Bloomberg Audio Studios, podcasts, radio, news. This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world. Carol Master along with Tim Stenwick getting ready for a big drop. You better be ready because they're out. A bunch of Mac 7. Ed Ludlow, of course, co-host of Bloomberg Tech on Bloomberg Television. He's out there in our San Francisco Bureau. Also with us is our Anurag Rana, Bloomberg Intelligence Senior Technology Analyst. He's out there in Chicago. Anurag, I want to kick it off with you. Go where you want. There's a lot coming at us. You want to start with Microsoft? Yeah, so Microsoft did beat a little bit on the Azure growth. So 38% goes to 39%. So minor inflection up. We're going to hear on the call whether they have used GPUs internally and what kind of guidance that they give. So that's really Microsoft. But the two biggest shocker are actually Google Cloud Growth and AWS Growth. Both have accelerated quite a bit. That shows that their cloud strategy right now is doing slightly better than Microsoft's. Ed Ludlow, come on in here again. We got a great round to Ed Ludlow, Bloomberg Tech co-host. That was Anurag Rana, Bloomberg Intelligence Senior Analyst, who we just heard from. And in a minute, we're going to bring in Ron Westfall, Hyperframe Research Infrastructure and Networking VP and Practice Leader. Ed, what's on your radar? How hard it is to follow Anurag? I gave you a little time. I gave you a little time. Yeah, look, I go with it logical. That AWS growth, Amazon Web Services is the number one position in cloud computing. 28% is the highest rate of growth for about 15 quarters. That's the severity of the performance. So going into this, I'm trying to get a common thread between Alphabet, the parent of Google, AWS and Microsoft, we looked for the growth rates of cloud because the swing factor in the market has been capital expenditures. Investors have been willing to look at the capital expenditures, even if those numbers get bigger. But in return, they want to see outperformance in cloud computing growth driven by AI. And also they want to see some kind of forward guidance, boosted forward guidance. And so in these statements, we have the numbers on growth for cloud. We don't have a capital expenditures figure for AWS that's any different from prior guidance. Meta does have a new capital expenditures figure, and I would just suggest we go to that next. Well, that's exactly where I want to go. $125 to $145 billion, increased from a prior range of $115 to $135 billion. As a result, we're seeing shares of Meta platforms carry down by 6.3%. Yeah, Kurt Wagner, tech reporter on the Meta Live blog. From the release, we anticipate 2026 CapEx, including those principal payments on finance leases to be in the range of that $125 to $145 billion. So increase from that range, just to reiterate. So that's a problem, Ed? Well, let's just do the calculation, right? So we know that CapEx is going up. What is the outlook for growth? Revenue in the current period, second quarter, will be $58 billion to $61 billion. Consensus was $59.6 billion. That is right in line. And we went into this knowing, based on a summary of the sell side and of the buy side, that if the capex numbers get higher, they want to see growth also going up in terms of guidance going forward. And this second quarter guide on meta sales, it's very in line with expectation. I want to bring in Ron Westfall, Hyperframe Research Infrastructure and Networking VP and Practice Leader. I want to stay on what Ed was talking about, Ron, and that's meta's capex estimate. We're also seeing some headlines. Headwinds in the EU and US could significantly impact results. The company sees scrutiny on youth-related issues as well. Shares of Meta platforms right now down about 5.5%. But it does seem like more important is that CapEx number, 125 to 145 billion, increase from that prior range of $115 to $135 billion. What are your thoughts? Sure. I'd like to start with looking at the bigger picture. I would see Meta as certainly benefiting overall, despite the recent dip, from the overall market expectations. That is, the total addressable market for Meta, alongside the other of the major four that are coming out this week, is a total addressable market of up to $11 trillion. And so I think that's going to definitely enable Meta as well as the other players to continue with the upswing in CapEx. And yes, that's causing concern. But I think what we're looking at is when you look at the group earnings, they're projected to grow 20% year over year. And that is outpacing the overall S&P 500, 14.5% growth expectation. And so as a result, I'm anticipating that Meta will definitely be looking pretty solid over the course of the year and further out because not only is it upping its CapEx expenditures, however, it's also, I think, benefiting from trading at a relatively conservative forward P.E. ratio of the lower to mid-20s as that fluctuates on a daily basis. and they're definitely benefiting from the fact that they're monetizing AI more rapidly than some of the other Mag7 thanks to their social platforms, certainly including Facebook as well as Instagram. And so I think that's something that will definitely be something to definitely look at as we find out what Meta is really going to do for the rest of the year All right folks I want to go over to Amazon A couple of things also popping up 59 billion year rise in purchase of property and equipment They say the increase in purchases reflect investments in AI. They also say, Ed, free cash flow fell to 1.2 billion for trailing 12 months. Come on back in, Ed Ludlow. Yeah, so this is exactly what I've got on my screen. So the story financially for each company is slightly different. But if we focus on Amazon, it's spending so much on AI infrastructure that trailing 12-month-three cash flow basically falls from $26 billion to $1.2 billion. Operating cash flow rises. Amazon's a complicated business, right? You know, AWS largely accounts for most of operating income. But increasingly, like, ads is important on the e-commerce side. And I'm hoping that Anorag will kind of talk a little bit about that. This is kind of a classic building cycle signal, though. And to this point, and maybe one of the other guys can weigh in on this, I'm just a journalist. What a smart one. You know, the market has been really sanguine about negative free cash flow or the prospect of it. You know, it's not something that everyone's like freaked out over, basically. That's a very simple way of putting it. Ron, come on back in. Ron Westfall of Hyperframe. How do you see it in terms of what Amazon's up to? I like that idea and this concept of you've got to spend to build for future revenue. But how do you see it? I think AWS is definitely benefiting Amazon's overall prospects. And I think that's underlined by the fact that the AWS AI revenue run rate has already gone past $15 billion. And that's linking to the fact that AWS growth is projected to accelerate toward 25.6% following its landmark $100 billion infrastructure deal with Anthropic. So clearly, that's something that I think will create not only positive perception, but I think it's giving the hard numbers that AWS needs to continue with these cap-esque expansions. Also, I think it's important to note that AWS capacity is selling out immediately. And so that's supported by a massive $244 billion contracted backlog, as well as high margin revenue from its Trinium and Graviton chips. And these, I think, are offsetting concerns around the large margin pressure from the $200 billion billing plans and capital expenditures for the year. And so you take this together, I think net positive is what Amazon is going to bring to the table. It's definitely, I think, something that applies to all the hyperscalers. And Amazon, I think, is definitely positioned to improve on its performance as a result. We've got to go to Alphabet, which is up 3.5% here in the aftermarket. Yeah, the company reported quarterly revenue and profit. It beat projections. It was fueled by strong growth in its cloud computing unit. It signaled that the internet giant's unprecedented investments in AI infrastructure are beginning to pay off. The company said that first quarter revenue, excluding those partner payouts, was $94.7 billion. That compares to the $91.6 billion expected on average by analysts. That's according to data compiled by Bloomberg. All right. Still with us is Ed Ludlow, Bloomberg Tech co-host on Bloomberg TV. Edna Raghana, Bloomberg Intelligence Senior Technology Analyst. analyst. Ed, as we continue to go through these numbers and results, where do you want to go? Yeah, I think you guys have done a masterful job. The cloud growth rate, if we put meta to one side for a minute, is really interesting because all things are relative. So Anarag pointed out, if you focus on Google Cloud, 63% growth, AI is for them also boosting search, right? And they have this kind of dual benefit, which is really interesting. They reported a metric that we've kind of not skipped over, but there's so much news it gets buried, which is that Gemini for enterprise, in other words, their AI tool that businesses pay for, saw its active user base grow 40% quarter on quarter. So there was a big jump in that. And the reason I flagged that as important is that that's the standard to which we hold open AI, right? And, um, and, and tropic, you know, but the markets of earlier this week were spooked by the wall street journal report of, of open AI missing its own internal metrics. One of them was the, the, uh, active user base of chat GPT, which isn't universally an enterprise product, it's consumer. But I find that to be really interesting. And, um, you know, it shows tangible growth on the other side of people actually using the Gemini tool in the real world, you know? Right, which we all keep talking about. We need to see, right, to kind of justify the spend. All right, we're going to continue with Ed Ludlow and, of course, Ron Westfall in just a moment. As we mentioned, Alphabet is now up about 5.8% here in the aftermarket. We're looking at Amazon down about 2.4%. Meta, a decline of 5.3%. And then we've also got Microsoft out with its results. And we're seeing this one. it's been under pressure in the aftermarket right now, Tim, about 1.8%. Hey, we were talking about meta platforms. We have spoken quite a bit about Amazon, Qualcomm, and more. I want to bring Alphabet to our attention. 6.6% higher in the after hours. The company reported quarterly revenue and profit that beat projections. It was fueled by strong growth in its cloud computing unit. That cloud computing unit reported sales of $20 billion with a, quote, meaningful acceleration and growth driven by demand for its AI software and infrastructure I want to bring it back in Ed Ludlow Bloomberg Tech co and Ron Westfall Hyperframe Research Infrastructure Networking VP and a practice leader Ron I want to start with you and Alphabet because we are seeing shares surge in the after hours. The company reported earnings per share of $5.11 compared with Wall Street's $2.62 per share estimate. The cloud growth is certainly top of mind. We should remind everybody that it competes against AWS and Microsoft's Azure. This report, though, what sticks out to you? Yeah, I think it's pointing to that Google is making more inroads in terms of capturing mindshare amongst the hyperscale competition. And I think what we saw is that when you look at Google Cloud specifically and reporting over $20 billion in revenue, well, that basically beat out the analyst estimates. And that is, I think, a remarkable 63% year over year growth rate. And so that by itself is congratulatory. And when you look further down, it's like, okay, why are the cloud margins expanding to nearly 30% up from just 20% six months ago? I think what is resonating is that the company is making the right moves. Certainly, its acquisition of Wiz, which closed just last month and has already become integrated. It's making Google Cloud a more attractive choice for enterprises that are requiring sovereign and highly secure AI environments. And that is certainly a hot topic in our conversations. and that is a sovereign AI is something that will underpin confidence and the ability of enterprises to adopt the hyperscale AI services and so forth. And certainly that comes to inferencing. And that is ensuring that their proprietary data never falls into the wrong hands, that it's not going to be something that will be exposed out in the public cloud at part of it. And I think what's also important is that what we saw at Google Cloud Next just last week is that when it comes to the TPU silicon, Google is coming up with innovative ways to augment the NVIDIA capabilities they have in-house. Certainly, they use their TPUs to train their own models in-house. That includes Gemini, for example. But I think they're smart about how they're now diversifying their AI chipsets to stand out. That is, now they have TPU, what they're calling T8, that is a specific for training only. But now they also have the TPU-8i, which is for inferencing. And so what we're seeing is a fundamental shift more toward inferencing. That is, you know, the AI capabilities being used in play. That is the ability to use handsets and other capabilities that take what has already been trained and actually apply it to real world scenarios. And so as a result, I think this is why Alphabet is definitely making inroads with wanting more cloud business. And if you look at Alphabet overall, I think also it's important to note that when it comes to diversifying revenue streams, that their Waymo unit is definitely making, I would say, waves. And that is, it's already scaling up to 1 million rides. And so that, I think, is something that will definitely continue the revenue generating capabilities moving forward. Well, we're definitely seeing it shine in the aftermarket now up about 6.2% here. I mean, listen, to be fair, Alphabet's definitely been hustling when it comes to AI. Amazon right now, though, down about 1.9%. We want to get a little bit more on Amazon. And with that, Matt Day, Bloomberg News technology reporter, follows the company joining us right now. Matt, walk us through what you think is important for our audience. You can go back to what Jeff Bezos said was important, his favorite metric, free cash flow. If you look at Amazon the last 12 months, it's not zero, but it's pretty close to zero, and it's a whole lot closer than it was last year. So the reason for that, obviously, it's AI spending, it's data centers, a whole lot of property and equipment that they're spending money on these days. Their cloud revenue is good. It's going up. It beat expectations. But just a reminder for Amazon investors, they're spending a whole lot to get a seat at this table. Is the spending paying off? It looks like it. If you roll things back a few months ago, folks were really concerned about Amazon's position in cloud. We just talked about Google. Microsoft was also really hot, and it kind of looked like they might be sort of a third-place cloud of the AI era to boil it down. Since then, they've done these big mega deals with OpenAI, with Anthropic, and it looks like some of that is starting to filter into their cloud results. They've accelerated the last couple of quarters. Anything you're scratching your head over here, Matt? A little bit of a market reaction, honestly, because they beat on so many things. It feels like a lot of these big tech names have been going between CapEx freak out to, you know, oh, AI is the future and quarter to quarter, it's kind of hard to tell what folks are sinking their teeth into. Is the, yeah. Oh, go ahead, Carol. No, go ahead. The investing that Amazon has done in open AI and Anthropic, it's committed to spend more than $100 billion on AWS services in the coming years between those two. How do investors look at that? Because it's, do they look at it as venture capital? like the company's making a bet, like a venture capitalist bet, or does it look like the company's trying, you know, guaranteeing business by making these investments in exchange for AWS usage I mean some of it is clearly buying business a little bit right Making sure that you got a tight enough relationship with OpenAI that they want to spend But I think there are some long questions You know, Oracle has seen versions of this. Microsoft have seen this where, you know, investors start to discount, okay, Sam Altman has pledged to spend, you know, $1 trillion plus all over the place. How much of that is going to materialize, right? So now Amazon's in a position where they've definitely got a slice of that alongside anthropic spending. So the question is, you know, when does that materialize? Where do you start to put that on the calendar and how much of a sure thing does that become? I want to bring back Ron Westfall, Hyperframe Research Infrastructure Networking VP and Practice Leader. He has been with us for about an hour as the slew of earnings came in. And thanks to Ed, we know, at 71 seconds for all of these companies to report. I love that he did that. We're still making our way through all of these. I weigh in on Amazon what we've heard from Matt, what we've heard from Ed as well, because This is a company where, you know, certainly AWS is the star, but it also and that's what moves the needle. But it also gives us a good idea of what Americans are paying and how American consumer spending is holding up, even though that's not really what moves the stock. It's amazing. I think when you're looking at, okay, what is Amazon doing that is, you know, continuing these organizations as well as consumers to, you know, use their, certainly their services. And I think when you snapshot, for example, AWS, that is, you know, the enterprises are using Amazon Bedrock. And that is underlined by their Tranium 2 and Inferentia. chipsets. And if you look at that, the chipset business alone has reached $20 billion in annualized revenue run rate. And so I think this is pointing to that Amazon is making the right bets across its entire portfolio. It's not just about, okay, how can we improve the Amazon experience, but also how can AWS meet business needs on an across-the-board basis? And I think, yeah, when it comes to fundamentals, when we're looking at Amazon, Amazon advertising is on track to exceed $70 billion in revenue just this year. And that is tied to the fact that there's so much high intent purchase data information that they're able to leverage that it's improving their capabilities. So that is, again, underlying why AI is making a difference in terms of their business model. And I think it's also reflected in what we talked about in terms of meta. So this is something I think will improve. No, this is all good stuff, really good stuff. We could go on and on. Hey, we've got about two minutes before we have to wrap up this segment. I'm just curious, for each of you, what do you think was kind of the most important headline or narrative from this drop of four results? And Matt, let me start with you. I know Amazon's your jam, so maybe go there or go anywhere. Oh, there's a good spot. I mean, it's that Amazon's got a seat at the table, right? They've got all the big models are on AWS. And so now, you know, there was a first leg of this AI competition was, you know, who's going to have the exclusive tie up. This one looks like you can get most just about anything anywhere. So who's got the better mousetrapping cloud? Looking forward to seeing how that transpires. All right, Ron, your turn. Come on in here. Just the most important bit of info you got from any of these companies that reported after the bell. And you can't say all of the above. Yeah, I know. They're demonstrating the runways there, that this CapEx is all justified. And I think we're seeing that it's having an impact already. We're seeing that the companies that have integrated AI into their operations are seeing cash flow margin expansion at roughly twice the global average. So, yes, it is now making a difference. The ROI is there and we're seeing the results. All right. Good stuff, Ron. Thank you so much. Ed, come on in. Same thing for you. I know you kind of love all these. It's hard to have a favorite child here. But I'm just curious, as you look at these headlines and you're thinking about your show tomorrow, is there a narrative, a headline that really just sticks with you? Yeah, I think, you know, across all four, and it includes Meta, which is a slightly different company, AI demand is running ahead of their ability to supply. That's not a new sentence or idea. People have been saying that for a little while. And so across the four, it's interesting to see those that they believe and those that they don't. This isn't profound selling in Meta's case or in Amazon's case. It's not severe buying in alphabets either. So I think the idea is proof points, like tangible new pieces of data. Google gave many of them and investors have kind of cheered that. But it's about AI in the real world. And that might sound abstract, but that's what the market's been asking for. Okay. Well, speaking of AI in the real world, Ed just pushes ahead to tomorrow afternoon when we hear from Apple, Tim Cook, John Ternus. What's 30 seconds on what you expect from Apple? This is the first earnings and earnings call since Tim Cook announced he'd stepped down. The vector's September 1st and John Turner's become CEO September 1st. And I think whatever Apple says about handsets or software, it will just be about those two people. All right. Unbelievable. 60 minutes on here on Bloomberg Business Week Daily. Guys, thank you so much. So appreciate our own Ed Ludlow, co-host of Bloomberg Tech. Catch him on TV 11 a.m. to 12 noon, Monday through Friday, Wall Street time. Ron Westfall thank you so much for all that time Hyperframe research infrastructure networking VP and practice leader out there in the Twin Cities and of course out in Seattle watching Amazon our own Matt Day Bloomberg News technology reporter incredible stuff
