BI Weekend: GM, Starbucks, UPS Earnings (Podcast)

Summary

Bloomberg Intelligence Podcast Summary

Episode: BI Weekend: GM, Starbucks, UPS Earnings
Date: January 31, 2026
Hosts: Scarlet Fu & Paul Sweeney

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Overview

In this episode, Scarlet Fu and Paul Sweeney of Bloomberg Intelligence dissect significant business stories and earnings results impacting Wall Street and global markets. The episode provides in-depth research-driven analysis of major companies including General Motors, Tesla, Nvidia, Starbucks, AT&T, UPS, and a discussion on Yale’s faltering endowment model. Bloomberg Intelligence analysts and industry experts provide insights into sector trends, company strategies, and the factors shaping various industries.

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Key Segments & Insights

1. General Motors (GM) Earnings & Auto Sector Trends

(02:11 – 08:54)
Guest: Steve Mann, Bloomberg Intelligence Global Autos & Industrials Analyst

• GM’s Portfolio: The GM lineup is still overwhelmingly internal combustion engine (ICE) vehicles, with EVs making up just 10-15% of the portfolio.
  • “ICE engine is much greater... you're talking about like 85, 90% ICE versus 10, 15% EVs.” – Steve Mann [02:33]
• EV Transition Strategy: GM is maintaining its EV portfolio but focusing on profitable gas vehicle sales, especially with relaxed government mandates easing the urgency to transition.
  • “Maintain whatever they can do with EVs and really push the ICE vehicles, maintain.” – Steve Mann [03:22]
• Hybrid Technologies: Currently not a core focus for GM due to high investment required and limited payoff.
  • “It's going to be a huge sinkhole for them if they invest in that technology today. So let's, let's not do that.” – Steve Mann [03:22]
• Gas Prices Impact: If gas prices rise, Japanese automakers (Toyota, Honda), with robust hybrid portfolios, stand to gain.
  • “If gas prices do go up, actually benefits the Japanese companies like Toyota and Honda where they have a full suite of hybrid vehicles that actually consumer love.” – Steve Mann [04:50]
• Tesla’s Challenge: With weak near-term sales, attention is on autonomous/RoboTaxi initiatives for future growth.
  • “Investors are actually looking... into, you know, what is Elon Musk going to talk about in their next earnings calls on the Robotaxi?” – Steve Mann [05:44]
• Charging Network: Tesla’s Supercharger network is a small but expanding revenue stream, being licensed to other brands.
  • “Selling these supercharging business and the revenues from the charging, it's still really, really small. I would say around 10%, maybe less.” – Steve Mann [07:10]
• Government Incentives: Crucial for accelerating EV adoption; Europe and China cited as models.

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2. Airline & Aerospace Industry Updates

(09:01 – 13:55)
Guest: Sid Philipp, Bloomberg Chief Correspondent for Global Aviation

• American Airlines & JetBlue:
  • American targets premium market segment to drive revenue growth.
  • JetBlue sees a difficult near-term outlook but long-term free cash flow by 2027.
• Low-Cost Carriers:
  • Ultra-low-cost airlines are struggling with cost pressures and intense competition.
  • Many, like Spirit, try to differentiate with added amenities and pseudo-premium features.
• Boeing’s Recovery:
  • Company is not fully back but making progress, bolstered by strong cash from selling a subsidiary and ramped-up aircraft production.
  • “Boeing is on the road to recovery. They're still not there yet, but they are, they are recovering.” – Sid Philipp [12:59]
  • Production target: up to 42 737 Max jets/month; goal is $10B in free cash flow.

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3. Nvidia’s $2 Billion Investment in CoreWeave

(16:28 – 20:00)
Guest: Anuragrana, Bloomberg Intelligence Tech Analyst

• Nvidia-CoreWeave Synergy: Nvidia’s investment in cloud player CoreWeave supports their ecosystem, expands customer reach, and helps fund CoreWeave’s growth.
  • “Nvidia is creating the chips and CoreWeave is helping them sell the computing using those chips... Nvidia isn't giving them money straight away but is basically saying we have confidence in this company.” – Anuragrana [16:47]
• Revenue Backlog: CoreWeave has $50B in contracted revenues but must rapidly build out new data centers.
• Challenges: Main hurdles are securing land, power, and especially capital (cost of capital has dropped from 10% pre-IPO to 8% post-IPO).
• Cloud Providers'” AI Chips: Microsoft and other hyperscalers develop in-house AI chips to reduce reliance on Nvidia, mitigate costs, and customize for their own workloads.
  • “For training they’ll still use the more powerful Nvidia chips, but for… running a copilot, they could get around and use less powerful chips. And if they do that, they actually save a lot of money.” – Anuragrana [19:12]

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4. Starbucks: Turnaround & Growth

(20:03 – 23:26)
Guest: Michael Halen, Bloomberg Intelligence Senior Restaurant & Food Service Analyst

• Performance: Global same-store sales up 4%, US and China both showing strength.
• Turnaround Focus:
  • Operational improvements (faster, friendlier service) driving increased customer frequency.
  • Menu innovation, e.g., “protein cold foam,” resonates with customers.
  • Improved marketing boosts growth.
• Cost Controls: $2B in annual cost reductions targeted over 1-2 years; labor investments have narrowed margins but are now under review.
  • “They've identified $2 billion in annual costs that they want to get after over the next one to two years.” – Michael Halen [21:30]
• Competitive Landscape: Intense competition from upstart chains (e.g., Dutch Bros, Seven Brew) and premium independents, driving Starbucks toward more health-conscious, innovative offerings.

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5. AT&T: Telecom Competition & Strategy

(23:30 – 29:03)
Guest: John Butler, Bloomberg Intelligence Senior Telecom Analyst

• Strong Results: Q4 revenue and profit exceeded expectations due to growth in multi-service subscriber base.
• Strategic Position: AT&T leads in fiber deployment; acquisition of Lumen’s fiber assets to further strengthen the position.
  • “They’re the fiber leader and they’re about to buy Lumen’s fiber business and add another million fiber subscribers there.” – John Butler [23:54]
• CapEx and Infrastructure: 2026 spending focuses on fiber and 5G network expansion; plans to lower capital intensity post-buildout to free cash for dividends and buybacks.
• Competitive Pressure: Wireless market likely to heat up with new CEOs at rivals; sentiment has weighed on stock.
  • “Sentiment has been pushed around... as these new CEOs look to make their mark.” – John Butler [26:07]
• Cable vs. Fiber: Cable companies are falling behind technologically; fiber seen as a superior broadband offering.
• iPhone Sales: AT&T “over-indexes” to iPhone users but does not expect the rumored foldable iPhone to move the needle significantly.

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6. UPS: Shrinking for Profitability

(31:47 – 36:45)
Guest: Thomas Black, Bloomberg Opinion Columnist

• Job Cuts & Strategy: UPS will cut 30,000 jobs in 2026, continuing a strategy of shrinking less profitable parts of its business (notably Amazon deliveries) and automating operations to boost margins.
  • “UPS continues to shrink to become more profitable. That's the big takeaway there.” – Thomas Black [32:09]
• Timeline: The restructuring is expected to finish this year, after which UPS plans to return to growth as a leaner, more efficient company.
  • “After this year... we'll be a leaner company and ready to grow. So it's going to be a little bit painful this year.” – Thomas Black [32:41]
• Automation: New automated facilities are 28% more efficient; automation is a key driver in workforce reduction rather than AI per se.
  • “Those automated buildings are 28% more efficient than the older buildings.” – Thomas Black [34:59]
• Competition: As UPS trims low-margin business, Amazon strengthens its own logistics arm, particularly in urban areas; smaller gig-driven delivery firms are proliferating.

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7. Yale’s Struggling Endowment Model

(36:49 – 44:08)
Guest: Janet Loren, Bloomberg Higher Education Finance Reporter

• Endowment Model Under Strain: Yale and peers are locked into significant private equity investments with high illiquidity at a time when public markets have outperformed and schools need cash for new taxes and expenses.
  • “Now, higher interest rates, fewer exits, you've got a huge amount of money locked up in private equity, in some cases 40%.” – Janet Loren [37:27]
• Endowment Tax: White House has imposed an 8% tax on net investment returns, forcing schools to sell assets at discounts.
  • “Yale and Harvard each had pegged their bill for the endowment tax... to be about $300 million a year.” – Janet Loren [39:28]
• Asset Allocation: Traditional Yale model favored illiquid alternative assets and minimal US equities; other endowments, like University of California, now favor liquid equities.
• First-Mover Advantage Lost: Oversaturation in private markets has eroded Yale’s competitive edge.
• Active Management: Yale relies on long-tenured fund managers, emphasizing a “fund of funds” approach rather than simple index investing.

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Notable Quotes

• On ICE vs. EVs at GM:
  “You're talking about like 85, 90% ICE versus 10, 15% EVs.” – Steve Mann [02:33]
• On Tesla’s Focus:
  “Investors are actually looking... into, you know, what is Elon Musk going to talk about in their next earnings calls on the Robotaxi?” – Steve Mann [05:44]
• On Ultra-Low Cost Airlines:
  “Costs for both pilots and cabin crew are hurting the ultra-low cost carriers and the low cost carriers. And that's… this K-shaped recovery that airline executives are talking about.” – Sid Philipp [10:54]
• On Nvidia-CoreWeave Deal:
  “Nvidia is creating the chips and CoreWeave is helping them sell the computing using those chips to different public that's out there.” – Anuragrana [16:47]
• On Starbucks’ Recovery:
  “Turnaround plans are starting to really take a hold right now and, and results really improved, rising, you know, 4% system wide.” – Michael Halen [20:22]
• On AT&T and Fiber:
  “They're the fiber leader and they're about to buy Lumen's fiber business and add another million fiber subscribers there.” – John Butler [23:54]
• On UPS Restructuring:
  “UPS continues to shrink to become more profitable. That's the big takeaway there.” – Thomas Black [32:09]
• On Yale’s Endowment Challenge:
  “Now, higher interest rates, fewer exits, you've got a huge amount of money locked up in private equity.” – Janet Loren [37:27]

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Timestamps for Important Segments

| Segment | Topic | Timestamp | |-------------------|-----------------------------------------------------|-----------------| | 1 | GM Earnings, ICE vs. EV Strategy, Tesla | 02:11 – 08:54 | | 2 | Airlines: American, JetBlue, Low-Cost Carriers | 09:01 – 13:55 | | 3 | Nvidia’s CoreWeave Investment, AI Chips | 16:28 – 20:00 | | 4 | Starbucks Turnaround and Innovation | 20:03 – 23:26 | | 5 | AT&T Earnings, Telecom Competition | 23:30 – 29:03 | | 6 | UPS: Cost-Cutting, Workforce, Industry Automation | 31:47 – 36:45 | | 7 | Yale Endowment Model Falters | 36:49 – 44:08 |

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Episode Tone

The episode balances a straightforward, research-driven style with personal anecdotes and accessible analysis. The hosts and analysts candidly address the uncertainties and challenges in each sector, echoing market realities and maintaining an insightful yet conversational tone.

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For deeper research and more company/industry analyses, the episode recommends exploring Bloomberg Intelligence via their terminal tools.

Transcript

[Paul Sweeney]

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[Scarlet Fu]

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[Scarlet Fu]

This is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney.

[Paul Sweeney]

How do you think the Fed is looking at tariffs, the uncertainty of tariffs?

[Scarlet Fu]

Let's take a look at the sectors and how they perform.

[Paul Sweeney]

A lot of investors getting whipsawed every.

[Scarlet Fu]

Day by news events, breaking market headlines and corporate news from across the globe. Could we see a market disruption, a market event?

[Paul Sweeney]

People just too exuberant out there.

[Scarlet Fu]

You see some so called low quality stocks driving this short term rally. Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals.

[Paul Sweeney]

On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall street and the global markets.

[Scarlet Fu]

Each and every week we provide in depth research and data on some of the 2000 companies and 130 industries our analysts cover worldwide.

[Paul Sweeney]

Today we'll look at why the chip giant Nvidia invested $2 billion more in the cloud computing startup Core Weave.

[Scarlet Fu]

Plus a look at why a turnaround plan at the coffee giant Starbucks is starting to take hold.

[Paul Sweeney]

But first, we begin in the auto sector. This week, General Motors released earnings that beat analysts expectations.

[Scarlet Fu]

The company also said it expects profits to grow as much as $2 billion this year and plans to return more of that money to shareholders with a higher dividend and buybacks.

[Paul Sweeney]

For more, we're joined by Steve Mann, Bloomberg Intelligence Global autos and industrials analyst.

[Scarlet Fu]

We began by asking Steve to break down GM's EV versus gas engine portfolio.

[Steve Mann]

Oh, it's actually ice engine is much greater. I know they have a full portfolio of EVs but you're talking about like 85, 90% ICE versus 10, 15% EVs. So you know, they do have a big portfolio, but it was just at the beginning of rolling them out. You know, they do have still, they do still have one more major rollout coming out, which is the Chevy Bolt, a smaller vehicle, which the industry and GM thinks that that's where the market is going, a cheaper, more convenient ev.

[Paul Sweeney]

Steve, it's almost to the point where the street rewards these companies if they not just not fully back away, but at least slow down the evolution to EVs and just focus on what's making money today. Is that kind of what where the industry is today?

[Steve Mann]

Yeah, exactly. Like Trump actually did the auto industry a major favor by relaxing the miles per gallon mandate. So basically every vehicle in the Big Three's portfolio are currently meeting those mandates. And what it means is less penalties. Right. And no need to buy EV credits going forward. Huge savings. And what that means is it could translate into a slower increase in car prices for consumers, especially for big trucks. Makes the big trucks a lot more attractive to sell for the Big three. So they're going to sell as many as possible given this opportunity. I know we talked about hybrid for gm. It's going to be a huge sinkhole for them if they invest in that technology today. So let's, let's not do that. Maintain whatever they can do with EVs and really push the ICE vehicles, maintain.

[Scarlet Fu]

What they can with EVs so that, you know, small 10 to 15% of their overall portfolio, forget about hybrids and just focus on the mammoth gas guzzling vehicles. What happens then? If gas prices do turn up higher unexpectedly and I know that the administration is doing all it can to prevent that from happening, but I'm looking at AAA gas prices and they bottomed at around 2 and have now made their way back up towards 290.

[Steve Mann]

Yeah, I mean historically when gas prices go up, it does impact ICE sales and you know, it may push some buyers into EVs, you know, depending on how where the expansion of the EV charging network is at. But I think at the end of the day, if gas prices do go up, actually benefits the Japanese companies like Toyota and Honda where they have a full suite of hybrid vehicles that actually Consumer love.

[Paul Sweeney]

Yeah, I just leased the Honda CRV hybrid. My son who drives in California all the time where the gas is really expensive.

[Scarlet Fu]

That's right. He probably wanted it and how often does he have to fill up?

[Paul Sweeney]

Not that often. I mean, just not that often. It's great, it's a great technology. Steve, let's just, while we got you here, what's the call these days on Tesla as we talk about this EV business, but really for Tesla, we're talking about so, so much more.

[Steve Mann]

Yeah. Looking at GM as a backdrop, you know, GM's earnings for 2026 is probably a little bit light. There's probably some more upside on the shift mix for more ice. So what it means for Tesla, it's an uphill battle for them. I know the stock is trading, you know, at a astronomical valuation at the moment. Investors are very focused on their Robotaxi autonomous vehicle build out. They people feel that, you know, they can actually out compete the likes of Uber and Lyft. So you know, sales will be weak in the fourth quarter for Tesla. But I believe the, you know, the investors are actually looking over past that into, you know, what is the, what is the catalyst or what is, what is Elon Musk going to talk about in their next earning calls on the Robotaxi?

[Scarlet Fu]

Yeah, it's always about the Elon, Elon Musk narrative, his vision going forward of what this company is going to be. I wonder, you know, Mary Barra talked about that charging infrastructure, the network and how we're not there in the United States, Tesla is offering the supercharger and that's part of its business model to be able to make that charger available to other automakers. How, how big a contributor is that to its revenue, to its profitability when it's profitable?

[Steve Mann]

Yeah, it's still a small amount. It is what they do is they want to expand that business. So they are talking to gas stations like Wawa out in Pennsylvania are actually buying superchargers, installing it next to the gas pumps and next to the stations. So they are trying to expand it in terms of charging. Selling these supercharging business and the revenues from the charging, it's still really, really small. I would say around 10%, maybe less.

[Paul Sweeney]

Hey, what do we know about how important are incentives here? I look at other countries around the world and they have got these huge EV percentages of China sales, China, the Nordic countries. How important are government incentives to get there?

[Steve Mann]

It is very important. I think the Germans are actually putting back the incentives and it has lifted EV sales in Europe and Germany. But at the end of the day, you really want to build a sustainable growth environment for these cars. And Mayor Barr is right. We actually publish A very extensive report on EV charging, comparing charging network in the US versus China night and day. Right. So you know, it's about convenience, it's about cost for the US Consumer. It's great to have, it's great for consumer to have some subsidy, you know, help pay for the cars that they're buying. But I think long term it really needs the consumer to really buy into the product.

[Paul Sweeney]

Our thanks to Steve Mann, Bloomberg Intelligence Global autos and industrials analyst. We turn next to some news in the aerospace industry.

[Scarlet Fu]

This week American Airlines projected revenue growth for 2026, but said that the winter storm that raged across the US this week will clip revenue this quarter.

[Paul Sweeney]

We also heard from JetBlue Airways who reported a wider loss than expected last quarter, highlighting challenges in a strategy to win over higher paying customers.

[Scarlet Fu]

For all of this as well as other news in the aerospace industry, we were joined by Sid Philipp. He is Bloomberg's chief correspondent for Global Aviation. We began by asking Sid for his take on American and JetBlue's recent results.

[Sid Philipp]

So the airline industry is actually in a sort of bit of a flux at the moment. I mean you've obviously had the impact of all these storms, you've had the impact of the government shutdown and you've got the uncertainty about the year ahead. And so American Airlines is taking a more bullish view of the year ahead. They're sort of following their peers United and Delta in targeting the most premium end of the spectrum. And they're sort of hoping that by aiming their product at the premium end of the market, they can sort of offset the sort of downturn that's happened at the bottom end of the market. JetBlue also talking about how at the moment things look a bit shaky, but they're talking about how they see a road to profitability and a free cash flow by the end of 2027. So slightly more long term view of when the recovery might happen. And that sort of explains a dichotomy in the is the earnings forecast for both these companies.

[Scarlet Fu]

And of course JetBlue is also doing what it can to premium, premiumize, if that's a verb. It's experience for customers too with absolutely opening of that new lounge in jfk. So that is the story with airlines and it's been fairly consistent too with what we heard from Delta and United. Where does that leave the smaller carriers that need to either team up or, or fade into oblivion? I'm thinking Spirit, I'm thinking Frontier. Is there still a market for these discount carriers?

[Sid Philipp]

So the market at the moment is very tough for the discount carriers. So essentially what's happening is that the top end of the market is going to Delta and United for their premium products like first class and business class. And on the other end of the market you have sort of everyone else competing to get the lowest cost tickets into the hands of the passengers. And that's sort of eroding margins, especially as costs for both pilots and cabin crew are hurting the ultra low cost carriers and the low cost carriers. And sort of, that's sort of been explained by this K shaped recovery that airline executives are talking about. And so JetBlue and the others are sort of trying to get the premium end of it. I mean we've seen even Spirit Airlines talking about how they're adding a so called business class product. They've added WI fi, they've added all sorts of things to keep people coming back to them. And so they're hoping that by slightly differentiating themselves from just very commoditized ultra low cost carriers, they can be able to get in those customers.

[Paul Sweeney]

Well then it kind of goes back to the point, is there a need for a real true low cost carrier out there? If some of these supposed ones are going kind of mid market, higher market, is there a market demand for that or is everybody just willing to pay up for travel?

[Sid Philipp]

At the moment it looks the people who are willing to pay up for travel are the people willing to pay up for travel. And so at the bottom end of the market, I mean everyone talks about how there will be a recovery of the ultra low cost carriers and that once people are more certain about the economy and once people at the bottom end of that key start to see some stability in the economy, people will travel. Because I mean, remember during the pandemic there was, after the as, as we exited the pandemic, there was this boom in travel for across the board and that sort of has further split up and so we will see that demand coming back. We just don't know when and what sort of shape that will be.

[Scarlet Fu]

So Sid, you also cover Boeing and it came out with its results and in terms of the numbers for the fourth quarter, free cash flow topping estimates, it generated cash for a second straight quarter. That sounds like it's good news. How far along this recovery, this long awaited recovery is Boeing actually.

[Sid Philipp]

So Boeing is on the road to recovery. They're still not there yet, but they are, they are recovering. I mean the fourth quarter results and their full year results were boosted by the sale of that Jefferson Digital Aviation subsidiary. And that sort of gave them a $9.6 billion boost. And at the same time, Boeing is sort of ramping up production, they are ramping up sales. I mean they've seen a surge in sales. I mean in the last ever since the Trump administration came in, we've seen a surge in Boeing sales. And so Kelly Ortberg, the new CEO, is sort of pushing Boeing to improve production, ramp up production at a steady pace. I mean, they've gone to about 42, 737 max jets a month and they are sort of further boosting those production numbers and that will get them on at the sort of where they want to be in Kelly Otberg talked about how 10 billion in free cash flow is his target and the company's on its way there.

[Paul Sweeney]

Our thanks to Sid Philip, Bloomberg Intelligence Senior Aerospace, Defense and Airlines Analyst.

[Scarlet Fu]

Coming up, a look at why the wireless provider at AND T posted fourth quarter profit and revenue that beat Wall street estimates.

[Paul Sweeney]

You're listening to Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2000 companies and 130 industries.

[Scarlet Fu]

You can access Bloomberg Intelligence via Big Go on the terminal. I'm Scarlet Fu.

[Paul Sweeney]

And I'm Paul Sweeney and this is Bloomberg.

[Scarlet Fu]

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[Paul Sweeney]

We move to some news in the tech space.

[Scarlet Fu]

This week we heard that the chip giant Nvidia invested an additional $2 billion in the cloud computing startup Core Weave.

[Paul Sweeney]

As part of the collaboration, Core Weave will be among the first to deploy forthcoming Nvidia products.

[Scarlet Fu]

We brought in Anuragrana, Bloomberg Intelligence tech analyst to tell us more.

[Paul Sweeney]

We first asked an Iraq for his reaction to this deal.

[Anuragrana]

If you go back in history and see when Corby was going public it was having a hard time getting a good pricing and then Nvidia kicked in and said, you know, we're going to be a part of this particular ipo and I think what's happening here is this Nvidia is creat creating the chips and Core Weave is helping them sell the computing using those chips to different public that's out there now at this time Core Weave has a massive backlog of orders, but it needs to get funding done in order to convert that into data centers and then capacity. Now Nvidia isn't giving them money straight away, but it's basically saying we have confidence in this company and it would help than Core Weave go out and raise capital from outside. So I think it's a little bit more like spreading the Nvidia ecosystem is what starts happening right now.

[Paul Sweeney]

Looking at your research note, you note that CoreWeave has $50 billion in remaining performance obligations. What does that mean?

[Anuragrana]

Yeah, basically it says this is kind of the contracted revenue they have on hand, which means Microsoft has said, you know what, I'm good for 10 out of that. For example, Meta has a deal with them. So they have this backlog of all these orders. But you, unlike other companies, you just can't go out and fulfill the demand. You have to create a very large data centers using Nvidia chips. It then starts to work out or runs and then you realize that 50 billion into revenue over the next several years.

[Paul Sweeney]

So what's the gating issue here for Core Weave? Is it more Access to more data centers. What's kind of the gating issue for them to fulfill that revenue?

[Anuragrana]

Multiple gating factors. One is actually the data center itself. For that you need land, you need power. The chip side is okay at this point because Nvidia is there. But then also you need capital. I mean, Code Weave is not a company like Microsoft or Amazon that has unlimited capital to create these data centers. It has to go in the market and raise capital. Before they went public, I mean, their cost of capital was north of 10% right now after they went public, I mean, the cost of capital has gone down to about 8%. But the entire new clouds arena, whether it is Core Weave or whether it is Nebias, really depends on private credit lending or lending by other banks to really come up with the funding to create these data centers.

[Paul Sweeney]

So I also see that Microsoft unveils latest AI chip to reduce reliance on Nvidia. What's going on there?

[Anuragrana]

So this is something that's going on with all hyperscale cloud providers. You know, whether that's Google with its CPUs, Amazon with its chip, and now Microsoft launching, I mean they have one chip, but the first generation was not, you could say, did not do that well in terms of, you know, reception from customers. What Microsoft is hoping here right now is, you know, for training they'll still use the more powerful Nvidia chips, but for, you know, running, let's say a copilot, they could get around and use less powerful chips. And if they do that, they actually save a lot of money. You know, in our math, we think if Microsoft is going to spend, you know, somewhere north of $140 billion this year, more than 50 of that is going to go just buying chips. And so, you know, it's, it's a very big ticket for them and they, everybody needs to be doing this, frankly, in house.

[Scarlet Fu]

Our thanks to Anuragrana, Bloomberg Intelligence technology analyst.

[Paul Sweeney]

We move next to earnings from the coffee chain Starbucks.

[Scarlet Fu]

And this week the company reported global sales at established locations rose 4% in the most recent quarter. That topped analysts estimates.

[Paul Sweeney]

For more, I was joined by Michael Halen, Bloomberg Intelligence senior restaurant and food service analyst. I first asked Michael to break down how CEO Brian Nichols turnaround plan is going at Starbucks.

[Commercial/Advertisement Voice]

The turnaround plans are starting to really take a hold right now and, and results really improved, rising, you know, 4% system wide. Same store sales US as well. China was up 7%. You know, here in the US it's, you know, mainly about better operations. Right? They, they rolled out new operating standards late last year and that they seem to be really boosting the speed of service, which is creating happier customers that come back more frequently. Right. Some food innovation including protein, cold foam seems to be hitting the mark. Right. And they're doing a better job on the marketing side. So all those are driving drove better same star sales than expected.

[Paul Sweeney]

Yeah, I don't know the one. I go to The Starbucks, Route 35, Wall Township, New Jersey. They do a great job for me and I've noticed the change. I mean little things like writing your name back on the cup like they used to back in the early days. In addition to that sticker which was a little antiseptic, I guess. Talk to us about costs there. Are they looking at their costs as well?

[Commercial/Advertisement Voice]

Yeah, they, they've identified $2 billion in annual costs that they want to get after over the next one to two years. You know, right now margins have been impacted. They've gotten those same store sales and traffic numbers up by adding labor to the stores. Right. And so they're seeing margin compression still. So now that they got people coming back to the stores, now that the operations are more dialed in, you know, CEO Brian Nichols said they're not quite where they need to be throughout the day. They're great at peak, but they have some improvements still to do. But you know, now that people are coming back to the stores, they're going to, you know, focus a little bit more on where, where they can save some money because you know, it was a smart move. Reallocating labor into the stores, but costly.

[Paul Sweeney]

Talk to us about the competitive environment because you go to like, I don't small towns. Seems like there's a coffee joint on every corner these days. What's the competitive landscape for Starbucks these days?

[Commercial/Advertisement Voice]

Well, you know, it's as, it's as competitive as it's ever been. You know, they, they, you have some of these younger chains that seem to do really well with Gen Z, like Dutch Bros. And seven Brew and they're, they're opening up these drive thru cans, you know, throughout the suburbs across America. You know, in the cities, you know, there's a lot of competition with these, you know, very high end coffee shops that, that are, you know, using very, you know, very high quality coffee and offering an elevated food experience. So competition is tough and that's why, you know, Starbucks is, is making some changes. You know, they're focusing on, on health and wellness. Right. They're looking to improve the food in the bake case. They're looking to improve the food throughout the day. They're looking into some new innovative drink offerings to boost that that afternoon day part. And so, you know, this, this is just the beginning of what Starbucks, you know, thinks they need to do for long term. Continued same store sales growth.

[Scarlet Fu]

Our thanks to Michael Halen, Bloomberg Intelligence senior restaurant and food service analyst.

[Paul Sweeney]

We move next to the telecommunications space.

[Scarlet Fu]

This week AT&T reported fourth quarter profit and revenue that beat analysts estimates.

[Paul Sweeney]

The results were fueled by customers who subscribed to more than one connectivity service. AT&T added more than a half a million fixed and mobile Internet subscribers in the quarter.

[Scarlet Fu]

So we brought in John Butler, our senior telecom analyst and began by asking John where AT&T stands relative to its rivals.

[John Butler]

Post the earnings call, they held a breakout session with investor relations with the sell side and there were a lot of questions about how broadband or how competition is now shifting from wireless over to broadband. I actually think AT and T is in a great position relative to their competitors because they're the fiber leader and they're about to buy Lumen's fiber business and add another million fiber subscribers there. So in terms of their ability to sell what are called converged packages or wireless together with broadband, they're in a great position there because they have both fiber and they have a smaller fixed wireless access business, which is that wireless broadband product.

[Paul Sweeney]

John, this is a company at&T that spends 20, 22 billion dollars in CapEx every year. What is that CapEx for?

[John Butler]

Typically a lot of it, Paul, is going towards wireless network upgrades as well as the deployment of fiber. So this year, for example, they're going to add 5 million new fiber homes. But it costs about $2,000, maybe twice that in some markets to build a new, what's called a fiber homes pass. So a lot of capital is getting spent this year, next year, and maybe to a little bit of a lesser degree in 28. That's sort of laying the foundation to build out that fiber network and that 5G wireless network. Beyond that, AT&T has said we're going to cut our CapEx, we're going to lower our capital intensity and you're going to see a lot more free cash flow flow through and they're going to be able to fund hopefully some dividend growth after that and increase the share buyback.

[Scarlet Fu]

Yeah, I'm looking at the dividend yield for AT&T, 4.6%. For Verizon, it's almost 7%. For T Mobile, a little bit less at 2.19%. John, where do the telecoms stand when it comes to this rotation out of big tech, looking for some cyclicals, looking for parts of the market that haven't been overbought.

[John Butler]

So it's a good question. Scarlett. I always say telecoms, particularly the dividend payers like AT&T and Verizon, are bond proxies to a degree. I think sentiment has been pushed around a little bit by the fact that we have new CEOs of both Verizon and T Mobile and these guys are going to be looking to make their mark. So there's been a little bit of concern, or more than a little bit of concern that the competitive intensity in wireless is going to pick up as these new CEOs look to make their mark. And I think that has led to some of the pressure, particularly on AT&T. Though again, I think they put a lot of those concerns to rest with their by reiterating their fiber plans and laying out new free cash flow guidance.

[Paul Sweeney]

John, on the competitive land front, where are the cable companies these days?

[John Butler]

They're struggling, Paul. I mean, they're at a technology disadvantage in that they're offering broadband over those legacy coaxial cable networks. They're doing what they can to upgrade the technology and increase speeds on those networks. But at the end of the day, fiber really is a superior product to everything else on the market. And fixed wireless access, which has been offered by the telcos has been a very popular choice. Given the fact that it's an easy setup, it's over the air, so there's very little problems with it. It's pretty much problem free. As broadband goes over time, it sort of has a headroom problem. It can't offer the same speeds as fiber. But through it all, cable is sort of flying underneath those two products, sort of, you know, trying to compete with what is a legacy product in the market.

[Scarlet Fu]

John, did we learn anything from AT&T's results regarding iPhones and, you know, consumers signing on for the latest version of the iPhone?

[John Butler]

So great question. It's very interesting. AT&T over indexes to the iPhone. They have a lot more users than Verizon or T Mobile because they had an early exclusivity deal. When the iPhone first launched. They were asked about the foldable iPhone that's rumored to be coming out next year and whether that's really going to move the dial for them. Their answer to me was interesting, I didn't expect it, which is they've been tracking the performance and the sales of the foldables that they have available on the network on the Android side and their expectation is that we won't see a huge bump in iPhone sales next year. I think time will tell. I actually think foldables are going to resonate well with people and Android isn't always the best read through there. I think it's a different kind of user that's on the Android phone versus iPhone, but we'll have to see in the fall.

[Paul Sweeney]

Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analyst.

[Scarlet Fu]

Coming up, a look at why the logistics company UPS says it expects to cut another 30,000 jobs this year.

[Paul Sweeney]

You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on 2000 companies and 1130 industries.

[Scarlet Fu]

You can access Bloomberg Intelligence through Bigo on the terminal.

[Paul Sweeney]

I'm Scarlet Fu and I'm Paul Sweeney and this is Bloomberg.

[Scarlet Fu]

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[Scarlet Fu]

With Scarlet Fu and Paul Sweeney on Bloomberg Radio.

[Paul Sweeney]

We move next to news from the logistics company ups.

[Scarlet Fu]

This week UPS forecast full year sales that beat analysts estimates.

[Paul Sweeney]

However, the company also said it expects to cut another 30,000 jobs this year to rein in cost and boost profitability.

[Scarlet Fu]

For more on this and the state of the shipping industry, we brought in Thomas Black. He's a Bloomberg opinion columnist.

[Paul Sweeney]

We first asked Thomas to give us his take on what we heard from ups.

[Thomas Black]

UPS continues to shrink to become more profitable. That's the big takeaway there. They're reducing their Amazon business and they're trying to retrench with more profitable, profitable packages. And that's probably a move away from some of the e commerce deliveries where the competition is fierce and there's lots of little companies that are, that are out there competing.

[Scarlet Fu]

So how far along this journey of shrinking to become more profitable? Are they? Are we in the third inning? Are we in the seventh inning?

[Thomas Black]

This will be the last year of this, so I would say we're in the sixth inning heading toward the ninth. So after this year, Carol Tomei, the CEO at ups, said we're going to be a, a leaner company and ready to grow. So it's going to be a little bit painful this year. She walked analysts through it. The first half is going to be more painful as they glide down from Amazon and they take some write downs and so forth. As you know, they retired their fleet of MD11s, which is this old plane that was sad crash. So they're going through all this in the first half and then the second half things should start to turn around. They're also, they're not only shrinking their Amazon business, are shrinking their footprint. Their facilities and the older ones are being retired and they're replacing those with new automated facilities and that's going to allow them to lay off more union workers. So that big union contract where the Teamsters push through a big labor increase is turning around to bite them a little bit because UPS is dealing with that by shrinking its workforce.

[Paul Sweeney]

How does this UPS strategy differ from that of FedEx?

[Thomas Black]

They're similar in the sense that they're both cutting costs aggressively. FedEx is a little bit different because it doesn't have the labor costs from the union workforce. So, so it's a little bit more flexible. And FedEx is undergoing a major overhaul that's probably in its last innings as well. And the last part of that is the most difficult part where they're going to combine their two separate networks, the ground network and express network. They're in the middle of that but so they're going to be coming out of that as well. So we're going to have two parcel companies that are restructured and ready to grow at the end of this year.

[Scarlet Fu]

Every time there is some kind of headline regarding UPS laying off workers or cutting positions, it's in, it's these massive numbers right this time around. It's up to 30,000 positions this year. And as you mentioned Thomas, this is all due to trimming down and small downsizing the scope of the company. At what point are we looking at job cuts tied to AI or have we not got even gotten there yet?

[Thomas Black]

Well, I would, instead of saying, I would say automation and those are these new facilities that handle packages automatically. You even have the induction of packages where you have robots putting the packages on the conveyor belts and taking them off. So those are the steps toward more automation. This is that physical AI that people talk about. Right. And interesting stat that Carol Tomei gave on the call is that those Automated buildings are 28% more efficient than the older buildings. So the more automation is worth they're leaning into. So it's part of it shrinking some of the low profit volume plus more automation to replace the human workers. Basically.

[Paul Sweeney]

E commerce continues to grow, I guess double digits. Who's handling all these packages if UPS is maybe backing away a little bit?

[Thomas Black]

Well, Amazon has its own delivery network. It tends to want to deliver into those big urban areas where it just takes things from a warehouse to a residential home. So they, they do that very well. Where they want help is on the rural areas. That's where they turn to folks like UPS and the Postal Service. So it obviously Amazon is a big player there. We also have lots of smaller companies. These are gig type companies that have apps and workers show up and they have an app on their phone and it gives them a delivery route and they throw packages in their car or their truck and they go deliver. There's a lot of those companies that tend to, to operate in urban areas. So there's actually a lot of capacity out there for retailers or people who are really smart on their inventory management.

[Scarlet Fu]

To tap into that was Thomas Black Bloomberg Opinion columnist.

[Paul Sweeney]

We move now to a Bloomberg Big Take story we recently focused on entitled Yale's Endowment Model Falters. A Tough Moment for Universities. You can find it on bloomberg.com and the terminal.

[Scarlet Fu]

So the story looks at how Yale bet on private equity and other illiquid investments. And now some of the wealthiest endowments, including Yale and others that follow the Yale model, are on the hook for hundreds of millions of dollars in new endowment taxes from the White House.

[Paul Sweeney]

Now universities are dumping private equity funds at discounts following years of poor returns, while public stocks have outperformed the asset class.

[Scarlet Fu]

For more, we brought in Janet Lauren, Bloomberg's higher education finance reporter.

[Paul Sweeney]

We first asked Janet to break down what is happening with Yale's endowment model.

[Janet Loren]

From time to time, we've seen that in certain years where simple just outperformed private Equity and other NVC. And in 2021, remember the outstanding returns that these schools had. But now, higher interest rates, fewer exits, you've got a huge amount of money locked up in private equity, in some cases 40%. And you know, look, these schools would like a little cash. They're looking, you know, perhaps they want to change managers. They need the cash to do other things as well and refresh their portfolios. But when you have, you know, in the 40% locked up, you know, time to think about other things. And that's perhaps why you saw Yale doing its first ever sale last year, which was a big deal.

[Paul Sweeney]

So again, this sale, Yale unloaded about $2.5 billion in LBO funds at a discount. That is brutal. Well, is that unprecedented or other things?

[Janet Loren]

Well, Yale has done it for the first time. You know, others have been doing this before. Harvard has unloaded a lot in previous years, but it's sort of a new normal in some ways. Looking at secondaries, the secondary market is very popular right now. And, you know, in the hunt for potential cash and liquidity, you know, you look at the UC endowment where we talked about this 80, 20, they call it the Blue and Gold fund, very proud of it. And in the height of the pandemic, when they wanted some liquidity, they gave almost $2 billion in cash to the campuses for liquidity. Compare that to 2008, when schools were forced to sell on the secondaries or borrow. That's kind of a stark example right there. When you need money.

[Scarlet Fu]

When you need money. And I think that's a key phrase here, especially in 2026, because this white House has been targeting higher ed. And even though Yale has not been targeted to the Extent that Harvard has, for instance, or Columbia. These schools need money in a way that they didn't before, if for nothing else to pay taxes on their endowment.

[Janet Loren]

Yes, and that's a huge game changer. You know, a year ago, we may not be having this conversation. Yale and Harvard each had pegged their bill for the endowment tax, which is now 8% of net investment returns, to be about $300 million a year.

[Paul Sweeney]

Wow. And is that enforced? Is that happening right now?

[Janet Loren]

Absolutely. That happened July 1st, when the, when the big beautiful act happened.

[Paul Sweeney]

How about the actual, I guess, halting payments to some of these universities that President Trump and the administration have talked about for some of their funding? Has that happened?

[Janet Loren]

So many schools have had settlements. Harvard famously has not. Yet there was a lawsuit in last September. The district court ruled in favor of Harvard. Late December, the government appealed. So that's still in flux. But there's a huge concern of Harvard and all universities, are we still going to get this federal research funding going forward? And Harvard may have temporarily solved their problem. Still very unclear. But what is the money going forward, forward? Our school, our universities, these large research universities, still going to be able to count on hundreds of millions of dollars. You know, Northwestern, which settled around Thanksgiving, had been self funding their research to the tune of something like 30 or $40 million a month. So we're talking, you know, lots and lots of money.

[Scarlet Fu]

Yeah, they need the money in a way that they didn't before. And going back to the Yale endowment strategy and how well it worked, at least initially, when David Swensen launched it back, I think in the 80s and 90s, those were the heydays of the Yell endowment model. Maybe it made sense when private equity, private investing was not a big thing yet, was not yet mainstream. Or maybe it makes more sense in a low rate environment. But times have changed and that's a big part of it, right?

[Janet Loren]

Absolutely. First mover advantage. You know, there weren't as many institutional investors doing what he was doing. He was, he saw inefficiencies in the market and he said, look, this is what we can do. We have the ability to lock up money for a while. We're very long term investors. We invest for centuries. We can do this. And it was extremely successful. And others tried to copy. Certainly more money piled into private equity, sovereign wealth funds, pension funds, foundations. And when you have a lot of money chasing returns, it just, it just isn't as successful, especially at this higher interest rate, when there are fewer exits.

[Paul Sweeney]

What is the Yale model in terms of asset allocation? And is it dead now?

[Janet Loren]

Well, you know, we had the head of a very large pension fund say it's not dead, it's perhaps on life support, but it's, you know, it's looking at inefficiencies in the market. Now, typically, Yale has not been a big investor in US equities, you know, tiny share of. Now we, we don't know the details because unfortunately they stopped publishing their asset allocation when David Swensen died. You know, a huge loss for me personally, because it gave you some great insight. But they, you know, typically had a very, very tiny investment in US Equities. Now look at the University of California, you know, 80% in global equities. But, you know, who is, who, who are they trying to emulate? You know, some investor in Omaha who's been pretty successful.

[Scarlet Fu]

Yeah.

[Janet Loren]

You know, betting on America.

[Anuragrana]

Yeah.

[Scarlet Fu]

But just buying cheap index funds. I guess what's not immediately obvious to people is that an endowment is more of a fund of funds rather than just a fund like the UC fund, the Blue and Gold fund you were talking about. That's almost like a very basic personal account where you're just putting money into index funds and not dealing with it for a long time.

[Janet Loren]

Exactly.

[Scarlet Fu]

But Yale is like they're picking up fund managers. Like, it's very, very complex.

[Janet Loren]

Well, it's actively managed. And Yale is very famous for, you know, having managers for 10 or more years. I did a story maybe 10 years ago that talked about the length of managers and it's often 10 years. And, you know, Yale very smartly came up with a new program. They call it the Prospect Fellowship, and they're looking for new talent. And we had a comment from a former Princeton manager who talked about, you know, they look for talent and they grow with them. So maybe a small allocation to a manager. Today, think Hill House at Yale turns when they're successful into, you know, billion dollar investments. And especially when they've done well, you know, you can grow with a successful manager. And then all of a sudden your, your allocations are much larger as you're growing with them, and that's what they're seeking. So that's sort of like a refresh for them.

[Scarlet Fu]

That was Janet Loren, Bloomberg's higher education finance reporter.

[Paul Sweeney]

That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on 2,000 companies and 130 industries.

[Scarlet Fu]

And remember, you can access Bloomberg Intelligence via by go on the terminal. I'm Scarlet Fu.

[Paul Sweeney]

And I'm Paul Sweeney. Stay with us. Today's top stories and global business headlines are coming up right now.

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