent.
Hey, we were talking about meta platforms. We have spoken quite a bit about Amazon, Qualcom and more. I want to bring Alphabet to our attention, six point six percent higher. In the after hours, the company reported quarterly revenue and profit that beat projections. It was fueled by strong growth in its cloud computing unit. That cloud computing unit reported sales of twenty billion dollars with a quote meaningful acceleration in growth driven by demand for its AI software and infrastructure.
I want to bring it back in Ed Ludlow, Bloomberg Tech co host and Ron Westfall hyper frame research, infrastructure networking VP and a practice leader. Ron, I want to start with you in alphabet because we are seeing share surge in the after hours. The company reported earnings per share of five dollars and eleven cents, compared with Wall Street's two dollars and sixty two per share estimate. The
cloud growth to certainly top of mind. We should remind everybody that you know, it competes against AWS and Microsoft's Azure. This report, though, what sticks out to you?
Yeah, I think it's pointing to that Google is making more in roads in terms of capturing you know, mind share amongst the hyper scale competition. And I think what we saw is that when you look at Google Cloud specifically and reporting over twenty billion revenue, well that basically beat out the analyst estimates, and that is I think a remarkable sixty three percent you overhear growth rate, and
so that by itself is congratulatory. And when you look further down, it's like, okay, why are the cloud margins expanding to nearly thirty percent, up from just twenty percent six months ago. I think what is resonating is that the company is making the right moves. Certainly, it's acquisition of wiz, which closed just last month and has already become integrated. It's making Google Cloud a more attractive choice for enterprises that are requiring sovereign and highly secure AI environments.
And that is certainly a hot topic in our conversations, and that is sovereign AI is something that will underpin confidence and the ability of enterprises to adopt the hyper scale AI services and so forth. And certainly that comes to inferencing, and that is, you know, ensuring that their propriety, proprietary data never falls into the wrong hands, that you know, it's not going to be something that will be exposed
out in the public cloud at part of it. And I think what's also important is that what we saw at Google Cloud Next just you know, last week, is that when it comes to uh, you know, the TPU silicon, Google is coming up with innovative ways to augment the NVIDIA capable at least they have in house certainly they use their TPUs to train their own models in house, that includes a Gemini for example. But I think they're smart about how they're now diversifying their AI chip sets
to stand out. That is, now they have TPU what they're calling t eight that is that is a specific for training only, but now they also have the TPU eight I, which is for inferencing. And so what we're seeing is a fundamental shift more toward inferencing. That is, you know, the AI capabilities being used in play, that is, the ability to use handsets and other capabilities that take what has already been trained and actually apply to real
world scenarios. And so as a result, I think this is why Alphabet is definitely making inroads with winning more cloud business. And if you look at Alphabet overall, I think also it's import to note that when it comes to diversifying revenue streams that their way MO unit is definitely making it would say waves. So that is that's already scaling up to one million rides and so that I think is something that will definitely continue the revenue generating capabilities moving forward.
Well, we're definitely seeing it. Jine in the aftermarket now up about six point two percent here. I mean listen, to be fair, Alphabet's definitely been hustling when it comes to AI. Amazon right now though down about one point nine percent. We want to get a little bit more on Amazon. And with that, Matt Day, Bloomberg News Technology reporter follows the company joining us right now. Matt, walk us through what you think is important for our audience.
You can go back to what Jeff Bezos said was important, his favorite metric, free cash flow. If you look at Amazon the last twelve months, it's not zero, but it's pretty close to zero, and it's a whole lot closer than it was last year. So the reason for that, obviously, it's AI spending. It's data centers, a whole lot of property and equipment that there's spend money on these days. The cloud revenue is good, it's going up. It beat expectations.
But just a reminder for Amazon investors, they're spending a whole lot to get a seat at this table.
Is the spending paying off?
It looks like it if you if you roll things back a few months ago, folks were really concerned about Amazon's position in cloud, and we're just talked about Google, Microsoft, was also really hot, and they kind of looked like they might be sort of the third place cloud of
the AI era. To boil it down. Since then, they've done these big mechad deals with open Ai, with Anthropic, and it looks like some of that is starting to filter into their at their cloud results, they've accelerated the last couple of quarters.
Anything you're scratching your head over here, Matt a little.
The market reaction, honestly, is they beat on so many things that if it feels like a lot of these big tech names been going between Capex freak out to you know, OAI is the future and in quarter quarter, it's kind of hard to tell what folks are stinking their teeth into.
Is the yeah, oh, go ahead, Carol, No, go ahead. The investing that Amazon has done in open Ai and Anthropic, it's committed that they'll h to spend more than one hundred billion dollars on AWS services in the coming years
between those two. How do investors look at that, because it's do they look at it as venture like the company's making a bet, like a venture capitalist bet, or does it look like the companies trying, you know, guaranteeing business by making these investments in exchange for AWS usage.
I mean, some of it is is clearly buying business a little bit right, making sure that you've got entitlement relationship with open AI that they want to spend. But I think there are some long term questions. You know, Oracle has seen versions of this. Microsoft have seen this where you know, investors start to discount. Okay, Sam Maltman has pledged to spend you know, one trillion dollars plus all over the place. How much of that is going
to materialize? Right? So now Amazon's in a position where they've definitely got a slice of that alongside anthropic spending. So the question is, you know, when does that materialize, Where do you start to put that up on the calendar, and how much of a sure thing does that become.
I want to bring back Ron Westfall, Hyperframe Research, Infrastructure Networking,
a VPN practice leader. He has been with us for about an hour as the slew of earnings came in at thanks to ED, we know at seventy one seconds for all of these companies to report, we're still you know, breaking our making our way through all of these I weigh in on Amazon, what we've heard from Matt what we've heard from Ed as well, because this is a company where you know, certainly AWS is the star, but it also and that's what moves the needle, but it
also gives us a good idea of what Americans are paying and how American consumer spending is holding up, even though that's not really what moves the stock.
It's amazing. I think when you're looking at Okay, what is Amazon doing? That is you know, continuing these organizations as well as consumers to you know, use their certainly their services. And I think when he snapshot for example AWS, that is, you know, the enterprises are using Amazon bedrock, and that is underlined by their trainingum to Inferentia chipsets. And if you look at that, that chipset business alone is reached twenty billion dollars in annualize revenue run rate.
And so I think this is pointing to that Amazon is making the right bets across its entire portfolio. It's not just about Okay, how can we improve you know, the Amazon experience, but also how can AWS meet business needs on across the board basis. And I think, yeah, when it comes to fundamentals, when we're looking at Amazon, Amazon advertising. He's on track to exceed seventy billion dollars
in revenue just this year. And that is, you know, tied to the fact that there's so much high intent purchase data information that they're able to leverage that it's improving their capability. So that is again underlying why AI is making a difference in terms of their business model. And I think it's also reflected in what we talked about in.
Terms of the metas.
Hey, guys, something I think will improve.
No, this is all good stuff, really good stuff. We could go on and on. Hey, we've got about two minutes before we have to wrap up this segment. I'm just curious for each of you, what do you think was kind of the most important headline or narrative from this drop of for results. And Matt, let me start with you. I know Amazon's your jams, so maybe go there or go anywhere there's a good spot.
I mean, it's that Amazon's got a seat at the table, right They've got all the big models are on a WS and so now you know, there was a first leg of this AI competition was you know, who's going to add the exclusive tie up? This one looks like you can get most just about anything anywhere. So who's got the better mouse trapping cloud? Looking forward to seeing how that transplarers?
All right, Ron, your turn, come on in here. Just the most important bit of info you got from any of these companies that reported after the bell.
And you can't say, ah, yeah, I think they both.
No, they're demonstrating the runways there that this capex is all justified, and I think we're seeing that it's having an impact already. We're seeing that the companies that have integrated AI to their operations are seeing cash flow margin expansion it roughly twice the global average. So yes, it is now making a difference. The ROI is there and we're seeing the results.
All right, good stuff, Ron, Thank you so much. Ed, come on in, same thing for you. I know you kind of love all these It's hard to have a favorite child here. But I'm just curious, as you look at these headlines and you're thinking about your show tomorrow, is there a narrative a headline that really just sticks with you?
Yeah, I think you know.
Across all four and it includes Meadow, which is a slightly different company. AI demand is running ahead of their ability to supply. That's not a new sentence or idea. People have been saying that for a little while, and so across four it's interesting to see those that they believe and those that they don't. This isn't profound selling in Meta's case or in Amazon's case. It's not severe buying in alphabets are either or you know. So I think the idea is proof points, you know, like tangible
new pieces of data. Google gave many of them, and investors have kind of cheered that. But it's about AI in the real world, and that might sound abstract, but that's what the market's been asking for.
Okay, well, speaking of AI and the real world, just push us ahead to tomorrow afternoon when we hear from Apple, Tim Cook, John Turnus. What's thirty seconds on what you expect from Apple.
This is the first earnings and earnings call since Tim Cook announced he's stepped down September one, and John Turnus becomes CEO September first, and I think whatever Apple says about handsets or software that it will just be about those two people.
All right, unbelievable sixty minutes on here on Bloomberg Business Weekday, guys, Thank you so much, so appreciate our own ed Ludlow, co host of Bloomberg Tech. Catch him on TV eleven am to twelve noon Monday through Friday, Wall Street Time, Ron Westfall, thank you so much for all that time Hyperframe Research, Infrastructure, Networking VP and practice leader out there in the Twin Cities, and of course out in Seattle watching Amazon, our own Matt Day, Bloomberg News technology reporter.
Incredible stuff.