Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hide in New York and Vla Lowe in San Francisco.
This is Bloomberg Tech coming up.
Alphabet, Microsoft and Meta all outward results showing heavy spending on AI and data center construction.
Plus Roebrock CEO David Zooki joins us to discuss the company's earnings as users and jumping, but so are costs.
And we'll break down what was said during the meeting between President Trump and China's Jugen King, what wasn't discussed and vidiots, blackweld chips.
Let's turn our attention to these markets.
And after record high, after record high, we take a breather. Then that's that one hundred HUNDERD pressure off by almost a percentage point. This as we think about the FED maybe not baking in that December cut as much as the market had anticipated.
You add to that some concerns about AI spending. You add to that a.
China US trade deton for a year that many felt were priced in ed and we just come down some across all asset classes. But you're looking under what's in the ecty moves yep.
Let's get through the top stories, and Video is down two percent. Blackwell, its latest processor was not discussed in the meeting between President Trump ands Ujenping. Later in the show out to South Korea to get the details of that meeting. Then there's earnings Microsoft thirty nine percent top line growth in Azure, the cloud computing unit, the only unit that mattered, but the stock selling off high bar for investors.
Alphabet is the one that's higher.
It told us what its capital expenditures are this year, but it also told us about growth a real number on AI or generatorve AI related products. Then Meta, it is the biggest decliner and the biggest drag capital expenditure concern. Then this morning, coming to market with an up to six part bond sale maturities ranging five to forty years. The forty year note one point four percent over treasury
above treasuries. There's a lot to discuss in Meta's capital requirements and then what it has to show for it. Let's do that with Brent. Phil Jeffrey's analyst joins us. Right now, let's start with Meta. That's kind of the equation, right, Okay, Capital expenditures will be higher next year than they were this year. Then what give us more, give us some longer term outlook. There just wasn't a formal guidance. Is that what spooked the market.
Yeah, Meta was just in a period of being really comfortable. Zuck had been very comfortable. The company had executed, they had invested, and they were harvesting those investments, and now they're going back into invest mode. So I think at the beginning of the year, advertisers were seeing that Meta was more sheltered because they didn't know what Google was going to do with AI, and we didn't know what
was going to happen to TikTok. And then halfway through the year, everyone realized, hey, Google's got their act together and AI, and we know that TikTok now has more of the foundation. So I think, as I call it, there's less.
Of a tailwind for Meta.
It's not a headwind, but it's less of a tailwind that they had at the beginning of the year when you talk to advertisers, and I think what Zuck said last night on the call was the investments in AI are paying off, and they just need more of them because everything they built, they felt like they had overbuilt and they sold out of what they built.
Yeah, so they have to build more and so yeah.
It doesn't have anything to do with the fundamental position. It's are we going to see margin compression and then when does that return come back? But we already know that. Then they have a return. We've saw with Microsoft. They've given this margin expansion even in the face of AI. So this whole concept that AI doesn't pay off is silly, you see, because but the.
Stock move is so big that we question.
Yes, we see Zuck on the call saying, look, I'm worried about underinvesting. We hear once again from Susan Lee that they're going to make notable investments. Everyone new Capex is going to go up into the right. Why is there such an air pocket on this stage?
You think, well, I think the outperformance of Google, I think you have money chasing weren't a momentum market. I mean, look at yesterday before any year, Needs everything and applications went down aing, and AI went straight up in infrastructure. So if you have Capex going this high, the pushback is why do I invest in internet and software right now? I should be invested in energy and land, and it all the enabling infrastructure, and the infrastructure goes up every day.
Look at all the energy names, they're all ripping. And so I think there's a common pattern with tech investors right now.
They're just broader.
Investors are moving their investments to other categories, and then they're chasing momentum. It's just the market's so narrow and you're seeing this. So there was nothing that was fundamentally offline. They're making any investment. They've done this before. How many times have we seen mat to do this and then return the stock goes hired. They're going to do thirty dollars running to power, put a thirty multiple on it.
You're nine hundred dollars on the stock. It's a buy on the pullback, Brent.
The name of momentum is Alphabet and Google. Right, they gave us two data points cap too Expenditch is ninety one billion to ninety three billion dollars. But revenue from products that are built on Google's generaty of AI models grew more than two hundred percent from a year earlier. That second part your reaction to it.
I mean AI is working, and I think the fear that investors have had is what happens when I go from a world of search to AI. And I think Google is showing they can do the high wire act.
Very well between search to AI.
Everyone thought search would implode in the last two quarters, they beat the search number.
This quarter they accelerated their search number. So what they're seeing is that search can be anywhere. It can be inside AI, can be in their own.
Engine, it could be a YouTube, it could be across different properties. And I think what what Google is demonstrating. And we've said this kind of for a while. They have better AI underneath the hood than they're articulating, and it's now coming out.
You can see it.
We said, you know, they kind of pulled up.
To the I race, you know, on a Toyota Camry body that they have the biggest engine and they pop the hood and everyone's like, whoa, this is incredible. And so I think everyone was realizing. When you look at Gemini, I mean we ran bench tests, it's almost equivalent to chet GPT. And then you look at the breadth of their offering. And again remember they own the world's Internet data, so you need data users in capital for AI to work, and they have all of those almost better than Meta, Microsoft,
many of the others. They have more data on anything in the world than anyone.
So I think they're proving that this engine's working.
The body didn't look great, you know, they're upgrading the body, but the engine look is really really good.
But what's so interesting is clearly Microsoft is still working. When you're looking at asure growth of thirty nine percent, that was better than the market I anticipated. Sure it might not be much of a growth uplift, but what was it? What was the fly in the ointment for Microsoft? Where Aimyhood again is saying, my issue is supply, not demand.
I don't understand the market because they just put up over fifty percent RPO backlog growth and one hundred and ten one hundred eleven percent commercial bookings.
Those numbers are insane, and that.
Didn't even include opening eyes two hundred and fifty billion incremental dollars. So I think the market's got this wrong honestly, that you got to look at the backlog. The backlog is leaning indicator of health. The reported AZURE number does not matter. When you're putting those backlog numbers up, that tells you their capacity constrained. You can't book that kind of revenue and not take it to Azure. And the differential is they just can't get the capacity up right now.
But their customers want to spend, and their customers are spending and they know that what Microsoft has. So I think this is a common pattern where you're seeing massive backlog growth commitments to AI from their customers, but Microsoft can't literally physically provision it fast enough. And when we talk to Microsoft offline, like the Azure number would be way higher if we now have the capacity constraints. So this is not a demand issue, This isn't a competitive issue.
This is an issue that the industry is facing right now across the board is they can't get enough of it to their customers. That number of have been way higher because you can't describe the math of the backlog being so high and Azure where it's at.
So I think again, we look at it.
It's important Wall Street cares like Wall Street should care more about backlog and bookings. This is again what all Oracle trades on. They don't care about revenue. Why does everyone just care about revenue now? So I think again, I think the Street's got it wrong.
Streets got it wrong. Brent phil and Jeffrey's putting it right. We thank you so much. But coming up more about earnings. Roblock CEO David Zuki joining us to discuss the company's numbers daily active users for the gaming platform and toping one hundred and fifty one million ED.
Let's look at Core.
We've shares down more than six percent. Core Scientific investors have voted no on Core We've acquiring the company. You'll remember that Core. We've tried to buy Core Scientific in July nine billion dollars and the advisory firm said that undervalued it. BI reacting saying it actually won't impact operations of Coreweed but another headline on the terminal. As soon as that vote was decided, Core weave to buy Marimo terms not discos, maybe a sense that it's moving on
very quickly. We'll have more when we can. This is Beningberg Tech.
Grow regard ninety nine Nights in the Forest, still a brain rot three games, propelling Roadblocks to its highest level of daily active users, a company also posting nearly two billion dollars in bookings in the third quarter. Still shares
of the company trading lower after the earnings. Let's talk all through all of this with Dave Zuki foundacy of Roadblocks and Dave this growth, this is real playing commitment comes at a cost, an infrastructure cost, and we see costs go up because of safety that you're enacting.
But also the cloud compute.
How do you start to monetize to make up for some of those costs.
Yeah, thanks for noting the amazing quarter we just had. Both bookings growth was up seventy percent year on year at one point nine billion, and as you noted, our daily active users passed one hundred and fifty million, which is up seventy percent year on year. In addition to those three games you mentioned, we had seven games on Roadblocks in the last quarter, past ten million daily active users and a really healthy content ecosystem. Five of those
seven experiences were created in the last year. We've hit some really peak numbers. We had forty five million concurrent players all at the same time. What we said on the earnings call is with all of this growth, which is cumulatively averaging thirty seven percent over the last two years, we are going to be spending on infra. What we said is the continued decreases in costs for infra, we may slow that down a bit as we spend, But the final thing I want to generate is the cash
flow that we generated on the platform. We generated over four hundred and forty million of free cash flow in Q four.
DAVE.
Looking forward, then, how are you managing out some of the technology plays that you made age verification technology in a way that doesn't impact or slow the growth of both active users in the bookings.
We've made a commitment a while by to what we believe will be the cold standard for safety on platforms like Roadblocks and throughout the industry. With new advances in AI, we're going to use facial age estimation to estimate the age of everyone on our platform. And in addition to the text filtering we do the critical harms monitoring the prevention of any image sharing. We're going to use that to help gate who communicates and who they communicate with.
I was just in an executive staff meeting on Tuesday playing with the role out of this product. It's really elegant and we of course want to highlight there may be some friction, but I'm really optimistic this is the long term good play for Roadblocks, which is really establishing the standard of how we believe safety and civility is going to run in the future.
And that your CFO made the point that's going to have long term value for shareholders. You make it again, Dave, talk to us there for about the new technology, not just in safety, but also in how you build gate and high fidelity feeling of a game. But some of these big winners that we've had, we just them at the top. They are kind of more old school feeling in many ways, but they're the ones breaking records, grow a garden, more classic and blockie.
How do you compromise on that.
We've highlighted our vision of getting the ten percent of all the global gaming content market running on roadblocks. In this quarter we pass three percent, so there's a lot of room to go. We have an enormous amount of new technology coming to support more diverse experiences, to support different types of avatars, to support competitive gaming and genres like racing or sports, to support role playing games and
other types. And we really do have a vision for genre expansion, but in a really future looking way, and that when creators make experiences on roadblocks, they run well either on low end Android devices like a two gigabyte Android phone, or on high end gaming piecs and they run around the world. So we're optimistic. With the new technology, our economics and discovery, we're going to see a diversification of the types of experiences we see on our platform.
Dave, you want ten percent of the gaming content market? That changed in the quarter. I saw layoffs at Amazon and Microsoft's gaming divisions. Electronic Arts elected to go private. The big publicly traded peer that you have private with the saudis. React with your interpretation of what that signals for the market you're trying to grow in well.
People estimate the global gaming market somewhere between one eighty and two hundred billion. What we've seen on Roadblocks is really a future forward optimistic look at gaming. We've seen new types of genres given the Roadblocks platform, the ability to play with friends on different devices.
You know.
Addressed to Impress last year was a whole new type of experience. People competing in a fashion show grow a garden. I'm really proud of because hitting those top numbers, making new records for over twenty million. Concurrence is literally a game you can play either while you're there or when you're not there. Your garden keeps growing when you're not playing.
So I think the way to think about this is not just protecting a bunst the history of gaming, but looking at whole new types of games that are going to be built on platforms like Roadblocks and accelerated with AI as every game starts to have access to AI as well.
David Zuoki, Roadblock CEO, thank you very much. Let's stick with earnings in tech. Comcast was also out before the bell this morning, the company managing to slow the tide of broadbanding cable TV customer defections in the third quarter with help from an Internet price lock guarantee and some bundle plans. Let's get out to Bloomberg's entertainment reporter Kelsey Griffiths and DC give us the need to know on Comcast.
Ist tenth straight quarter of broadband losses. So the company came into this quarter knowing that they had to do something to start stemming this tide. Like you just said, they did in fact succeed in kind of slowing some of those losses, even though those numbers weren't positive. Necessarily, they were losing customers at a slower rate than usual, and so the executives were saying that some of the changes they've made over this year earlier seemed to be working.
Seeming working, but the share price is still lower.
And what's interesting maybe in some of the analyst notes there is a concern that maybe they'll spend more, particularly when they're thinking making a bid for parts of Warner Brothers.
What do you make of that, Kelsey, that's right.
Warner Brothers is one piece of the strategy that Comcasts said they're looking at, although they didn't express a really high level of interest. They said, when something like this in our industry comes on the market, it is something that we have to take a look at. But look, we're good with our content strategy even without M and A. They just succeeded in Laurene Taylor Sheridan over from Paramount Plus and he is going to be a really big part of that content links get going forward for them.
They also have NBA TV rights and those are things that they're really excited about in the nearer term.
Great roundup, Kelsey Griffiths.
We appreciate you on Comcast, and let's just stick with the Warner Brothers story a little bit more. Because CEO David Sazov said that the board would need a higher bid to justify a sale at the company. He said those comments during a town hall meeting for employees yesterday, according to sources. Now Sazadov also told the staff that the board had rejected three.
Offers from Paramount Skydin send.
Okay coming up.
President Trump and China Jijingping attempt to ease trade tensions inside their high stakes talks on the future of the global supply chain. We have all the details. Next, this is bloom Bag Tech. M H.
We did discuss chips and he's going to be They're going to be talking to the video and others about taking chips. We're not talking about the black one that just came out yesterday, but.
A lot of chips, you know, a lot of the chips, and that's good for us.
I was President Trump speaking to reporters on board Air Force one after meeting with Chinese President Jijingping, saying chips were in discussion, but in Nvidia's latest blackwell was left off the table.
Blueboks.
Tyler Kendall has been traveling with the President and joins us from South Korea.
What is the absolute latest?
What do we need to know about that came out of those talks between Trump and Jijingping.
Yeah, hey, Ed, Well, when it comes to in video chips, it certainly dampens a speculation that Washington would go on to approve the sale of such chips to China. President Trump went on in that gaggle on Air Force one to be asked specifically whether or not anything was brought up about the potential for a downgraded version of the
Blackwell processor. He said that it was not, but that ultimately in Vidia the company itself, is going to continue direct talks with Washington, as you well know, and Vidia has been trying to regain market access in China since twenty twenty two, after going from a ninety five percent
market share peak down to zero. But I have to say this was welcome news in Washington this morning for those defense hawks who have previously advocated against such sales over national security concerns, Which brings us to the broader issue of the general trade talks, because while we are getting this easing intentions, our own analysts at Bloomberg Economics say those more fundamental issues, including national security, were not
ultimately addressed. But Ed and Caroline, of course, a welcome news that we are seeing what appears to be at least a year extension when it comes to the broader trade troops.
Yes, blueboth, Tyler Kendall, thank you so much. That's the latest from South Korea. Let's get more news, Carol.
Yeah, it's time now aired for talking tech and first up. Open Ai is said to be preparing to file for an IPO as soon as next year that could value the company at one trillion dollars. But it's all according to a report from Reiters. The company is said to be considering finding the paperwork with regulators soon as second half of twenty twenty six plus. Microsoft says its cloud services are recovering from an outage that disrupted workplace software
products and impacted several companies. For the outage prevented people from checking into Alaska Airline flights, for example, and disrupted features in Microsoft's own copilot AI. We are ex consultants from McKinsey, from Bain, from BCG are recently contracted to train AI models on entry level consulting work for open Ai. Now bluemeggers learn that our gentum project is run by the same third party firm using ex bankers to train open ai on financial.
Models, said Okay coming out.
We have more magnificent seven earnings coming up after the bell today with Apple and Amazon, and we're going to have what to expect from those giants next. Apple up treading water three ten percent, Amazon down nine tens to one percent. Maybe there's more read through there from the other cloud names and what that might or might not spell for Amazon or at least investors attitude towards it.
Elsewhere. We know what the story is.
And the top stories of the day stops moving in different directions on the earnings context. Met Us down twelve percent, really interesting, notably higher capex in twenty twenty six and twenty twenty five. Alphabet gave us the same number of capex, but they also told us how revenues directly tied to AI are growing, and right now the market's rewarding that with the Google pairing up five percent.
This is Bloomberg Tech. Welcome back to Bloomberg Tech.
Let's recap the three magnificent names that already reported last night.
Different stories.
Microsoft down three percent, as your growth was thirty nine percent above consensus, but it was a high bar quarter. Same story across all three of them, as we know the capital expenditures environment. Meta told us that capital expenditures would be notably larger next year than they were this year. But the investor bases spooked a little bit because we don't have this kind of longer term outlook for how that translates to sales apart from we do from Alphabet
the parent of Google. So they told us what the capital expenditures picture looks like, but also that they're products that result from investment in data center capacity. AI models generative. AI grew two hundred percent year in year, and that name is up five percent in direct reaction, and there.
Are so many more earnings out there current.
There are, and another one on the rise is Service now ed it gave an outlook for strong revenue growth, said AI of course is helping the company reduce its own costs. We spoke with Service Now CEO Bill McDermott a little while ago.
The most important thing is to reinvent and all of these back office operations and companies. So for example, in our company, whether it's IT support or customer support or security and risk, ninety percent of this work now is being done by agents, but not at the expense of people. The people in our company now have an AI teammate on their shoulder to do the things.
That they'd really never really liked very much.
Earning cities and continues with both Amazon and Apple reporting later today. Let's talk about what to expect, Bloomberg Execute's reporter Ryan Vastellika. Let's start with Amazon. Then it's down a percentage point. Maybe this read through from what we learned about cloud computing from the three that went last night.
What are we expecting at.
Yeah, absolutely, I'd say there's absolutely people looking at the results we saw last night from Microsoft and Alphabet and kind of extrapolating into what we could expect from Amazon. I will say that there has been growing concern about the strength of AWS, that's Amazon Web Services, the cloud
computing business. There some concern that it is falling behind, maybe losing some market share, not as quite well positioned for the AI era, and maybe the fact that we saw such strong results, especially out of Alphabet, maybe indicates that maybe it's going to be on the back foot a little bit here. There also continues to be a
lot of focus on how much these companies are spending. Amazon, of course has very high CAPBAX levels, not only with building out its data center, and cloud business, but all of US logistics operations. I'll be very curious to see there if we get any sort of improvement on the margin front, especially when it comes to commerce. I say that those are the two major things people are looking at there.
A I use deployment all about for Amazon, almost for Apple, it's ignored. We're just wondering how iPhones seventeen in air are doing.
Yeah, absolutely so.
So far, it seems like the iPhone seventeen is selling pretty well, especially the higher end model. So that is atail one, especially when it looks at average selling prices right there. People I spoke to have said that maybe a lot of people who bought phones during the start of COVID and the pandemic five years ago, maybe they're just at a point right now where they're starting to upgrade, even without AI features, even without the foldable phone that's
expected next year. So there is a lot of optimism that the strong iPhone sales that we've been seeing indications of so far, maybe there's room for this to grow over the coming quarters, especially as we get new designs, more AI features and so forth. Of course, now the question is you have a stock that's valued at four trillion dollars. It's in hitting record levels. Is all this optimis is going to be justified by the results that come out this afternoon.
I mean, while Amazon languishes only about two and a half turning Bloomberg ran Plastelica, thank you very much, And let's just talk about where investors' heads are at, how they're reacting to this really busy week of earnings. Ibek oskodeshkay is with our senior market's analysts over at Swiss Quote. We had Brent sil from Jeffrey's on the top of the show, and he said he doesn't.
Understand the market right now.
Do you understand the market if you're looking at Meta being sold off so hard, Alphabet rising after earnings. We'll get back to her in a minute. Technology on technology shows and this many years into zoom, sometimes we don't press the right button, head, but really, I do think the one cell coming from Meta is a key one to be discussing because we have got this five vocated market where we're selling off certain names, in particular when we're worried about capital expenditure.
But what more was better.
To do twenty six percent growth in terms of revenue record numbers. We're also thinking about what therefore that pushes forward to Amazon and how much they have to vindicate the spend on capital expenditure too.
Yeah, one thing I'd say is we go back to Epek Deshkai, who I think is now good, and back with us is with respect?
Do investors have short memories?
Because Meta told us in the prior quarter that CAFTO expenditures would be higher in the next fiscal year, they used a different language this time around, which was notably larger in fiscal twenty six and twenty five.
But maybe it's what they didn't say.
They didn't tell us what top line or bottom line growth directly from AI investments looks like what's your read?
Well, actually, for Meta, the investments look more more riskcared than they are for Microsoft or Amazon.
We do have these data centers and they say that if we over invest, we will have the option to sell this excess capacity.
And if you're looking at the market reaction and the mixed reaction there, we also think that macraeconic context is here is very important.
Important in the sense that just before these.
Earnings came out yesterday, the Federal Reserves said that they're not sure that they will be cutting the interest raised by twenty five bases point. So I think that that also dumpened the mood just before the earnings came in. Looking at the spending these companies must spend in order to keep up with the man and Microsoft has been very clear about the fact that they have not been able to catch up with the significantly higher demand. So
they must invest. They do have the free cash to invest, and if they do not invest and miss the turn, the AI turned that that would be worse for.
Investors then seeing them over investing.
So I think that in the in the context of the actual growth, these companies must invest and it doesn't really bother us as long as there are no concerns about oversupply, and this is not the case right now.
You got Meta said if they have too much compute, they can start selling it to others.
So is this an air pocket?
Is this just where people buy into weakness or is there going to be a significant pullback in questioning of the market rit large if the FED isn't going to be cut in come December.
Well, I think that the FED situation could eventually lead to a certain pullback in valiations. But I don't think that that's going to be a bubble pop kind of a market's reaction, because these companies must invest now in order to make sure that they don't hit into capacity constraints one year, one and a half year from now.
I believe that investors understand that there is a bpoort showing that or claiming that the data capacity computing needs will be doubling every nine to eighteen months due to our AI application, So these companies must keep up with that pace. And again I believe that these fending plants have been almost in fairly you know.
Put out there, so they have being revised higher. But this is not this is not a surprise coming in right now.
Looking at the deals and the strength of the demand that we see in the sector, these companies are out there trying to keep up with the demand. And I believe that again, as the executives are also saying, not keeping up with the demand or risking to head into capacity constraints is worse than over investing right now.
What's interesting is, of course, perhaps just to show the amount of spend that was necessary, Meta comes to market with a ginormous twenty five billion dollar bond sale and talk to us about demand across assets for AI related companies. Should we pull back inequities that their record highs. How is demand looking for the bond side of the equation.
Well, I think the bond side is also looking well.
Especially right now we have seen that the bond sales are have been quite interesting for these companies. I believe that in the actual environment as well, the bond sales are going to be interesting. So the investors who are not necessarily willing to take the equator risk at the higher valuations, they will be plugging into the bond side of the market. You are not expecting them to move separately.
You expect them to do to move in tandem. But on the bond side the potential of rises less and the risk that we're taken for.
It is also less.
So this is another way of taking exposure and passive exposure to these companies without however, taking the risk of the equity fluctuations.
Epeck.
If I take the earning statements and cool transcripts of all the tech earnings we have so far, run them through chat GPT and ask chat GPT to cross reference for a theme that is not capital expenditures what would I get. What else do you see that they have common between them?
Well, the couple of expenditures are actually rising.
I don't know.
I have an ass chat.
Topt what he thinks about it. But what we see is that this is growing exponentially and there is investment worries about that. But if you do not invest today again a year and a year and a half from now,
you might into bigger capacity constraints. What's happening right now is if today, for man one prosoft for example, you are not able to catch up with the demand, then tomorrow is going to be a harder because you know, we're just going divergently because the demand is going to be exponentially rising.
And that's the main issue.
That's why these companies are investing so badly or so highly.
And this is I think what chatteropt will tell you.
Because as AI applications will be and running, demand for competing is going to rise exponentially. And this is exactly why Nvidia is also not only concentrating today on the AI applications, but all on the networks and intelligence networks as well, to make sure that even the networks and the pipelines will be able to handle all that data flow down the road.
We did get a FED cut quarter point for a second consecutive meeting, and we did get a warning that a December rate cut is not a foregone, foregone conclusion. Ipek Oskar Deshkaya Senior Markets and list at Swiss Quote having earnings and FED story ic