Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hide in New York and ever Low in Sent Francisco.
This is Bloomberg Tech coming up, Qualcom and arm out with their earnings. Will break them down with the two CEOs, Christiano Amon and Rene haass.
Plas Alphabet's capex mic drop record spending plans hit the stock despite strong earnings.
And Bitcoin falls below seventy thousand US dollars for the first time since late twenty twenty four. Will break down the negative momentum impacting crypto.
Markets and that negative momentum is affecting markets more broadly. At the moment, check out the nasak off by one point four percent. We are training the lowest since November. Right now at the moment ed we are seeing pain across the board. And that's why we've got to go to our Bloombost Cross Asset reporter to say we can dig into all of these moves across asset classes with Alexander Zamaneva, who's with us now, I don't know where to look at the moment, everything is in the red.
It has been a really ugly week, Caroline. We have obviously seen corrections in tech over the last three years since the launch of chat GPT, but nothing has rivaled the sheer magnitude of this sell off that we're seeing in the sector across various assets, hitting both stock and credit market. Software stocks, of course, have been at the forefront of this. They are down about fifteen percent this week and twenty nine percent from their all time highs
in September. It's also important to note that this selloff has triggered a number of extreme levels. From a technical perspective. The share of software stocks at over sold levels eclipsed seventy percent yesterday. That is an all time high. In the broader tech sector that shares about forty five percent, also a record and another barometer of how painful it
has been. The I Shares Expanded Tech Software ETV that is ticker IGV compared to the S and P five hundred is the most over sold that it has ever been, and of course that risk off sentiment is spreading today. What we've seen so far is that it has really been focused on tech, so up until today, it's really been a rotation out of tech and in two other pockets of the market, and now we're really seeing the sell off broad and out. Looking at the S and P five hundred, it is down one point two percent
right now. The Dow Jones Industrial Average, which up until today has been kind of shielded from this, is now down one point two percent. Also, the SNP equal weight yesterday, for example, was up zero point nine percent even as the broader market sold off. It is down again today, So really risk off across the board. And we have
to talk of course about Bitcoin. It fell below sixty eight thousand today, which is the lowest since November twenty twenty four, down about forty five percent from it's October high. Also big news today that crypto exchange Gemini plans to cut about twenty five percent of its workforce, so really seeing the pain of that.
Bloomberg's Alexandre just Semonova with the macro picture at the index level, this is what matters when it comes to technology earnings.
Caroline called it the mic drop moment.
Alphabet parent of Google with a Capex forecast for the fiscal year of one hundred and eighty five billion dollars. The street had forecast just shy of one hundred and twenty billion dollars. That's a bit of a delta. The stockdown almost five percent, on track for its biggest drop since May of last year, a big number to digest earnings. Also in the chip sector, Qualcomm down almost eight percent. It gave a forecast for the current period eleven billion
dollars in sales at the top end. How much better would that have been were it not for the impact of what's happening in memory chips right now?
In the memory market, ARMED.
Similarly, but actually it is up five percentage points and it's accelerated throughout the session. Sales and fiscal fourth quarter will be about one point four to seven billion dollars, just ahead of consensus. How are they managing what's happening in the memory shortage and when is they going to transition from the handset story to the data center story. Let's talk through it. ARM CEO Rene Husk joins us. Now, Rene, good morning, thank you for joining us. That there is
a lot going on. Let's get the sort of handset, smartphone and memory situation out of the way. If that's okay, You know clearly this is impacting outlook for the smartphone market across this calendar year.
How do you think it showed.
Up in the earnings that you posted and would it have been slightly better if the situation were different?
Yeah, good morning, Good morning, ed. So, first off, the quarter was amazing for us. We had not only record revenue, but record royalties one point two to four billion in revenue, nearly seven hundred and forty million dollars in royalties, and if you just stack that up, that's twenty seven percent year on year. Our data center business is exploding. We were up one hundred percent year on year, probably north of one hundred percent year on year. So to your question, no,
the memory situation isn't really impacting arms so directly. And you might ask, well why is that? Well, Number one, we are a spread across a lot of different businesses. As I said, the data center business is increasingly growing for us, and we think in a few years it'll be our largest business.
Secondly, our products are used across the.
Board, so we tend to see in memory shortages is the bottom end of the stack starts to get impacted, and that's actually lower royalty rates for us.
So as a result, we don't get impacted very much.
So no, short answer is no impact this quarter, and we raised our guidance for the next quarter because, as I said, we're just not seeing that kind of impact, but I'm not denying that it's there. But for the ARMED business, the impact is quite minimal.
Renee, thank you for that.
Data center royalty revenue grown one hundred percent year on year, As you outlined, I get the same question for you from everyone's sell side through the buyside, which has give me a specific year.
Market on the calendar.
When ARM goes from being handset to data center and it accounts for more of your business, is that selection points clear on your calendar?
At least it's very clear, And that's why in the earnings call, I said in a few years. As you know, we don't typically provide forward guidance on an annual basis, but we have a line of a site that says we see it coming and it's probably coming sooner than we had thought. And the reason for that is the data center growth. But if you click below that, why is data center growing so rapidly, it is the a presence of ARM CPUs in the data center. We're now
over fifty percent market share with the hyperscalers. Secondly, the CPUs that are being used are using more arm CPUs inside the chip one hundred and ninety two cores for example inside a graviton chip going from ninety six VERA and video VERA going from seventy two cores on grace now to eighty eight. So what does that mean. That means more cores, means more royalties and high growth rate. Well,
why are there more cores? When you think about agentic AI and everything associated with agents moving workloads across systems, managing workflows, et cetera, et cetera. That's the kind of work only CPUs can do. So to your question, while we're not giving a date, we can see it and it's coming sooner than we had thought, even probably six to nine months ago.
And probably on the back of when you look at an alphabet increasing its capital expenditure by another well potentially one hundred and eighty five billion dollars renee. Is the AI bubble this worry about AI infrastructure build out a thing of the past to you, or there are still somewhat bottleneck issues that you're concerned about.
Yeah, so it's a great observation, Caroline, and yes, there's huge growth in Google's capex not all of that one hundred and eighty billion dollars as coming does of course, but what does that say. We continue to see investments in the data center, whether it's what Meta had announced or Microsoft announced and now Google Alphabet that exceed what people had originally thought was even possible even a couple
of years ago. If you go back to when we announced the Stargate initiative in January of twenty twenty four, five hundred billion dollars over a number of years, people looked at those numbers and said, how is that even possible? Now eighteen months later, it looks quite quite credible. So bottom line is we are seeing such an investment because the AI opportunity, the way I like to think about it,
is kind of the final frontier relative technology. When you think about what could be on beyond AI, it's really hard to imagine. So also the fact that AI has really had very little penetration, let's say, into large enterprise or into our health systems or things around drug discovery.
So there's a long, long runway.
I think people are a little nervous about it as decidedly so because we've not seen it before, right we've not seen the order of magnitude we're talking about, so it's somewhat natural for you to look at it and say, well, gravity's got to hit it sometime. But then if you're a little intellectually look at it and say, my gosh, is AI going to be something that will change and trainansform how everything is done well? Of course, and then
there's going to be an investment to support that. And that's what we're saying, investment.
To support that. We don't mention stargate. That immediately makes me think of Massa. And you were clear on the call yesterday that you've spoken to him. You don't think Soft bangk is in any way going to sell down at stake in ARM. But how much is that an overhang in the longer term and how much actually do you want to see more free float of your stock?
Well, I have one very large shareholder who I talked to quite frequently who loves ARM and he's very long on ARM. So he has no intention to sell at all. And I shouldn't even say anytime soon. I don't know when that would be. Quite frankly, we do talk about it. He said he's got no interest in selling how that impacts the float and etc. You know, that's not something candidly I spend a whole lot of bandwidth thinking about. But he's very, very long on ARM because he sees
the enormous opportunity that we have. And if you think about what we've done since we've gone public, Carol, and in the Flaw of twenty twenty three, we told the world we'd be growing at twenty five percent year on year for two three years, and people didn't believe it was possible. Here we are now a couple of years later, and we're beyond what we told investors during our roadshow, and things are even stronger than they were at their time.
So as a result, he sees it.
He sees probably more of the data than anyone does, and that's why he's not selling RAN now.
I want to go back to CPU.
January twenty sixth, Bloomberg speaks to Nvidia CEO Jensen Wang, and he speaks for the first time about selling to the market via CPU as a standalone. And that seems critically important because if you think about the pipeline for Blackwell and Rubin, right, those are GPUs coded in on based architecture and those building they don't want to sort of have to cross pollinate x eighty six based platforms with their ARM based GPUs. It seemed to be really substantive.
You explain how much of a boost that was for ARM and whether this idea that the VIA CPU goes into the market as a standalone product changes the trajectory at all, because at the same time a video talks up about how much content it owns proportionally in the overall system.
Just take it and run with it, please, Yeah, you know, so, first off, thrilled to see Jensen say that they're a great partner and Vera is a great product.
And as I mentioned earlier, VERA has gone from.
Has gone now eighty eight CPUs inside it CPU cores from seventy two. So why is that a really good thing for us going forward? Well, primarily because when you think about the data centers and how they're evolving to from what is general purpose compute moving to AI compute a mix of training and inference, and those inference workloads are urgentic. That's right down the center of the plate for what the CPU not only is good at, but can only do, can only do. So what that means
is inside the data center. You're going to start to see movement towards a homogeneous type of structure where people would love to have the ARM stack running almost everything. It's just easier from a maintenance standpoint, it's easier from an upgrade standpoint, it's easier from a cost standpoint. So and also the flexibility it can affords you can build
a tremendously efficient custom system based on ARM. The Vera Reuben platform AD compared to Grace Blackwell uses six x the number of CPUs and that's when you look at the storage, the DPU, the offload. That's a huge increase. So yes, selling loose veras that's a great thing. We're super happy to see that.
Briefly, Renee, you have such a bird side perspective because you're working with Nvidia, but also you're working with open Ai. It was reported potentially was looking with you at your technology to be working with its own custom ship with Broadcom. You've got Meta looking at custom chips you of course, how do you see this evolving?
Yeah, I have a lucky job.
I get to work with just about everybody in the industry across the planet, whether it's in the fab foundry area, whether it is a chip company, whether it's an OEM, whether it's a software provider. We work and talk to everyone because ARM is just so pervasive. The common theme we see is continued investment in AI, and not just at the data center. It's trying to figure out how do you run those AI workloads everywhere?
How do you run them in wearables, how.
Do you continue to make them more efficient in a smartphone or a PC, or in physical AI, whether it's autonomous driving and or robotics. So we're involved in all the conversations and the common theme is heavy, heavy investment. And one of the challenges that we see in the chip world around this is, as you know, it takes a couple of years to build a chip, the IP that we developed that goes into the chips a couple
maybe a couple of years in before it. Trying to predict what the architectures look like four years after the chip has been designed where the AI models are going is really very tricky. That lends itself also though, very well to ARM because we are programmable, we are flexible, and we are low power, meaning that wherever the chips drop no pun intended, we should be in a very good position to be able to drive those workloads.
I'm cia n A has with the broader perspective. We thank you for it. Now coming up, we got more earnings to talk about. Alphabet's results. Expectations for Amazon just coming thick and fast, folks.
As a bitty bag tech.
Record spending by cloud providers, Well, it's raining on the parade.
Of big tech earnings.
Following Alphabet's results last night, Let's talk it through with Ioko Yoshioka, who say with Wealth Enhancement Group. Ioko, it looked at one point after the announcement yesterday that we were going the way of Meta that even though Capex was going up, we were celebrating the AI rewards and the revenue boost, and then we went more the way of Microsoft and we were worrying about the said to the Kapex are you selling on this?
No, Caroline, We're not selling on this. You know, these companies are still high quality companies and they're still growing very quickly. I think it's just an adjustment from a valuation standpoint in terms of what are these companies worth over the long term, how much longer are they going to be spending at these levels, because the issue for investors is really just the sort of collapse in free cash flow that we, you know, have been just grown
accustomed to. These these companies used to return so much of that free cash flow to shareholders and now it's being spent for investment for good reason, and over the long term this should.
Help them grow.
However, it just means that the investor kind of gets put to the to the side for a little bit.
Are you worried in any way about the free cash flow the alphabet is perhaps taking a hit on because from what we could understand from the numbers, in fact, the becoming ever more efficient. The marginison is being supported because they're to be integrated. They're able to cash in on growing cloud and focus on compute much more than rivals per se.
Absolutely, I mean with you know, the cloud business growing forty eight percent, well beyond what investors were expecting at around thirty percent. If that continues, the investment that they're doing is justified, and I think investors will eventually reward them for that. It's just in the meantime. Meantime just
recalibrating really what you want to pay. And the momentum had been so strong for Alphabet going into earnings that there's just a little bit of a you know, take profit attitude going on in marketing.
Right, Okay, let's bring back the capital expended. Just chart, wait for some TV magic. It's going to appear any second. And then you look at that and you go, my goodness, you know it is Caro called it mic drop moment.
It is shocking.
But what you said a moment ago, Google Cloud growing at forty eight percent, Like the whole Microsoft anxiety was that Azure was off by a percentage point? Why is Alphabet not getting the credit for the Google Cloud growth? And everyone's just staring at that chart.
It's a great question.
I mean, you know, Microsoft missed by zero point four percent. You know they posted thirty nine percent instead of thirty nine point four, and you know, yet Google really sort of blew it out of the water. And you know, I really feel like it's that focus on that CAPAC spend in twenty twenty six more so than anything else.
It's great that we're seeing that growth on the cloud for both Microsoft and for Alphabet, but really it's that spend in order to get those growth numbers, I think is what is giving investors a little pause.
Amazon's down four percent.
How much is that just anxiety about what they will won't need to say tonight?
Absolutely?
I think I'll lot of it has to do with the anxiety about what they'll say tonight and how much investors might be off or the street might be off. In terms of the estimate for twenty twenty six CAPEX for Amazon, I think investors are anticipating about one hundred and twenty five billion in spend, which is up twenty two percent or so from twenty twenty five. And so we'll have to see if Amazon decides to spend a little bit more.
Yoka Yoshoka, Wealth Enhancement Group, really good summary of what's going on in the mag seven.
Thank you so much for coming up.
AI tools keep coming for the enterprise software market, But will they be the existential threat that investors fit?
We've got more on that next. This is been Big Tech.
And it's introducing a new platform to help companies deploy AI agents more easily and pave the way for broader adoption among corporate customers. The new product called Frontier, and iizations to build and manage those AI tools so that each agent has appropriate guardrails and data access ed.
What have you got?
Speaking of the enterprise shakeup caused by AI anthropics, legal plug in, for its clawed cowork, may not be as devastating a blow to legal solutions providers as according to research from John Davies at Bloomberg Intelligence, who joins us now at John as someone that's suffered through years of law school and was born to two attorneys.
I enjoyed reading it.
Your conclusion is that Claude Legal is insufficiently expert to mount a challenge. Just dig a bit deeper into your thesis.
Absolutely, and hello.
I think the key thing is that all these generic tools don't have access to the vast googles of data which the very specialized tools which the established companies have access to, which it built up really over many decades, even centuries. In some cases, they're not easily replicable sets of data. It's a lot of shoe leather involved. You've got to visit vast numbers of courthouses, and it's not simply a question of digitizing the information.
You've also got to put it in context.
So the companies we're talking about here are West Law and Lexus and Nexus each employ many hundreds of legal professionals and have done for a very long time, and all that information is caught up inside their products. And that's the thing which I think the generic tools won't have access to don't have access to, and therefore they're more likely to make mistakes, to hallucinate and to lead
people astray. And you can't really work this stuff out from first principles because sometimes the law defies logic.
It's not really like a science problem.
Here defies logic.
It's interesting John that in many ways.
Look Claude Cowork had said that in a statement, they said, look, you still need a human in the loop. We're not suggesting this to just run wildly free. And particularly we had an investor on yesterday, Ude Charuvu who's from Harding Loafner, who is saying the thing with the Lexus and Nexus though, is that it is a point solution, it's not a platform solution. And that's why people have the anxiety that
might be knocked out in such a way. What more could we see from these AI developments that might give you pause about Alexus, Nexus or whoever's being competed against.
I think if they, if they do somehow manage to gain access to the data, and clearly, you know, while it's expensive to replicate, these companies have a vast amount of money, so that could be could be one angle, and I guess I guess the other one is if in some way it's a bit like proving a negative but if they can somehow prove that they're no longer hallucinating, then and they can they can point to where they don't have the knowledge and say, okay, beyond this point
you need as a lawyer to go and do the work yourself. But here is the kind of basic tool set that could become quite a useful product which could be sold, perhaps at a much lower cost than the number of providers have at the moment. But it really seems like quite a stretch, and there's an enormous amount of experience built into the use of the existing products people have been using in the decades, much.
Like they have various tools in financial markets.
And your notes point out they've also been enthusiastic adoptors of AI themselves, so have been major innovating too. John Davies, Bloomberg Intelligence is a great note. Thanks for bringing it to us. Meanwhile, coming up, put it all about crypto increasingly under pressure. We'll break down what's behind these moves. Next, this is Bloomberg Tech.
Welcome back to Bloomberg Tech.
In the last thirty minutes or so, actually markets have come off session lows and as that one hundred is down nine tenths of a percent, had been down about one point eight percent and trading at its lowest level since November. We'll keep an eye out on the Bloomberg terminal. I'm not really sure what the news flow is. Maybe this is just to kind of market sentiment thing that's going on. Earnings though, of course, are a big factor in it. We talked about Alphabet, which itself is on
track for its worst day since May. After the bell, we get Amazon, and Amazon's down four percent. Right, you don't usually see a name that's going to report earnings after the bell decline with that conviction, usually you're treading water. But because Alphabet, the parent of Google, posted such a monster capital expenditures forecast for this year one hundred and eighty five billion dollars, maybe there's some read through their cara.
Maybe the market's like, oh wow, what's Amazon going to say? Like what do we thinks coming here? And of course we're bracing.
Yeah, we're bracing. Meanwhile, well, if you're bracing for crypto to be falling further, you got that delivered. We're off by six percent today, we're below the important seventy thousand dollars level, and that negative momentum is just accelerating across cryptocurrency is written large.
Look, it's driven maybe.
In part by vanishing marginal demand amid this week's volatility in other areas tech equities, precious metals. The most cryptove reporter Ioshan joins us, Now we are is this people selling crypto to cover losses elsewhere?
Is it more fundamental than that?
Right now, it feels like there's some more fundamental issues within the cryptoal industry style based on what I'm talking like everyone I'm talking to in the crypto industry, there's a crisis face right, Like you know digital digital currencies like promise of like we build this like internet like Internet money, and that's kind of disappearing because like when prices are going down of assi class that's supposed to be going up, that's like really hard to sell the moment.
It's a store of value.
It yes, losing faith.
Yeah, not just not just bicoin as a digital goal. Also other cryptocurrencies, right, like you see like Etherian Solana. All these blockchains and crypto are supposed to sort of build like rebuild a Wall Street and rebuild fintech and Neil Bank and whatsoever. But that's not really happen right now. Even if they're happening, as we're seeing some adoption from Wall Street for example, right we start institutes are getting
into the space, but that's also not affecting prices. I think that's a bigger puzzle for the industry to resolve at the moment.
I think you wrote a really excellent summary using data in the chart that actually, for all the hype around bitcoin, if you compare to other asset classes, it has lagged, not just in the short term but on a longer term basis.
Just explain the reporting.
I think the issue is that, like you know, Bitcoin is supposed to be like the digital gold, but what's happening again, as I just mentioned to Caroline, that is like, you know, we have this digital gold that's price is supposed to go up, but we are seeing that gold and solar prices are going up, but meanwhile Bitcoin is selling. That's the issue of crypto right, like you don't have
a fundamental happening right now. That's like proving what like all the bitcoin fans are trying to sell to the market at the moment.
Right the most motion, thank you very much.
Another source of pain right now software debt, and just for weeks, nearly eighteen billion dollars in loans has been pushed into distressed territory, the highest level since October twenty twenty two. For more, Bloomberg Americans finance edits a Sally Bakeworld joins a Sally. There's enough anxiety and concern in the market right now as software before we even started
writing about the debt pile. But it's the smart thing to do explain what's at issue here, right and in that kind of milestone that I just read out.
So I think the big question here for debt investors, for the market more broadly, is how much of this sell off in loans that are tied to software is justified. Now,
that's the big question that we can get to. But in the meantime, it is providing a lot of potential opportunities for investors who are scaring the market looking for companies that are sort of good software loans I that can withstand and maybe even benefit from AI, versus those that are likely to be made obsolete or have their revenue severely stressed by AI.
So that's sort of the big question.
And what is interesting is the sort of spirited defense that some of the loan buying community, some of the
biggest loan buyers, have come out with. Aries said some interesting things on its earnings call that you know, there are different kinds of kinds of companies and a lot of them will benefit from AI, and that AI cannot actually replicate replicate a database, It cannot replicate proprietary data, and so if you build a software portfolio around elements like that, you can actually build a portfolio that's resistant to AI and actually will benefit from it.
In fact, Mike Arraghetti join previous earlier shows. Today the CEO of ARES talking about people are not really understanding how senior and safe a lot of these loans are as well. Is this a case of sort of throwing the baby out with the bath water, or when are we starting to potentially see people getting more nuanced on which loans are exposed, which software names aren't adopting AI fast enough sally.
Companies like aries like blue Al, They've all and tom O, Bravo, who you know who buy in the space or borrow heavily to fund in this space. They're probably all going through all of their portfolios right now to look at this. You know that there are AI companies, there are software companies out there that generate billions of dollars of revenue, and they're actually showing earnings that are accelerating, not declining, So you know, they're using words sort of like it's
not monolithic. You don't just have this sort of very binary situation, and you do have to look at the nuances of some of the companies there. But there's some really interesting dynamics going on in the loan market. For example,
clos collateralized loan obligations. They're big buyers of these loans and they're only they have limits on what they can hold, so they may become sort of fource sellers of loans that do slip into distress set territory based on this sell off, and again that could pose a lot of buying opportunities which investors have to look through and sort of sort out the good from the bad as.
It were, So interesting how John Z's however, Apollos sort of talked about questioning if the real risk is if software is dead, and they'd cut their exposure by half. In twenty twenty five, we'll see how this continues to ripple through the market. Sally Beekwell with the cross asset
AI read across. Let's talk about now SpaceX holding meetings with banks from outside the US for its IPO, including from Europe and other regions, and that's what According to sources, the meetings took place before SpaceX announced that it would acquire Xai, but the combined company is still expected to hold the IPO later this year.
Ed Okay, coming up.
Snap Paid subscribers rise, but the company sees a dip in daily active users, particularly in America. The more in those numbers. Next down nine percent. This is Bloomberg Tech.
Time.
Now for talking tech. Let's go through some more of the earnings. First up, Sony reporting a twenty two percent rise in profit over the holiday quarter, and it said it secured sufficient memory supply for its key PlayStation five business this year.
The company did caution, however.
The profitability of the wider games and networking division worsened due to rising hardware costs, plus a video partner on Hi saw revenue time thirty five point five percent in January to the equivalent of twenty three billion US dollars. The tai One based company is one of the key players in the AI hardware industry and is benefiting from the billions being spent on the gear needed to train
and operate the models. And shares of Peloton a down after the fitness company provided a weaker than expected revenue.
Forecast for the fiscal third quarter.
Investors have been hoping the release of AI powered treadmills, bikes, and other new products would put some muscle into Peloton's turnaround efforts.
Like that character pardon your puns.
Meanwhile, let's continue this theme of earnings and those that are falling on the back of it. Snap down more than eight percent amid a drop in daily active users here in the United States. Still, the company actually posted better than expected holiday quarter sales and actually paid subscrires. We're rising twenty four million, So let's break it down.
Mitter Smiley Emake to senior analysts with us, it's many pronged conversation we can have about Snap, But first and foremost why are we seeing a decline in users in the United States.
Yeah, it's a great question.
I mean, I think Snapchat definitely has kind of a stickiness problem. I feel like we see people often age out of it as they grow older, and then we're also seeing reports that younger people are not adopting it. You know, I'm talking jen now for really young people aren't adopting it at the same rate that gen z might have.
So they're kind of in this tough spot.
It's interesting we see a lot of the other social platforms like Facebook, for instance, they're really trying to court young users, and I feel like Snapchat in some ways has the opposite issue, where it sort of has a hold on this specific generation of young people, but when you go above and below that, it is struggling a bit more and I think that is why we're seeing some of those falls.
And interestingly, you go back to November when we had the previous earnings numbers and the shares skyrocketed, not just a back of numbers, but on the back of a deal they were meant to be had four hundred million dollars in Mikestro cash and Acty with Perplexity, a partnership to AI.
Any news on.
That, Yeah, I think everyone was kind of hoping this earnings call, which shed a bit more late on this deal and what's going on there. Of course, they ended up saying that it's been delayed. They didn't provide a ton of detail. And it's interesting because when the deal
was first announced, it was certainly welcomed by investors. I think they were excited to kind of see a new revenue stream for Snapchat and also just see how snap is kind of looking into how it wants to compete in the broader AI race, and so to see not really any updates there is concerning and it also just raises a lot of questions people already had around, you know, sort of why Perplexity in the first place, Why was the deal only for one year, How is it going
to fit into you know, how is Perplexity going to fit into Snapchat's broader interface and whatnot.
So more questions and answers at this point. For sure, I'm.
Trying to understand where Snap fits in the world. It's the first time he uses decline since twenty eighteen. I haven't been on Snap for a very long time, and twenty eighteen I certainly wasn't that.
Sounds like a worrying signal.
Right, you know, you're talking about the different revenue streams, But at the end of the day, what is snap and what does the shrinking user base suggest to you MINDA Yeah.
I mean I think it's a fair question, and I think that partly explains why we are seeing the shrinking user base. I think a lot of users just aren't seeing the value in it that they used to, especially as we see Instagram, TikTok now YouTube really really gains team and just really take a chip away a time spent.
That's something we see in our own forecast at E Marketer.
I mean, we are seeing time spent on Snapchat decline year over year, at least in the US, and we're seeing.
Them try to, you know, try to fix that. Really.
That's why they're investing in things like games, and we're seeing they introduced other features last year that are really just meant to get people keep people on the app longer.
But it is tricky, you know.
Snapchat is really distinct and the social media landscape, which in some ways I think has worked to its advantage, but also has heard it because it really kind of seems to struggle to keep up with the broader trends unfolding in the broader landscape.
You know, it's easy to try and compare and contrast with Meta, right, particularly in the glasses context. You know, Meta has a generative AI tool, Meta AI and the glasses have been the surprise package, the modus operandi by which people interface with that with that AI tool. Can you see the same story as snap with the glasses and what the point of them will be ultimately?
Yeah, I think, you know, personally, I'm pretty I'm pretty much a skeptic when it comes to the smart glasses space in general. I just think it's you know, it still remains really niche, and I think there's still a lot of uncertainty around to what extent it will ever hit mass adoption. And I think, but you know, even say it does take off, people do end up wanting
these glasses. Snapchat is still in a tough position. I mean, it is competing with pretty much all the all the major tech giants who are investing in this space, who are pouring tons of resources in this space. They all have a lot more money than Snapchat. So yeah, it's interesting to see them. Bet on it. It makes sense with their history of augmented reality and whatnot, but I think they're in a tough position going forward in that space.
Minder Smiley a v marketer, Thank you very much. Now coming up, we speak with Qualcomm CEO Christiano Amon. That conversation's next. This is Bloomberg Tech. Let's focus in on Qualcom shares right now down about eight percent, on track for their biggest drop since last summer. At one point in the session, we were down eleven percent, on track
for the biggest drop since March of twenty twenty. The world's largest maker of smartphone processors issued a lackluster revenue forecast, raising some concerns that memory supply constraints could push prices higher, which in turn with weigh on the handset demand. Joining us to discuss is Christiana Ammon quil Comco. Christiano A good morning. Thank you for becoming a morning bow Tech.
That I give you that what's happening in memory is completely outside of your control, right, but the forecast of the current period of sales up to eleven billion dollars, I suppose one way of looking at it is how much better would that have been were the market not so constrained by the supply of memory right now, but also the pricing pressure that that supply deficit puts in place.
Yeah, look, it's a very interesting situation. You know, in one hand, I'm incredibly happy with the business, like everything is going well. Demand, the strong macroeconomic indicators are good. Demand for HANC it is strong. We have seen we had like a record quarter in Q one. We saw all of our customers reporting sell true data better than expectations.
But then the industry is now defined by the availability the memory that is is going to be available for consumer electronics, and it creates, you know, a sudden change in how OEMs look at their build plan and they say, look, I have to size the size of the market not based on demand, but the memory that I can get for consumer electronics. And that one makes it like this unique period there's a go ahead.
Let me drop it.
But you know, within that market there are some specific interesting case studies. Right the premium segment is good, like from a demand side, particularly in China. So usually like in any hardware environment where your supply constrained but demand is high, like that's a good thing. And increasingly, like think about the content in the phone that you provide. How can you kind of navigate this to your advantage?
Yes, and that's a great observation.
That's why I think there's a lot of I think a lot of unnecessary I think speculation. Right now, here's what's going to happen. We saw this with Covid. OEM is the first thing they're going to do. They're going to prioritize premium and high tier, you know, because those are more resilient I think.
To price increases.
They are we are going to see probably adjustment in prices on hences and because you know demand it's strong, it is very likely that the premium and the high tier is going to be less impacted than the mass tier on phones. And we have seen that the premi teer continue to expand regardless, regardless over the several years, the premi teer is expanding, and we're more concentrated on the premium and the high tier.
So your your theory is one hundred percent correct.
All that happened is OEM's had thinking about a particular size of the year that got resized by the memory availability. They're adjusting their build plans and we're going to see how this is going to play out in the next few quarters. That's that's really the story. The good thing is demand as high.
So the second quarter chip sales guidance was what worried people, But third quarter, fourth quarter, it's going to play out over that time frame.
Do you think it's one thing that I carefully worded. I think during our earnings call, I said the memory availability in pricing will be the defining factor for the size of the hands and market. And we talk about the size of hands and market because we have visibility whole market because of our licensing business. But now we're going to see how this play out. And I'm a little hesitant to make a very definitive prediction on how this is going to play out in Q three and Q.
Four, But the pandemic was a good proxy.
When we have something like that and we have a semiconductor shortage, we saw the PREMI teer has been more resilient, and you know, we're going to be working with our customers as they move the roadmap to kind of those type of devices.
And now you control the controllables, and those controllables have been diversification in many ways. This speaks to why you've been focusing in on new areas of growth, whether it be autos or we connected devices, whether it be the future of robotics, whether of course of BAI Christiana, how much can you accelerate that to make up for the handset issues.
Look, we we you know, it's not hopefully it's not lost on people that we had another record in automotive. We had actually a record in the company in Q one, and not only we continue to be satisfied with the direction the company is going on diversification, we had a new things like robotics, for example, we had a record in automotive. A couple of things that happen in the
quarter that are very very important. One is we announce a broad partnership of Volkswagen Group across all the brands to build you know, the Snapdragon digital chassis for Volkswagen. We saw the launch of the Raw four or one of the top selling cars in the world for digital cockpit, and IoT is growing. We we enter robotics in a short period of time with some major customers, so we're
excited about that. The fundamentals of the company are actually incredible, and we just navigate to another phone cycle.
Christiano second consecutive quarter where automotive is above a billion dollars. And I remember over years us discussing what was a backlog in automotive. Right, apply that story and that experience to your hopes in data center. You know, you've told us when this will happen and who it will happen with first, But how do you see that translating from your order backlog to revenue growth and hitting milestones like a billion dollar quarter.
Yes, we we.
We restated the data center will start showing up in fiscal twenty seven. We have been talking for a while that the data center is going to change. It's going to go from the current focus on training into inference. We have been saying, I think before what's popular, that a different architecture will be required. I think the post GPU architecture interesting. That the Grock development is kind of validating that, and we're getting a lot of good feedback.
We have a new architecture, including for memory. We don't need HBM, which is causing all of this memory situation, and it's we have been very encouraged by the traction we're getting. So it's going to be material in twenty seven, and you know, we're going to provide a lot of details in ourcoming investor event.
Just broadly, how are you thinking about the actual consumer right now as well, Christiana?
Just briefly, yes, so phone is a great proxy for consumer microeconomic indicators are strong. Consumer demand very strong. And one of the things I said in the earnings called sell true data on phones, and we have visibility because of our licensing business exceeded all expectations.
Phones are getting off the shelf.
Well, it's not a demand issue, it's just a memory supply issue.
We'll come Seo, Cristiano Aman, We so appreciate you joining on this day after the earnings.
Stay well.
Meanwhile, that does it for another extraordinary edition at Bloomberg Tech. There is so much market volatility for earnings coming think and fast. We've got Amazon for tomorrow ed.
Yeah, so Alphabet has the mic drop of one hundred and eighty five billion dollar CAPEX forecast. Is Amazon judged by the same metric and they communicate that differently. Recap those conversations on podcasts, two important CEO interviews.
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