Cisco Slips and Walmart Rises Post-Earnings

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This is Bloomberg Technology with Caroline Hyde and Ed lud Love.

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This is Bloomberg Technology coming up.

Full earnings coverage ahead. We've got Cisco. It's sliding because analysts dub its outlook conservative.

We'll hear from the CFO Plust.

We dig into Walmart's results as the commerce giant posts a big jump in its online business.

Only We're just sitting down with the CEO of hot Ai search startup Perplexity to discuss growing competition in the search space and a new set of board advisors in the here and then now is to dig in to

Do you think hi creator the honesty. Look, it's clearly it's a good risk one day. I think there's fundamental reasons for that. You know, of course there's a discussion

Disease reach record highs.

As Sebahad dead in San Francisco. Looking at all the index level energy so far yere today, right and you look at the NAZAQ one hundred s and P five hundred. I can't believe we showed the Dow Jones Industrial average and the top of this program today. But I think what I'm trying to find out is if there's any commonality in the direction of the market and strip out the mag seven, because I know that that's top of

So I think those single technous they are clearly still dominating the market.

They're driving a lot.

But what you have seen from the most recent earning season is that this good performance is spreading out to other parts of the economy.

Other sectors have done pretty well. So if that can be maintained, and particularly if you.

Do actually start adding in those ratee puts towards the last part of the year, that will help the story, particularly for certain segments of the market. I mean, even if you just thinking about small caps, they need those rate cuts. But overall this is a broad good story.

What about the valuations of well, they're fewer than seven now when they're magnificent, But more broadly, let's call it chip stocks, let's call it the winning formula of Nvidia, of Well, Alphabet, even Apple getting some lift again.

Now, are those valuations out of whack.

It's interesting.

I was traveling across the US last week and I was with investors everywhere, and that was a question that still keeps coming up, is you know, do we think of this as overvalued and is a time for a correction? So we would definitely push back on that. Yes, it's a little bit frothy, but do we make comparisons to the dot com bubble?

Absolutely not. These earnings are somewhat believable, maybe a.

Little bit frothy, as I said, but there's actually something fundamental in those valuations.

So it doesn't really concern us.

Inevitably with this kind of market, when there's so much good news priced in, there's always going to be risk of a bit of a pullback, But we look at the tech story as a long term play, and from a long term play, we still it's still one of our favored areas of the market.

It talks about the good news that's priced in. Seema.

I don't want to bring the mood down, but something we've been talking a lot about recently on the show is the relationship between the US and China, whether it's constructive or otherwise. Is that a headwind you're factoring in right now, particularly when you look at the technology sector, so Ineffe, it's.

Something that we do to consider, especially when you're going into the presidential election, where China is going to be top of the news as we get close from closer to that point. So it is something we consider, but I think it's very much on a single stock name basis, because there's some which are going to be particularly exposed

That they are a little bit less at risk than we would have considered.

But certainly the geopolitics is something we always have to watch, but it's not yet at that point where it's changing up perspective on positivity about the sector.

I like that we go global because look, it's not just US stocks have done particularly well of late Japanese stocks on a tear, European stocks at Sandraman and at a record as well. Where are you liking other geographies right now?

Yeah, And it's a great question because at the moment, I mean, at least for the last couple of weeks, what we've been challenged with in the market is that although I think a lot of people continue to believe in use exceptionalism, they have been confounded by the fact that the rat debate continues. We're not very sure about where that's going. When you think about the growth story, you're suddenly the economic downside surprises in the US, and

So if you think about Europe, which.

Is the perennial disappointment, but now you're seeing that we know what the ECB is going to do, we have I think pretty much good confidence that there's going to be cut in June, and then thereafter we know that we're starting to see a cyclical economic upside upside surprise, not an acceleration, but at least we're seeing some good news come through, and then valuations more attractive.

So if you look across Europe, that's fairly good news.

And even in China, as I said, given where sentiment was, you couldn't get much worse than that. And now with the economic data seeing some signs of brightness, that is looking like a more attractive part of the market too.

A Seema, you're a regular on Bloomberg Television. You're a regular here on Bloomberg Technology away from the market, So I wanted to ask you about how you're using AI at work or at home. You know we're going to be talking later about AI driven search. What have you been up to in the world of AI.

Look, I mean, I think any company out there has to be embracing AI and trying to figure out where they can.

Use it in any parts of working home.

So from a work perspective, of course, trying to adopt AI into our models, trying to analyze the companies from a single sector, single stock perspective. That is going to be the easiest way to try and do full analysis and get a full complete level of information.

So that is something that we're trying to bring into work.

I have some more children. AI is the stuff that they talk about it at school. As well, so you can see that this is everywhere. It's not just dominated by the finance news.

Princevill Asset Management, Chief Global Strategy as semashark Ai everything all the time and markets.

What more can you ask for? On Bloombo Technology.

Coming up on the show, we're going to hear from the Cisco CFO Scott Heron is the company's slides and its outlook is being seen as conservative as coming up next, Stick with us because we'll be right back.

This is Bloombo Technology.

Got to talk.

Cisco because it's been quite the volatile trade after hours and in today's training. We're now off by one point seven percent, moving lower well despite the forecast actually showing a return of customer spending of networking gear, analysts dubbing the outlook perhaps a little conservative. Wiliam had got the chance to discuss all of the results earlier with Cisco CFO Scott Heron Tickulasen.

So this was our fiscal third quarter that we announced. Then normally I wouldn't guide fiscal twenty five until we get to the fourth quarter earnings call. But you know, we just acquired Splunk. So the big news for us is we acquired Splunk. We got a closed mid quarter, and I think the analysts are all trying to adjust now to what does the combined company look like.

So what I wanted to do is kind of.

Get ahead of that with fiscal twenty five and without doing a fulsome guide, just get enough information out there so that they could narrow down their expectations for fiscal twenty five conservative. I think it's a first view of

Is the right set of numbers.

So it sounds like you're not saying no, but making the point that it's very early. I mean, twenty twenty five, who knows what will happen. But let's talk a little bit more about inventory.

You make the point that it feels like you've turned a corner when it comes to a lot of those supply chain disruptions, and what does that say about corporate spending. A lot of people looked at this report and said, there's screenshoots there, there's a bit of an uptick.

That's the case. Where is that coming from? What kind of customers are we seeing that demand from?

You know, what's really interesting for us? And of course we've got Splunk added in for just half a quarter. So if you net that out and look at what the core business apples to Apple's basis, looks like. Actually orders were flat overall, which is an improvement from where it's been as customers have been really trying to implement the huge amount of product that we shipped out to them in three consecutive quarters.

We see that ending.

We see them getting through implementing all of the product that we ship to them. By about the end of this fiscal quarter, which for US will end at the end of July, and as that happens, we're already starting to see demand return and product orders flat, I think encouragingly within that overall flat growth in security orders, growth in collaboration orders, but most importantly growth in data center networking orders, which has been a headwind for some time,

So some tailwinds there, and it took me through questions, but we.

Have to talk about AI because of course a detail that caught a lot of people's eyes was the fact that you have about a billion dollars on AI infrastructure orders in sight. And I guess my question there is is that for a particular line of business, where would that spending actually be taking.

Place within Cisco.

Yeah, it's a great question. That's not a new data point we put that out there. It's in the back end. So if you think of how these AI models get trained and then get used, which is called inferencing. It's in the back end, so it's networking and optics in the back end. A lot of that going to the big, large public clouds that you'd expect in the Tier two AI infrastructure build out is what drives them.

Cisco CFO Scott Heron giving Frankly a classic class on being a CFO for a technology company. Let's get some clarity on Cisco It's technology and its endings. Efering Bloombergsy and King. There was a lot of CFO speaking on pick it for us and explain the quarter that's just gone.

Yeah, I think the best way to view it is through the lens of what happened with the share price. We had an initial spike yesterday and after hours right exactly and after hours trading, and today we're sort of down moderately a little bit more sober.

What really happened and Scott kind.

Of alluded to that was the expectation for orders was that they would be down possibly as much as ten percent, maybe even.

More in the quarter that they just reported came in.

It's kind of okay, maybe up slightly when you include this new acquisition. So there was like, oh, things aren't as bad as we had feared. Kind of reaction that happened in the after hours. Then when we go through the numbers and listen to the call, we've seen a reaction this morning which is more like, yeah, okay, it's okay. But bearing in mind they've just done this massive acquisition, maybe they're not getting quite the kick from that.

Yeah, I mean, we have to take Splunk into consideration here, and there's gonna be new role of president for example, in But what about some of the other partnerships natural M and A. But you know, they had this big fanfare of an end video deal and partnership has that bringing in any much needed revenue streams.

Well that is still in the early day, so we don't really know. But you know, back to the conversation that was had with Scott and the big question of this billion dollar of AI related orders. Obviously Cisco wants to go to the party too at the moment though, and there were a lot of questions on the call yesterday, well, what exactly do you mean by a billion dollars?

Who's giving you these orders?

How sure are you that these are real orders and not just an aspirational goal, and there was a lot of to and fro with a leadership team about you know what that really means and whether this is real and really the bottom line is that investors aren't quite yet ready to let Cisco go into that AI party.

I and you broke a story literally as we started the show and before you walked on set about ampare the chip company teaming up with to make AI technology AI infrastructure. I didn't know that Qualcom was in that line of business. I do now give us the details.

Yeah, I mean what's going on. There is Umpair, who we had at our tech conference flash It. They're an armed server chip company trying to get into all of the big hyperscalers. They're teaming up with Qualcomm to bring in this accelerator to try to basically bring a cheaper alternative to the kind of thing that Nvidia is selling for many tens.

Of thousands of dollars. We'll see how well that goes. We'll see how well that performs.

I mean, we sat with Renee James, both you and I individually at various points throughout that event last week. I and she has a brother fresh air in many ways to the area of computing and the startup side of things. But it looks like there's kind of a trifecta going on. They can't just do it alone. They've got to be working whether super Micro's involved, super Microcomputer alongside Qualcom, alongside a pair. But the key refrain coming from everyone is energy right efficiency.

Here, Yeah, as you as you point out, Reno is pretty fired up about this, and she's making a point which many agree, which is we cannot carry on like this. The cost of AI in terms of power, in terms of money is just too great right now. We need technology answers to that problem. We need more efficient chips, we need cheaper chips, and she's trying to offer that her company as a solution to that problem.

Well, certainly managing to come out to the market with a combination offering at the moment, Ian, it's brilliant that you got to break it for us.

Thank you, Blue Meg's Ian King. Time now for talking tech.

First up, Microsoft is said to have asked hundreds of its China based AI staff to consider relocating.

That's all, according to the Wall Street Journal.

Now, the tech giant has asked its employees based in China to move to a different country, perhaps US, but Ireland, Australia and New Zealand. It's all a growing tensions between the US and China on technology. Those who choose not to transfer could remain working in the country for now. Plus, Michael Varie's investment firm is doubling down on its Chinese

Real revenue real earnings.

They came in at four point four billion for the three months ending in March. Meanwhile, JD dot Com reported well better than expected seven percent rise in revenue, this after the Beijing based retailer actually cut prices ramped up customer perks to counter us on that competition. JD dot COM's results are seen as one of the key bellweathers of Chinese consumption, which look a struggle to recover since the country lifted COVID curbs.

Yeah, there's going to be a big global e commerce theme in today's show because Walmart's also out with its results this morning. It showed a twenty two percent jump year over year in its online business. This is e commerce growth, principally in the US. Let's get out to Bloomberg's Jay one Com who covers Walmart for US, and that's the story.

But what's behind it?

What's Walmart been doing with its digital presence?

Yeah, so e commerce has been a really important business for Walmart. It's you know, definitely one of the factors of growth. And what they've been doing is, you know, really adding capabilities like delivering orders super early in the morning. They're also working to deliver their items faster so you know, the same day, you know, or in a couple of hours.

They're also improving what.

The company calls a perfect order, which refers to different metrics like you know, when orders arrive or how complete the orders are, and they've been working on improving all of those things while cutting down costs associated with delivery.

The numbers are phenomenal.

And when you're looking at what four billion items in the last twelve months delivered by in the same day or next day, that's comparable to Amazon. What's also comparable to Amazon is some of the teething problems that they have back in the day when they started having third party sellers. Look, I was just sat down in makeup and make a part of saying, look, have you seen that there's like some fake handbags being sold on Walmart?

Now, I had an.

Issue with my son's gift arriving during Christmas because it was from a third party vendor and that bender didn't seem to live up to the expectations.

What's going on in terms of teething issues.

So Marketplace has also been one of the factors of growth for Walmart, and it's been trying to you know, add sellers and increase the number of items that it sells on on Marketplace in the US and abroad. And a huge benefit of that business is the fact that you know, the company can really grow the range of items that it selves online and they you know, see a lot of opportunities with general merchandise in particular. So you know, this morning they talked about items like pets

Business compared to selling items in stores.

And so you know we'll see the different puts in takes that they'll you know, test start with that business for.

Now, and thing's looking very strong. Thank you so much, Joy and Kang on All Things warm Up. Welcome back to Blue Bag Technology and Karin Hide in New York.

And I'm id love Low in San Francisco.

But for now, there's news from Perplexity, the developer of an AI based search engine platform. It's creating brand new advice board that will include Mikhale Parakin, the former head of Microsoft being researched, of course, Rich Minor, Google Advisor, Android co founder, and Emil Michael, former.

Chief business officer over al Uber.

Here for more on this news is Perplexity CEO Aravin Shunibas. So we have this new set of advisors. I'm going to start with the obvious. Having your look to the pictures. You're four male co founders and you've got three men on your advisory board. You are a man of color. I don't need you to preach to the converted. Whereas the women, where's a diversity.

So one of our board directors Cacile Hem from IVP, she's a woman. We also have another board observer and board 'ski from Anya who's also a woman. And Susan Wojitski, farmer, YouTube CEOs and investor in US and she's also very helpful in advice. So we have a lot of people from many different diverse backgrounds helping us right now.

Okay, so one female board member, one observer, one investor that you name. That doesn't feel like a lot, but I get it. You feel this diversity enough. Many would quibble with that, but let's talk about what these three people bring from a across the board, across experience.

What is it that you need right now in terms of advice.

Yeah, So as a startup, we've been fortunate to scale up so much in such a short period of time. The next step for us is to really think hard about strategy, both in terms of search, how to build our own index and how to like scale it up to like even more users, and in terms of how our mobile and distribution strategy. It was right, So search is all about distribution. They all say soon their purchases CEO Google because he really cracked the distribution code to Chrome.

And in terms of mobile, I would say it was too aggressive.

Yeah, we'll try to tone it down, sure, but.

Look, startups have to be aggressive in terms of competing against incumbents who already have like billion users or Opening I has one hundred million users.

We don't have that today, so we have to be it's on us to do that.

And it requires a good mobile strategy to a great mobile experience, so rich from Android it would be very helpful there. And of course the core thing is search, and no one better than Mikail who used to head bing. He rolled out being chat co pilot and was previously doing all the search infrastructure for yandex. So he's going to advise us on building a lot of in house infrastructure for us.

Aravin. Thanks.

Coming back on the program, I've got to ask you about Google Io and the real emphasis frankly that Google put on integration of AI into search specifically, it's like this.

Idea of AI overviews.

Right, you know, you search for something, it gives you a text answer as opposed to link. A lot of people want to know what is Aravin Shinabas's reaction to what you saw out a Google IO.

That's the same reaction to what I saw last year when they called it Search Generative Experience. It's just the exact same thing called it is a different name. There's literally no change to it. And sure it's being rolled out to more people, but it's not going to be rolled out for.

Every single query you type on Google.

And the most important thing when someone uses a product is they should know what's.

Going to happen.

When people go to Google, they hate the latency being bad. They expect instant and the links to render. So the moment you start making people wonder what's going to happen, whether that's going to be a streaming of tokens for an answer, or is this going to be links, or whether it's going to be ads, or whether it's going to be some other panels and a UI that's so cluttered with all these elements at one face versus a

Aravin, Do you have any information or even just sense that this was Google responding directly to perplexity, pulsa and possible right? And how do you plan to respond yourself?

But being a better product by actually working on categories of searches that they're definitely going to be not incentivized to, for example, shopping. If it's still like I'm on the SGE experiment already, and when I still type on shoes, I don't get any of the AI overviews. I just get all the Google Shopping clutter UI, so I still

At you to click on them.

There's just no incentive for them to put an AI overview for those querries and like lose their revenue share.

What's interesting though, is you actually are built in some ways. You use claw three, you also use open aiyes underlying large language model. And there's rumors that open aie got to come out with some sort of search. That worry a little bit more.

Not really though.

Their strategy is cleaner than what Google is doing. They're not actually just changing chat GPT to put in search. They're building out a separate product. But by building out a separate product, you're competing for users from you know, in the same way as like Google rolling out Gemini or Bard. You're not actually taking advantage of the existing

It's competition for talent, it is competition for dollars because this is not a cheap process to be answering all our questions, are you fundraising again?

As rumors that you are are there rumors?

I mean, I don't know.

Look, all I'll say is that we are trying to be as efficient as possible and not going and raising like a billion dollar round or something like that. I would say, yes, I agree with you, this is going to be expensive. We would have to fundraise again at some point. But our goal is to get our revenue in good shape so that as we scale in terms of a number of people, that's a good revenue per employee and we're a healthy business too.

Aravins, Welcome to Bloomberg Technology. I'm glad that you're in the studio with us today. When we say that you're coming on the show, we get a lot of questions from the audience. Unsurprisingly, there are many perplexity users out there right. What always strikes me is how simple the questions are. They just want to know from you, what your daily active user metrics are, the latest on the user base geographically where these people are.

Yeah, so we actually care more about the number of queries we get every single day. That's a better metric for us because that's more directly tied to expanding our index and getting our models in better shape. So we are pretty close to ten million daily queries of this fine somewhere in the late single digits of millions, So that's actually a really good progress from where we started.

Aravin I wrote on Monday in The Tech Daily that consolidations coming among AI startups essentially, have you held talks with a bigger technology company about the potential of being acquired or do you see yourselves as an acquirer of some of the other smaller names or teams that are out there.

Yeah, so I agree with you on the broader point of consolidation. It's already happening. Like a lot of us startups that used to be there no longer there, and like the fewer ones that exist continue to keep getting more and more powerful in terms of user based or market share and APIs. So we've had interests in the past, I'm not going to deny that. And we've also looked into acquiring a few smaller startups, and in fact we've made one active hire already, like a company called spell Wise,

An arab intion Abatis pop CEO, thank you for coming back on the show in Bluebot Technology and joining.

Us at the New York studio. Appreciate it.

Sticking with AI, the Senates by Partners in AI working Group, which is led by Majority leader Chuck Schumer, finally released its highly anticipated roadmap yesterday to provide guidance on congressional efforts to harness AI's benefits but mitigate potential risks. The blueprint recommends thirty two billion dollars in annual government spending to support non defense AI research and development efforts, in part to stay ahead of rivals like China.

Caroline long time coming, a fur bit of criticism from some lobby years over there. But now we're going to take the conversation forward and actually maybe divert into the world of web three.

For a moment.

Segey Nazarrov's gonna be with US co found and Chainlink to discuss the trend in asset tokenizations from New York, where we're also looking at meta shares, talking of all things social media. Look, we're currently under pressure just by one point four percent, and the day interesting risk off tone given that the rest of the market is pushing higher measure being suspected by the EU of hooking kids

Let's talk crypto an assets ognization with chain Link, a company that connects blockchains and brings real world data on chain and which now works with the likes of BNP, Bank of America and Citybanking. Just in the last few moments has had some pretty significant breaking news. Sergey Nazarov is the co founder of chain Link and joins US now let's start with that news.

DTCC.

You have a new arrangement with them, a new relationship, explain it to us.

Yes, yeah, sure.

So we've been working with them for some time now on how to create high quality on chain digital assets that are driven by data. And so the report that's just come out today shows how data can flow into assets on chain and prove critical things about the assets on an ongoing basis, which is very different from how the current financial system works, where the ownership of an asset doesn't give you access to data that becomes your responsibility.

And others were part of the pilot with them.

And I think what this shows is that real world asset to organization is taking a more mainstream institutional interest level, especially the real world assets that are backed by data, because the big difference here is that the asset can have critical information about it continually updated, and the holder of the asset or the buyer of the asset doesn't have to search for that data and they don't need to have any special expertise. And also the data can

It's interesting, of course, because there are many vocal critics of some of the actual coins and investment opportunities when it comes to crypto, but they've always all together now said, but we like the underlying technology. We like blockchain CEO Jamie Diamond for example of JP Morgan. How does this disintermediate longer term financial institute?

I think financial institutions have a fundamental role to play in terms of compliance and in terms of allowing users to use digital asset products in a compliant way, in relation to their identity, in relation to ways that regulators and csds and central banks find acceptable. So I don't think banks are going away. I don't think things like the DTCC are going away. I don't think central banks

But in my opinion, if you want to go.

To the hundreds of trillions that will be the blockchain format, you need the global c as these the central banks, the big commercial banks, to basically adopt the technology for its value. And that's what this collaboration with the DTCC has been about, is providing that technical value in ways that benefits both the traditional financial system and consumers and the Web three blockchain community.

This is about, you, say, accelo, to the investment fund tokenization movement, which particular real world assets we're ultimately going to see being put forward on the blockchain. First, it's already being done, already being experimented with. But for the audience out there who also happen to be training equities or in a commodity space, maybe they're upond syndicate desk. Where are they going to see their assets at HIT first?

So it's actually going to vary by institution and what institutions are good at tokenizing or good at turning into securities.

There are basically two categories.

There are the core financial pro products of the current financial system, treasuries, money market funds, bonds. These are being tokenized by bigger institutions, and the benefits of tokenizing them are around collateral management, and they're around diversifying your on chain holdings so that you're not just holding cryptocurrencies on chain, you're holding treasuries on chain. Then you have what are called assets at the edges. These are assets that have

Estate, and carbon credits. So again, Nazrov co founder Chainling, great to have you on the show. Thank you.

So.

Service Now is beefing up, It's increasing its workforce, its expanding in enterprise software.

How pretty simple. The hiring from a larger.

Competitor salesforce me to Brodie Ford is here with a very well read story today because everyone loves to hear about people pinching people from workplaces, and this is.

What's going on.

We all love a rivalry, The tech industry loves a rivalry, and we're seeing one here. Service Now is a very fast growing software company. A lot of other software companies have seen this real almost oppressive environment. They've managed to keep growing quick. They're expanding into new product categories. Where does that leave them? Edging up? Into Salesforce, right, and so what do you do? You poach a couple hundred people.

You know.

Emily Changs can be speaking to Benioff later today. I'm speaking to Bill McDermott on Monday.

Yeah.

I wonder if it come I wonder if it comes up. Put that aside.

Put that aside for a second. Competition is not new in this place, this town. Is it salaries?

Is it stock? How they're doing it?

Yeah, I would say part of it is that there's been disruption at Salesforce, right, I mean they had the big layoffs a little over a year ago. A lot of it I hear is that salespeople got laid off over there. Service Now said hey, we actually need more salespeople with your kind of experience or come on over. But it's not at the executive level too, right, I mean Service Now's new chief marketing officer came from Salesforce, so I imagine there are some pretty aggressive offers happening here,

I love that Phil Patterson is giving you the quote of basically that imitation is the best form of flattery. So it's quite flattering, honestly that they happen to aspire to be more like us.

The larger company doesn't usually want to engage with this kind of thing because then it validates it, right, So yeah, they they kind of poo poo to the competition.

Oh well, we'll see how they handle some of the questions. Yeah, Emily, and from our own end a little bit later, Bridie Ford always great writing, great explaining. He love having on Meanwhile, that does it for this edition of BlueBag Technology.

Yet what an addition of BlueBag Technology was check out the pod. Lots of chat about the pod all the time, you know exactly where to find it. One day left in this fantastic week. Keep with us from San Francisco and New York. This is Bloomberg Technology,