Woojin (3:22)

Yeah. Hey Scarlet. So now when we think about it, it is going to create a new normal. Quite quite frankly the magnitude of the DRAM price increases was a bit higher than we had anticipated and it's going to be a drag on margins. At least it already hit the current quarter, reported quarter and then it is going to be another 200 basis points gross margin erosion next quarter. The one thing that we can be assured of is that there's going to be price increases across the board for a lot of Cisco's products and more importantly a lot of big tech products such as Dell and HP going forward.

Scarlett (4:04)

So is this more today an industry problem or a Cisco problem here?

Woojin (4:09)

No, it's an everybody problem quite frankly. I mean look, there's a couple of things here, right? The DRAM pricing isn't going to hurt only Cisco. But I'm scrambling to get new laptops for my kids before the DRAM prices hit the PC market as well. And you know what, we are going to see that anything that's DRAM heavy in particular servers, that's going to be bogged down on the gross margin side. But what I'm trying to balance out is how much of that is going to, how much are the companies going to eat that gross margin and how much is that going to be passed through?

Host (4:48)

Okay, so I guess the other part of it was that Cisco shares were kind of priced to perfection as a lot of people were putting it. So it didn't take a whole lot for investors to react negatively to Cisco and the latest results. But 10 and a half percent, you know, that's, that's a pretty big adjustment. Are people rerating this company completely?

Woojin (5:06)

Yeah, and you actually make a good point. Right. As I was looking into the print, the P. E was at roughly 2122 times. And the last time we saw the P Es like that was back in 2023 when people were pre buying a lot of networking gear during the COVID cycle. Right. And what you know historically PEs are roughly around 17 to 18 times for Cisco. And what we are seeing is that the multiples coming back to the 17 to 18 times and I do think that's kind of a bit wr Scarlet primarily because this story is actually has a lot of sales behind a lot of wind behind its sales and I think a lot of investors are overlooking the the opportunity which is going to be multi year for Cisco.

Scarlett (5:54)

How long will the industry have to deal with? I guess chip shortage going forward. Is this something that chip makers can just flip a switch and start making more chips?

Woojin (6:04)

You know I wish I had a bottle with the magic genie that will pop up and create new drams. But the fact of the matter is is that every time you have if you want to create capacity for new memory chips it takes about two to three years. And the memory manufacturers were struggling very badly during the, during the COVID period when there was overcapacity. They've been hesitant to build up the capacity. But this AI boom and the memory demand related to the boom is a lot stronger than we had anticipated. You know I think my colleague Jake Silverman has a good piece out on how long it'll last. It might take another two or three years before it gets resolved.

Host (6:44)

So is there and I realize that this, this is more Jake's remit but is there still any kind of excess inventory of those memory chips or have we drawn down on all of that?

Woojin (6:55)

Well, I also covered the hard disk right space.

Host (6:57)

There we go.

Woojin (6:57)

Scarlett. So my guy, my hardest drive guys are sold out until 2026 and possibly into 2027. All the read throughs from SK, Hynix, Samsung, Micron and SanDisk, they're all sold out through 26 and into 27. They're already taking orders for 27 and 28.

Scarlett (7:15)

So this is a global problem. This isn't a trade spat, supply chain screwing everything up, trade war, tariff type thing. This is just a global supply issue.

Woojin (7:26)

Yeah, that's exactly it. Right. You know, the BI team has been writing about this for a couple of couple of months now and it's starting to exasperate into higher levels. To give you some context, we picked up on the higher chip memory prices back in November when they were rising roughly around 50, 60% on a year over year basis. Over the past quarter, DRAM prices have doubled to almost tripled. So everyone's scrambling to get chips before they rise even further.

Host (8:01)

All right, so inevitably that means laptop prices are going to be higher along with everything else. What about smart appliances? Do they use memory chips or do they use the analog chipset Texas Instrument makes?

Woojin (8:10)

Well, I mean get to get your smart tv, get your smart refrigerator, Laundromat stove as quickly as possible. I think the bigger issue here, Scarlett, is probably going to be the smartphone market. You know IDC has cut their smartphone forecast to be in decline primarily because there aren't enough memory, DRAM chips and as well as storage to help supply all the smartphones. Apple should be okay, but at the end of the day that there is going to be a supply constraint there.

Scarlett (8:44)

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend small cap stocks with improving operating margins or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by ZeroHash Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures@public.com disclosures being a small.

Host (10:03)

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4imprint Representative (10:59)

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Host (11:59)

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Andro Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.

Scarlett (12:13)

We got all the hotels reporting, a lot of the leisure companies reporting here, Hyatt just reported and some decent numbers. The street likes it. Stocks up 5.6% today. That's a 52 week high and the stock's up 11% year to date. Let's check in with Jodi Laurie. She's a senior credit analyst for Bloomberg Intelligence. Jody, talk to us about Hyatt. We heard from Hilton. What are the folks at Hyatt saying about their business?

Jodi Laurie (12:37)

So everything is seeming to be pretty upbeat. I mean we're seeing a lot of the same narrative that we heard from Marriott that we heard from Hilton. And it's that we're seeing the strength in the luxury market at the moment. And it just, it's, it's not so surprising for us because we've been talking about this. I mean we did our travel survey we ran in in November and we talked about the K shaped economy. We anticipated that coming into this year, people who have the ability to spend on travel are going to Continue and those who aren't might pull back a little bit. And so I think we've started to see that. I think what's probably more interesting maybe is that both Brian Egger, my equity counterpart and I have been talking about this topic and we've been comparing notes and we're pretty aligned, which usually you don't really see equity and, and credit analysts aligned, but it's kind of hard not to be in this situation.

Host (13:24)

Right. The fundamentals are the fundamentals and these companies are able to monetize on that K shaped economy certainly by focusing their efforts on the upper end. So what about the lower end? Marriott runs Courtyard by Marriott and that's its branding right there. Does it mean that it just, you know, focuses less on that or devotes less resources to it? Is that a brand that kind of has a ceiling?

Jodi Laurie (13:50)

So I don't think it necessarily has a ceiling per se, but I think that, you know, and I think the companies are taking a longer term outlook of okay, right now at this moment those businesses might be a little bit weaker. They also actually cost a little bit less to run because when you think about luxury businesses, you have a lot more additional costs that you have to contribute to give the quality of service that the customer expects. So I don't think they're necessarily going to stop creating those brands and building out that platform. In fact, I think they're going to continue doing that because eventually this will run its course. What I do think is an interesting point that we've talked about a few times is if you look at a company like Choice, which is much more heavily embedded in that lowering consumer, embedded in that extended stay market that was likely more so affected by for instance the government sh, which Marriott, which Hilton talked about on most recent quarters. And so I think that's where you're going to really see the differentiation is not so much in these companies that have these global massive brands that they, they can sort of like shift around resources and also anticipate that some of their brands might be stronger than others at different times of the cycle. I think it's more in the ones that are a little bit more concentrated that might have some issues.

Host (15:03)

Okay, that makes a lot of sense. And I want to pick up on what you said about how luxury running those luxury brands costs more. How much of those costs does Hyatt, the company which has an asset light business model, bear versus whoever's paying the licensing fee to Hyatt?

Jodi Laurie (15:18)

Sure. And I think that's a key question too because Scarlett, when You think about it, you know, the Hyatt is doing the management of it, right? So they, they have the brand, they have the management, but you do have the company that owns the property and, and more. So what, you know, what they, they sort of referenced on the call and we've heard this a few times from the company, is more the anticipation that some of the owners of the hotels, if they have issues with financing, that these companies have to sort of think about ways that they can leverage their higher quality ratings to help them with financing to grow up the business and to make these sort of modifications on the properties themselves. I hired is, is an interesting company in and of itself because you know, it generates great cash flows. It anticipates to generate strong cash flows this year, but it's twice now done the same thing where it made these relatively large scale acquisitions to expand its footprint and to build out into all inclusives into other parts of the market and extend their sort of, you know, vertical integration. And in both instances they levered up to do so, but they've been pretty quick to delever. And to your point Scarlett, they used their pivot into asset light, meaning selling their properties and entering into management agreements to do so. So they benefit from that fee structure inst.

Scarlett (16:37)

So is there debt for you to look at for these hotel companies? Are they all this asset like stuff?

Jodi Laurie (16:44)

There is debt because the companies are still borrowing, you know, they're borrowing to sort of build out their platforms, they're borrowing to do tech upgrades, they're borrowing for all sorts of reasons. Marriott has sort of this, I don't want to say it's a flywheel because it's not. But they're at the point now where they have, you know, they have triple B ratings. They access the commercial paper market and they can access it because of their short term ratings at the moment and they use it as cash gaps, right? And they'll fill those cash gaps and then they refinance the debt that's coming due. So I don't think we're in a situation where these higher grade companies like Marriott is going to necessarily decrease their debt load. They're just going to sort of lean on the EBITDA growth. They're going to lean on the fact that they have these cash flows to support that. You know, they are going to give back to shareholders. They're continuing to do so. We're seeing Hyatt talk about that as well and I expect that that's going to case now in Hyatt's situation, they are still talking a little bit more about deleveraging just to get back to the category that they need to be in. But I think that over time it's the type of thing that we see these companies issue debt for an acquisition and then they delever and then they do it again.

Scarlett (17:53)

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend, small cap stocks with improving operating margins, or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures@public.com disclosures small businesses are.

Host (19:12)

The pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level that makes it possible for you to connect, learn from each other and grow together. There's a real commitment to seeing small businesses succeeded. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more@chase.com business chase for business make more of what's Yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply JPMorgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co. Finding the right Promotional.

4imprint Representative (20:13)

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Host (21:10)

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Andro Android Auto with the Bloomberg business app Listen on demand. Wherever you get your podcasts or watch us live on YouTube.

Scarlett (21:25)

Again, a busy day in the earnings fund, particularly for some of the restaurant companies. McDonald's reported numbers that beat estimates. Restaurant brands think Burger King, I think is kind of, it raised its dividend. So let's talk to Michael Halen. He is the analyst at Bloomberg Intelligence, follows all the restaurant companies out there. Mike, thanks so much for joining us here. Let's talk about McDonald's. Their value menu was kind of a hit with consumers.

Michael Halen (21:52)

Yeah, they've re established themselves as the, the value leader in QSR, which makes sense.

4imprint Representative (21:58)

Right.

Michael Halen (21:58)

They have 14, 000 stores in the US more scale than anybody, you know. And they've done a phenomenal job with the marketing. I mean I think they sold 55 million pairs of Grinch socks. Right. The Grinch Happy Meal. There you go. One of their most successful promotions ever. Right. So yeah, they're, they're firing on all cylinders. They also benefited from lapping E. Coli a year ago and that's, that's how they ended up with such a strong comp in which was a pretty tough quarter for most of the industry because of the cold weather and the flu that we saw in December. Right.

Host (22:33)

And we also are hearing that McDonald's is not going to rest on its laurels. It's looking to innovate. It's going to introduce some new beverages under the McCafe, McAfee, McCafe, McCafe, McCafe, Mccafe that's hard to say.

Scarlett (22:47)

McAfee Cafe.

Michael Halen (22:49)

It's not French.

Host (22:50)

Anyway. Indulge in coffee. That sounds kind of fancy. Is that to appeal to the consumer who might be trading down to McDonald's.

Woojin (23:00)

Now?

Michael Halen (23:01)

You know what it's. Beverages are hot. I mean cosmics, you know, although that, that chain isn't, isn't, you know, has been kind of dissolved. They, they've learned a lot about the beverage, beverage industry through that, through that test. Right. Dirty sodas. You know, there's a chain out west called Swig that, that absolutely crushes it with dirty sodas. Think you know, Coca Cola with added syrups and whipped cream on top and things of that nature. Right. That's a lot of energy drinks. These, these are like really a really hot segment of the QSR industry. It has been for years. Right. As some of these bigger, slower moving chains like McDonald's are starting to, to kind of jump on this bandwagon a little bit later. But you know, we think this is, this could be meaningful for them in the second half, you know, and it's no longer public. But you know, this could take a chunk out of Sonic's business, you know, because they've, they've long been a beneficiary of the, the beverage market, you know, and what's nice about that business is a lot of those drinks are sold and during that snack period, you know, during when these restaurants have a low around, you know, two, three, four o' clock in the afternoon.

Scarlett (24:20)

Restaurant brands, they also reported some numbers here. Mike, remind us who restaurant brands is and what they're doing these days. How are their results?

Michael Halen (24:28)

Yeah, so you know, it was kind of mixed results versus what the street was looking for. You know, I look at the underly trends and I think they're still strong. So the reason why it's down right now is, you know, Burger King showed an acceleration in the US which is pretty promising. You know they showed strong results out of International. International is a pretty well oiled machine for this company. But there was some deceleration in the Tim Hortons numbers which makes up 60% of adjusted EBITDA. And you know, Popeyes remains kind of weak. Right. So I'd say the biggest concern in this report is really about the slowdown in Tim Hortons, but it's lapping tougher comps. And when we look at, you know, same store sales trends going back, you know, a handful of years, the trends are actually accelerating. Even though it decelled on the, on the one year and a two year basis. And so, you know, Tim Hortons is a monster in Canada. I wouldn't be too concerned about it. Like I said, a big part of this story is the international unit growth that they're, they're putting up. And we think they can get back up to mid single digits here in another year or so. You know, Popeyes and Burger King are absolutely crushing it around the globe. And you know, we expect pretty, pretty solid growth here and we think they can outperform a lot of their quick service peers here in 2026.

Host (25:55)

Michael, how are the McDonald's and the restaurant brands of the world using AI? We've seen them embrace automation with, you know, you have to go order yourself at the kiosk and then someone calls your number. So they've removed, they've made things more automated in that regard. But how will AI change the whole experience?

Michael Halen (26:16)

Yeah, well, you know, AI is going to change the experience, the restaurant experience in different ways. Like different chains are going to look to different solutions. Something that works for one type of chain, like a Chipotle, isn't going to work for, for McDonald's and vice versa. So, you know, I think when you're looking at AI, first and foremost, it's going to be a continued progress on that one to one marketing, getting people into your loyalty program and eventually getting those very directed offers to them at the right times. Right. This has been kind of a long time coming. AI should really kind of help with that piece. And I think for these quick service chains, the thing that's going to be probably most useful is like an AI assistant. You know, Taco Bell is rolling this out, testing it and then eventually going to roll out to all its stores where they have basically an AI assistant for their GM tells them how much food they need to prep. If they need more labor on the line, helps them have more accurate sales projections so they know how much labor they're going to need on any given day, how much food prep they need to, whatever it might be. Right. So I think those are going to be the two most ubiquitous use cases and probably the ones that we'll see most of the progress on in the near term.

Scarlett (27:39)

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called generated assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend small cap stocks with improving operating margins or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures@public.com disclosures small businesses are.

Host (28:57)

The pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level that makes it possible for you to connect, learn from each other and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more@chase.com business chase for business make more of what's Yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co. Finding the right.

4imprint Representative (29:58)

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Host (30:55)

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple, Apple CarPlay and Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.

Scarlett (31:10)

One of the stocks on the move to the downside is tech company Applovin. Just looking at the stock here, really taking it on the chin here today. They had some earnings and some guidance. A little bit of a challenge here. The stock's down 19% today and 45% year to date. This is a big company that a lot of people, including myself, don't know a lot about. We're going to change that right now. It's got a market cap of $125 billion. Nathan Naidu joins us. Bloomberg Intelligence technology research analyst. Nathan, do me a solid here and just tell me what Applovin does number one and number two, why is this stock getting hammered today?

Nathan Naidu (31:50)

Thanks for the question. First question, Applovin essentially controls an auction which is a marketplace where ad space inside of mobile apps bought in Seoul. It has a commanding influence on this sort of real time auctions for in app ad space. And that is helping. You know the reason it runs an auction house is because it essentially connects advertisers which want to advertise inside of mobile gaming apps and also mobile gaming app publishers that want to sell ad space to make dollars. You know, because a lot of these days, a lot of mobile of apps, games or otherwise, I actually offer for free. So how else are they going to make money if not selling the ad space inside of the apps? And Applevin is essentially the mediator connecting brands which want to advertise and apps which want to sell the ad space. And on the share price reaction we saw today, I think, you know, I think to some extent that's due to this sort of AI disruption risk or so called AI fears. And obviously Applevin is not alone in facing disruption for any sort of AI companies. And there is been a lot of headlines whether Google Genie in the last week that can create an interactive video with simple text prompts. It means people like you and I can create games, you know, any, you know, sometime soon. And also more closer to home for Applevin there's a startup called Cloud X which is in the space that Applovin is in. It's Applevin's brand about a business which is mobile ad monetization. And there's still uncertainty around how much disruption, the extent of disruption to Applevin because Applevin's moat, which is a word they get thrown around a lot but it's essentially its competitive advantages are relatively stronger than other rivals in the space. Yeah, I think I would. I'll leave it then to see if there's any follow up.

Host (33:41)

Okay, thank you for that introduction. So it sounds like to a large extent because it's tied to the advertising industry, that it is cyclical, that it's going to move in line with how people feel about the economy. So where does that leave this company when it comes to disruption or resilience to the AI narrative? I mean even if it doesn't happen right away, there's that idea that it could down the road.

Nathan Naidu (34:09)

Yeah, you certainly write like that it could happen down the road. But I guess going back to the extent of disruption and this so called moat which is competitive advantage and I think ample has some tricks up its sleeves. For example, it has these AI or machine learning models that took more than five years to build and it's trained with data from in app transactions back when it was still publishing games. And obviously how sharp a model is at targeting ads depend on the quality of the data and the length and the amount of data. And I believe because Applevin's model, at least in helping advertisers target ads instead of mobile gaming apps, that model is mature in a sense it would take some time before any sort of upstarts can catch up to that level of sophistication in the modeling. So I believe Evelyn said some one way and like for context, right. And when an ad is shown to a mobile gamer, seven or eight out of ten times that ads is mediated by Applevin. That is how much of a commanding influence Applevin has in the, in the auction of digital ad space. So I believe that dominance it's, you know, it would take a lot to displace that. But you know, obviously for smaller arrivals in the space, whether it's Unity's vector or you know, you know, for smaller rivals, I think, you know, the concerns of AI fears might be even more pronounced.

Host (35:43)

This is the Bloomberg Intelligence podcast available on Apple, Spotify and anywhere else you get your podcast. Listen live each weekday 10am to noon Eastern on Bloomberg.com, the iHeartRadio app TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

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