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Let's take a look now, add some stocks to watch in the week ahead. I'm Nathan Hager, joined by Bloomberg Intelligence Global Head of Tech Research, Man Deep saying, because it really is all about tech this week, I think we're hearing from what five of the mag seven when it comes to earnings, and a lot of them are just this Wednesday, right, Man Deep.
They are. And look, I think what Tesla has shown us is, you know, capex increases are still a big focus in terms of what these companies are doing around the AI infrastructure build out, and so that's a common thread across all of them. Yeah.
Absolutely, Well let's start off with one of the biggest names. Micro Soft is one of them that's reporting on Wednesday. We just heard this past week that they're offering voluntary buyouts to a bunch of their workforce. What does that tell you about what we could get when it comes to the earnings.
Look, I think with Microsoft, clearly the stock has been under pressure because of their open AI partnership and you know just the way it's evolving. And when it comes to the top line growth, I think what investors are waiting for is what kind of lift they are going to see in their Azure segment from all these AI workloads. I mean last quarter Google had that ten percentage point gap where Google grew forty eight percent and Microsoft's was
thirty eight percent growth. So Microsoft really needs that lift in that Azure growth line and that's where I think investors will be comparing them against the likes of Amazons and Google Cloud, and to me, that's what they need to show that they can deliver on that Azure growth numbers.
Are you expecting that we're going to hear much more from Microsoft about their CAPEX plans after what we heard from Tesla. I mean, they were a big part of that six hundred and fifty billion dollar number we heard from the hyperscalers just a few months ago.
Yeah, I wouldn't be surprised if that number is revised upward. Now it won't be a big revision, but clearly, as things stand, everyone seems to be compute constrained. That's what we have heard from Anthropic and these leading labs and Microsoft. If they are able to show that sequential acceleration and Azure growth, that could be the justification to raise their capex, but otherwise I think the stock may react negatively if they end up raising their capex.
Also Wednesday, we're going to hear from Google parent Alphabet. They're a big part of this KAPEC story as well, and they just came out with a new generation TPU chip. Where is Google Cloud in the AI race?
Mandy, Yeah, Google Cloud clearly has seen an acceleration, and so I expect, you know, this quarter to be the growth and Google Cloud to be closer to fifty percent. And look, they've just launched two new chips TPUs, one for training, the other one for inferencing, and they signed that big deal three point five gigaboard deal with Anthropic
and Broadcom. So from that perspective, there is a lot of momentum they have with their chips and cloud, and their margins in the cloud business also seem to be expanding. The only thing which I'm not sure about is their search business, because there are puts and takes. I mean, clearly there is some search volume pressure because these chat pots, whether it's Open AI or Tropic Cloud they are taking
some volume of search queries away from Google. At the same time, they don't really have an AD's kind of surface to their queries. So from that perspective, Google should be insulated. But I would be curious to see how they end up doing in their core search business in terms of the top line growth.
And I keep seeing Google Gemini try to sneak into my search results as well. Where do they factor in when it comes to some of the other chatbots.
Yeah, so Gemini will not show you any ads. It's purely subscription driven. Although Gemini is what's powering their AI overviews and that's where Google could show a lot more engagement with their searches and so in turn that could translate into better ADS growth. But clearly Gemini is the model that's powering all of their llms across the family of apps, whether it's YouTube or or any other surface
they have. So from that perspective, you know, Gemini standalone contribution may not be that much, but clearly it's influencing all the family of apps that Google has.
And also Wednesday we get earnings from meta platforms they're guiding for what thirty percent revenue growth? Is that right?
It's phenomenal that upward revisions we have seen on Meta, partly because they have used their compute capacity for their ad recommendation systems. So the expectation is that ad pricing will probably be very strong for someone like Meta, which is able to target the ads much better than anyone else in that digital ad ecosystem, and that's what's driving
the expectation for thirty percent growth. But look, they've raised their capex, they've talked about how they're releasing a new model and that will help improve the ad targeting and engagement further. So high expectations, but they seem to be doing quite well in terms of that top line growth in digital ads compared to everyone else.
And where do they stack up? Do you think when it comes to the digital ad environment compared to a player like Google.
I mean Google's ad sales, the core search ad sales will grow fifteen percent, or that's the expectations. Meta is expected to grow almost two times that thirty percent. So clearly the social ads seem to be working. And the rational for that is, you know, there isn't much LLM competition when it comes to social media. In fact, open
ai has shut down as Sora apps. So when you think about you know, AI generated content around social media, there isn't much to talk about, whereas in search there is a lot more competition from lms, and that's why the top line growth expectations for Google Search are much lower than a meta, which is expected to grow thirty percent top line.
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