Deere’s Disappointing Outlook Shows Farm Recovery Is Elusive

Summary

Bloomberg Intelligence Podcast Summary

Episode: Deere’s Disappointing Outlook Shows Farm Recovery Is Elusive
Date: November 26, 2025
Host(s): Scarlet Fu and Paul Sweeney
Guests: Chris Giolino (Machinery Analyst, Bloomberg Intelligence), Woo Jin Ho (Senior Technology Analyst, Bloomberg Intelligence), Diana Rosetta Pena (Consumer Staples Analyst, Bloomberg Intelligence), Matt Britton (CEO, Suzy and Author)

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Overview

This episode examines the latest quarterly earnings and outlook from Deere & Company, which signal deeper challenges for North American agriculture and farm equipment markets. The discussion broadens to cover Dell and HP earnings, Petco's margin strategies, and emerging AI-driven consumer shopping trends, reflecting the current market landscape and the technological shifts impacting both businesses and consumers.

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Section 1: Deere’s Prolonged Downturn – Why Farm Recovery Remains Elusive

Main Discussion Points

• Deere's Earnings & Disappointing Outlook

  • [02:05] Paul opens by noting Deere’s iconic status and its foundational role for American farmers, then sets the context for the surprisingly poor earnings and guidance.
    • “It's the tool for the American farmer who feeds the world…they came out with some numbers. Disappointing. It's a little tough out there in farm country.” – Paul (02:13)
  • [02:48] Chris Giolino explains guidance was worse than expected, signaling a “lower for longer” agricultural cycle in North America.
    • Net income guidance for 2026 points to another 10% decline, with projected earnings per share (EPS) of roughly $16.50 — 18% below consensus.

• Severity and Uniqueness of This Downturn

  • [03:55] Chris calls it cyclical, not structural, but the cycle is “more severe than initially expected.”

  • Large ag retail sales in North America expected down 30% this year, with another 15–20% drop anticipated in 2026—volumes at a 40-year low.

    “I don't think I have a model that goes back far enough that shows that trough level of volume…from a cycle and volume perspective, this is as bad as it gets.” – Chris Giolino (04:28)

• Key Drivers of Weakness

  • [04:57] Oversupply leading to soft crop prices, persistently high input costs (interest, rent, labor, fertilizer).
  • Lingering trade uncertainty, especially with China—formerly the largest ag customer for Deere-linked US farmers.
    • “A lot of the input costs for farmers are still very elevated, even on the interest, rent, labor, fertilizer costs are still too high.” – Chris Giolino (05:19)
    • “China had essentially stopped buying our soybeans. That's our largest ag customer…So the combination of those three has really kind of, you know, extended the duration of this downturn.” – Chris (05:44)

• Signs to Watch for Recovery

  • [06:09] Recovery tied to improvement in crop prices and stability/predictability of Chinese purchase commitments.
  • Need to see China consistently return to the US market before confidence returns and farmers invest in new equipment.

• Lingering Skepticism Over China

  • [07:03] Chris doubts that lasting change in Chinese buying can be assumed ("show me" story); without dependable demand, farm spending will not recover.

    “Until China delivers on some of their commitments and delivers consistently, farmers aren't going to go out and spend.…we need to see it to believe it first.” – Chris (07:13)

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Section 2: Tech Earnings Spotlight – Dell and HP Grapple with AI and Cost Pressures

Dell’s AI Server Story

• [10:00] Dell increases annual projections for AI server sales, now eyeing $25 billion driven by large “clustered Blackwell” deals.

  • “We’re starting to see some of these clustered Blackwell deals…billions of dollars for each.” – Woo Jin Ho (10:33)

• Margin pressure persists as server margins, while improving, lag expectations; higher input/commodity (DRAM) costs impact both server and PC businesses.

  • [11:28] “The server margins have improved…But the bigger story…is that the DRAM pricing has gone up and these higher commodity costs is bringing a drag…” – Woo Jin Ho (11:37)

HP’s Cost Cutting and Outlook

• [12:31] Facing similar pressures, HP cuts EPS guidance by $0.30 for fiscal 2026 due to high commodity (memory) prices; announces further workforce reductions (4,000–6,000 jobs by FY28), emphasizing the impact of AI automation.

  • “They've been in cost cutting mode for the past five, six years…and they continue to be in cost cutting mode. So you know profits are going to be terrible and they're going to try to preserve their cash flow.” – Woo Jin Ho (13:19)

• Investors remain wary—cost cuts aren't translating into near-term profit gains; the next years are a “wait and see” period.

Dell’s Funding and Operating Leverage

• [16:20] Dell’s strong balance sheet, cash flow, and business diversification are advantages as it invests in high-upside server infrastructure for AI demand.
  • “They have a fairly sizable traditional IT service business, traditional servers as well as storage…that helps cushion the lower margin profiles of the AI servers for them.” – Woo Jin Ho (17:07)

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Section 3: Petco’s Path to Growth – Margin Expansion, Service Diversification

Petco’s Earnings Recap

• [20:32] Petco’s recent earnings matched consensus, but EBITDA margins expanded by over 100 basis points.

  • Profitable growth is on track (phase two of strategy); next phase is to restore comparable sales growth, likely in the second half of 2026.

• Increased margin achieved with smarter inventory, emphasis on high-margin services (grooming, vet), and store closures.

  • “They're relying more on services.…grooming…vet side. That generates a lot of income and a lot of profitability for them.” – Diana Rosetta Pena (21:31)

Market Environment

• Competition and consumer spending on pets are stabilizing after years of volatility.

  • Pet adoption rates expected to grow at their historical pace by 2026.

• Petco’s customer surveys reveal increasing willingness to spend on discretionary pet items.

Capital Allocation

• No dividend or buyback plans imminent; focus remains on deleveraging and executing turnaround strategy.
  • “They're focusing on…the right inventory on the shelf as well as getting profit profitability up there and, and getting leverage down to like less than three times ebitda.” – Diana Rosetta Pena (25:18)

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Section 4: The AI Shopping Revolution – Generational Change and Industry Implications

AI as the New Shopping 'Front Door'

• [29:24] Matt Britton highlights the paradigm shift from traditional search (Google) to conversational AI interfaces (ChatGPT, Gemini, Perplexity) as consumers’ entry points for product discovery and purchase.

  “The Internet looks like it's about to have a new front door. For the last two decades…Google has become a verb…That is starting to shift.” – Matt Britton (29:24) “Google reported a 9% year over year decline in their classic Link search in Q3 of 2025. At the same time, ChatGPT saw 1.8 billion weekly queries.” – Matt Britton (29:45)

• For Generation Alpha (born after 2010), using AI as an interface is intuitive and standard; they may never use traditional web search at all.

  “Gen Alpha…never will live with the through a world where you went to Google, right?…They're going to go to a ChatGPT to do research.” – Matt Britton (31:16)

AI Optimization and Brand Strategy

• Brands are racing to master “GEO”—optimization to ensure their products are surfaced by AI recommendations.
• The process is a “black box”; whoever figures it out first will gain significant competitive advantage.

  “Every brand wants to be the first brand that ChatGPT recommends. And right now, frankly, it's kind of a black box…” – Matt Britton (32:36)

Live Shopping and the Influence Economy

• [33:30] Live shopping, led by social influencers, replaces “traditional” online browsing, especially with Gen Z and Gen Alpha as heads of household.
  • TikTok, “whatnot,” and other platforms enable creators to move from awareness to direct sales and equity, accelerating commerce shifts.

  “They are engaging in what you…talked about is live shopping…they can actually use their audience, use their credibility…to actually sell products.” – Matt Britton (34:00)

Funnel Disruption – “Alpha Buyer”

• “Alpha buyers” (Gen Alpha consumers) expect instant checkout, creator trust, and minimal friction—changing how products are marketed, researched, and sold.

  • Raises the risk of increasing dominance by a small set of digital platforms and further transformation of the retail business model.

  “You can do your research and…purchase on maybe just one platform. Right. And that's going to change the entire funnel…” – Matt Britton (35:13)

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Notable Quotes & Timestamps

• “From a cycle and volume perspective, this is as bad as it gets.” – Chris Giolino (04:28)
• “China had essentially stopped buying our soybeans. That's our largest ag customer.” – Chris Giolino (05:22)
• “Until China, you know, delivers on some of their commitments and delivers consistently, farmers aren't going to go out and spend.” – Chris Giolino (07:13)
• “Dell…raised their server guidance from $20 billion to $25 billion. A lot of that coming into the fiscal fourth quarter.” – Woo Jin Ho (10:28)
• “No one likes cost cuts…you're not getting the profit gains…it's more a wait and see what those impacts are going to be.” – Woo Jin Ho on HP (14:20)
• “The Internet looks like it's about to have a new front door…ChatGPT saw 1.8 billion weekly queries as of October 2025.” – Matt Britton (29:24, 29:45)
• “Gen Alpha…are never going to know a world without AI…One day they may look at traditional search engines the way you and I look at rotary landlines.” – Matt Britton (31:09)

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Segment Timestamps for Reference

• Deere Results & Ag Cycle: 02:05 – 07:38
• Dell & HP Earnings Analysis: 10:00 – 17:27
• Petco Earnings & Retail Landscape: 20:18 – 25:52
• The Future of AI Shopping: 28:43 – 36:12

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Conclusion

This episode delivers a candid look at industry inflection points: Deere’s outlook underscores a bleak moment for North American agriculture, Dell and HP face the dual pressures of AI investment and cost inflation, Petco shows resilience through service-led strategies, and the AI-driven transformation of shopping is creating both uncertainty and unprecedented opportunity across sectors. The thread tying these narratives: major sectoral change—whether cyclical, technological, or generational—is redefining what it takes to thrive in 2025 and beyond.

Transcript

[Host/Announcer]

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[Chris Giolino]

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[Paul]

One of my favorite American companies is Deere John Deere company Because it just to me a the products are just awesome, the big tractors and stuff like that, and b they're such high quality and they're just known around the world. Great engineering, great technology and they're just the backbone for the American farmer. It's the tool for the American farmer who feeds the world. So I just always followed this company really closely and they came out with some numbers. Disappointing. It's a little tough out there in farm country, so we want to break it down with Chris Giolino he covers all the big machinery companies for Bloomberg Intelligence. Just one of our top top analysts. He knows this story well. Chris, tell us what you heard from Deere with their most recent quarterly results.

[Chris Giolino]

Yeah, thanks, Paul. You know, we expected pretty conservative guidance coming into the print, but this was well below our expectations and I'd say even below some of the most bearish estimates out there. And really just kind of points to a lower for longer ag cycle here in North America. Their 26th net income guide calls for another 10% decline in 2026. It implies roughly earnings per share in the $16.50 range, which is 18% below consensus. So it's not great news. I would say there are a couple positive takeaways though. One, we do finally now have, I think visibility and line of sight on trough earnings this cycle. And two, I think there's probably some inherent conservatism built into this outlook just given the lingering trade and tariff uncertainty.

[Co-Host/Interviewer]

Yeah, well, Chris, I'm looking at that net income guidance which is down sharply from last year's levels. Right. So talk to us about that. Do you think that is more of a cyclical thing or are we actually seeing something more structural that's playing out in this space?

[Chris Giolino]

No, it's the cycle. You know, I think we always tend to kind of undershoot on the way down and overshoot on the way up. But this cycle is, you know, playing out, I think probably a little bit more severe than we had initially expected. Large ag retail sales here in North America are going to be down roughly 30% this year. That's the second year of the decline. And now Deere's expanding, expecting another 15 to 20% decline in 2026. That would put volumes at the lowest level in more than four decades. I don't think I have a model that goes back far enough that shows that trough level of volume. So I think it's. We're pretty confident that this will be the bottom. It's just kind of a lower floor. On the flip side, I mean, the earnings per share are still, you know, we think are structurally higher just given some of the improvements they've made in the business model. But from a cycle and volume perspective, this is as bad as it gets.

[Paul]

Why do you think that is? What's different about this cycle versus past cycles here?

[Chris Giolino]

Yeah, it's a combination of a couple things. I mean, at the end of the day, farmers aren't going to buy equipment when you have crop prices that are down. We've seen a little bit of improvement in corn and soy over the last three months. But at the end of the day, we've had too much production, oversupply. So that's put a lid on where crop prices have been going. We also have high input costs. So while we're starting to see some of that inflation moderate, a lot of the input costs for farmers are still very elevated, even on the interest, rent, labor, fertilizer costs are still too high. And then on top of that, you have all the trade uncertainty. Who am I going to sell my, my crops to? China had essentially stopped buying our soybeans. That, that was, that's our largest ag customer in a particularly important market for deer and row crop farmers. So the combination of those three, I think, has really kind of, you know, extended the duration of this downturn.

[Co-Host/Interviewer]

Yeah, well, we know of course that South American demand expected to be flat. So I suppose a lot of growth potentially coming from North American farm economy. But what are the signs that you would want to look out for to suggest that, look, the worst really is behind this company? There's a turn forthcoming in the horizon?

[Chris Giolino]

Yeah, I think firstly you're going to look at crop prices and I think we're starting to see a little bit of positive momentum there with China, you know, getting back into the US Market and making a few soybean purchases. So, so some stability on the crop price front. That would be one, and then two is really having China back in the market more consistently.

[Co-Host/Interviewer]

Right.

[Chris Giolino]

We need stability, we need predictability around their purchases. You know, they kind of fell short on their phase one trade deal agreement during the first Trump administration. So we need to see them, you know, consistently back in the market. And I think that will kind of give farmers confidence then maybe then to go out and start replacing some of this aged equipment.

[Paul]

Is there in fact concern that again, last time, the last Trump administration, the last time a deal was reached with China to buy more US Ag, China did not really follow through. At the end of the day, is there a belief that maybe this time could be different?

[Chris Giolino]

It's a good question and I don't know. That's the million dollar question. Right. So I think ultimately this is why this is going to be a show me story. And until China, you know, delivers on some of their commitments and delivers consistently, farmers aren't going to go out and spend. So when we see that occur, I think that will lend more support to improvement in crop prices. And then I do think, you know, you start to see farmers start to go out and replace some of those, you know, aged equipment in the on their fields. But again, it's very much I think we need to see it to believe it first.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this. What is actual investing? We believe that it's a real world task to deliver thoughtful capital deployment.

[Chris Giolino]

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[Paul]

Ideas time to flourish. Bailey Gifford Actual Investors Find out [e-mail] support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC trading provided by ZeroHash. Complete disclosures available at public.com disclosures introducing.

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[Paul]

Earnings continue to come in. We had a couple of the tech companies, Dell and HP report numbers. Let's break it down with Woo Jin Ho Senior Technology Analyst, Bloomberg Intelligence, joining us from our Princeton HQ down in Jersey. All right, let's start with Dell here. It looks like they, they're raising their annual projections for the AI server market. Is that still the heart of the story?

[Woo Jin Ho]

Hey Paul. Yeah. So it's the leading part of the story for results. They raised their server guidance from 20 billion to 25 billion. A lot of that coming into the fiscal fourth quarter. And look at the end of the day, we're starting to see some of these clustered Blackwell deals starting to come through. Think about the Open Aires and the core weaves and so on and so forth that are billions of dollars for each of these deals and that's probably going to carry through into fiscal 2027.

[Co-Host/Interviewer]

Now, Jin, a lot of focus, of course, in that positive story. I suppose the less positive spin here is the fact that this is going to cost Dell a lot of money to deliver these orders. Right. Think some analysts are taking a look at the margins that they reported, which came slightly under estimates, depending on the measure that you're looking at. But you know, what is it? Where does kind of the lay of the land go when it comes to kind of cost versus return? When for. For Dell's ability to deliver these servers and get some profit off of that.

[Chris Giolino]

Yeah.

[Woo Jin Ho]

Hey, Christina. So, so there's actually a tale of the two stories behind the margins. The gross margin expectations. You know, I was back 20.3%, 20.4% on gross margins for the company. Consensus was at 22%. And you're right, server margins are lower, but that's always consistently been the case. Now the one thing I will say the server margins have improved this quarter relative to the fiscal two quarter results as their supply chain has gotten better. Now the bigger story is, and actually applies to HP is that the DRAM pricing has gone up and these higher commodity costs is bringing a drag to potentially bring a drag to not only their PC business, but their server business as well. So I think there's something else underlying that's driving the margins lower.

[Paul]

All right, so let's talk about hp. HP is the ticker, I guess.

[Matt Britton]

Pardon?

[Woo Jin Ho]

Hpq.

[Paul]

It's exactly. Okay, talk to us about the current. I guess they gave an estimate that fell short on the profits they're going to. And I also saw that they're going to cut 4 to 6,000 employees through fiscal 28 by using more AI tools. See, that goes to my thing. I think my thesis has been from the beginning that is going to be a net job destroyer here. Talk to us about hp. What did they tell us this quarter?

[Woo Jin Ho]

Yeah, so just as I was saying Paul, the higher commodity cost is actually going to be pinching gross margins. The way I'm looking at it right now, they cut their EPS guidance while they're saying that the high commodity cost is going to pinch about $0.30 in EPS in fiscal 26 and that's roughly about 8 to 10% of earnings that's being pulled away because of the higher commodity costs. There's going to be more back end loaded. So what that tells me is that they stockpiled inventory at least into the first half of the year. But I think there's a bigger part of the story too. You don't cut back on a headcount. Looks like about an 8% riff or reduction in force because of AI if you're in a position of strength. So they've been in cost cutting mode for the past five, six years now and they continue to be in cost cutting mode. So you know profits are going to be terrible and they're going to try to preserve their cash flow to pay back their shareholders by cutting headcount.

[Co-Host/Interviewer]

Yeah, well, interesting region. As you mentioned, they've been in cost cutting mode for years now. This is their second round of major workforce reductions in three years. The shares though not really liking what they saw from HP yesterday. How do you think investors are interpreting this? Are they wanting more cost cuts? Like what do you think they're they're expecting from HP moving forward?

[Woo Jin Ho]

Yeah, so, so Christine, like no one likes cost cuts. Shareholders may from a profits perspective but you're not getting the profit gains. Right. So consensus was at 335 in EPS. And if the 30 cents of the EPS cuts were primarily from the supply chain headwinds, you're not getting the gains from the cost cutting cuts, at least not in fiscal 2026 but hopefully a little bit better in 27 and 28. So it's more a wait and see what those impacts are going to be. And again like I said, you're not cutting costs from a position of strength. It's more of a position of weakness.

[Paul]

Hey, for Dell. Going back to Dell, Silver Lake owns a big, big chunk of the stock here. What, what have they said about their intentions with the stock?

[Woo Jin Ho]

Well look, look, I believe Michael Dell is a, has a seat with Silver Lake. I think they're going to hang on to it for, for quite a bit. I mean if you think about where, where Dell was when they came out of being a private company to a public company the returns on that has been fairly good. So if the, if the story continues to take hold, Right, and they continue to take market share and they can drive margin expansion, you know, I wouldn't be surprised if valuations continue to expand from here because we're coming, we're still coming off the peak and the performance of the shares or could continue to drive returns for, for Silver Lake going forward.

[Co-Host/Interviewer]

Okay, why don't you walk us through the Dell operating leverage standpoint here. What's, what's your take on that? Because that's been kind of a point of, I guess, focus for markets recently. Just the fact that are these companies that aim to deliver service or other equipment related to AI demand, are they going to have to borrow a ton of money to be able to deliver that? For some companies like Oracle is not working out. But how's it working out for Dell?

[Woo Jin Ho]

Yeah, I mean the one great thing about Dell is they have a very solid balance sheet. They don't have much debt coming out. They deliver a lot of cash flow. There are only a handful of hardware companies that can do that. Cisco is another one that has a strong enough balance sheet to support that. And also, you know, going back to Paul's point on the Silver Lake relationship, Silver Lake actually has ties to some of these customers who are buying these larger deals. So funding really shouldn't be an issue with them. Now, to your point about margins and the margin leverage, having a diversified business is a very good thing for, for Dell. I know that the server margins are pretty weak and the PC margins are weak as well. But they have a fairly sizable traditional IT service business, traditional servers as well as storage, and that's going through an upgrade, a modernization cycle and that has higher margins and that helps cushion the lower margin profiles of the AI servers for them. So diversity in the business model is actually a good thing not only for Dell, but for Cisco and hp.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com. you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry leading 3.6% APY high yield cash account switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Crypto trading provided by ZeroHash complete disclosures available at public.com.

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[Paul]

Lots of earnings out. One of them is Petco. Some concerns out there. Diana Rosetta Pena. She's a Consumer Staples Analyst at Bloomberg Intelligence. Diana, talk to us about Petco. What did they what did you learn with their earnings and what's their strategy going forward?

[Diana Rosetta Pena]

Yes, so they were pretty pretty in line with consensus in terms of phase two. EBITDA was very strong. They grew more than 100 basis points points EBITDA margin. So, you know, phase two of their strategy of creating profitable sales growth seems to be on track. Now the next phase, which is actually getting consent comparable sales to grow, that's probably going to be an inflection that we probably see in the second half of 2026.

[Co-Host/Interviewer]

Yeah. So Diana, very interesting that the Petco actually managed to expand their margins, especially in the environment where costs are rising left and right. Talk to us about what sort of strategies they use to be able to achieve that. Is that something that they can sustain moving forward?

[Diana Rosetta Pena]

Yes. So basically they try to be a little bit smarter with their inventory. They're, you know, displaying better margin items on the shelves. They're relying more on services. They're trying to do a little bit more on the, on the grooming side and on the vet side. That generates a lot of income and a lot of profitability for them. So, you know, obviously cost store closings also helped in the quarter. So that is how they have managed to grow more than 100 basis points margins in the past three quarters.

[Paul]

What is the competitive landscape of the pet food business?

[Diana Rosetta Pena]

So they, they said that it has, is not, it's, it's stabilized. You know, in the past few quarters, we have seen the likes of Chewy and Petco say that consumers remain a little bit more conservative with their spending, particularly on discretionary items. It seems that that has stabilized and family formation, or pet from pet family formation has stabilized as well. We actually think that by 2026, we're probably going to see more pets being adopted, probably at the same pace as historicals, which is usually in the low to mid single digits.

[Co-Host/Interviewer]

Yeah, well, I'm certainly not in the market for a new pet at the moment. My cat would allow for that. But Diana, why don't you talk to us a little bit more about what you mentioned earlier. Right. Kind of like diversifying the services they offer. They're focusing on grooming as well. Are you seeing signs that this is translating into sustained traffic, especially into their stores?

[Diana Rosetta Pena]

Yes, absolutely. We actually run a survey every, you know, we have been running it for the past three years and actually this year was the first time that we saw that people were a little bit more willing to spend more on discretionary items compared to previous two years. So we actually saw that coming earlier this year than, you know, before everybody was saying it, that that was happening. So people seem to be a little bit more, while they're being very cautious in their spending, they're actually willing to, you know, groom and take their pets to the vet for sure.

[Paul]

All right. So where in your retail space, where do you see some of the best opportunities where you're talking to clients, what do they want to talk to you about your names of coverage because you cover a lot of the consumer products and packaged goods companies, things like that.

[Diana Rosetta Pena]

Yes. So on the pet side, definitely there seems to be a little bit more appetite for, you know, those, those companies that seem to be on the upswing. We have chewy that they have expanded their, you know, their revenue channels beyond merchandise and they're doing more ads and other, you know, revenues that are going to increase profitability on the long term. You have Petco that is probably going to start growing in the second half of next year. So by that time it's probably going to be a good name that is probably going to be in the business for a while.

[Co-Host/Interviewer]

Yeah, well, a lot of disruptors in this space for sure. But you know, as far as kind of Petco is concerned, it seems like no dividends really no buybacks are on the table at the moment. Is that something that could turn away investors, maybe something that could push them towards some of these emerging competitors in the space?

[Diana Rosetta Pena]

Yes. So that is something that they mentioned last night in the call. Obviously they did not specify when they're going to start returning to shareholders. They're focusing on the strategy getting the right inventory on the shelf as well as getting profit profitability up there and, and getting leverage down to like less than three times ebitda. So once that happens, they might be a little bit more willing to, to see where that goes. You know, it's not, it's something that the new CEO is thinking about but not necessarily a timeline just yet. So yeah, shareholders might not necessarily get a return similar to other packaged food or other consumer staple companies. But it's, you know, it seems that this is more of like an investment opportunity in terms of the strategy that they are they're going through.

[Paul]

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry leading 3.6% APY high yield cash account Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Crypto trading provided by Zerohash. Complete disclosures available at public.com disclosures introducing.

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[Paul]

Just in the last year or two, this AI is crept into our vocabulary. I think before it was just big data and then before that it was just data. I don't know, but it's just everywhere and I think it's. I'm being told it's also going to be part of our shopping Experience as well as we head into the big shopping part of the year. I have no idea how that's going to work. Matt Britton. He does. He's the CEO of market research firm Suzy and he is the author of a book entitled Generation AI Why Generation Alpha and the Age of AI Will Change Everything. Okay, that, that kind of gets at you. Matt, thanks so much for joining us here. AI shopping go. What's going to happen?

[Matt Britton]

Well, you know, the Internet looks like it's about to have a new front door. For the last two decades, if we wanted to find out anything, whether it was for research or we're booking travel or we wanted to buy something, you know, the word Google has become a verb in our culture, but that is starting to shift. In fact, Google reported a 9% year over year decline in their classic Link search in Q3 of 2025. At the same time, ChatGPT saw 1.8 billion weekly queries as of October 2025. And over 40% of those queries are search like in nature. So consumers are sort of acting with their fingers, so to speak, in terms of the sites that they're going to and they're going to these large language models. Now, it should be stated that Google also has its own large language model called Gemini, which released an incredible version, Gemini 3, just this week. So I'm not saying that Google itself is in trouble, but the notion of going to a traditional search engine to find things at the beginning of your shopping journey, I don't think will ever look the same way again.

[Co-Host/Interviewer]

Yeah, Matt, I know exactly what you mean, because just yesterday I was searching in my chat GPT for more affordable dupes of this really expensive skincare product that I'm in the market for. So, yes, exactly what you're talking about. But you know, for my generations, this is something that we're still kind of wrapping our heads around. Right. But you're talking about Generation Alpha as the generation that's basically just very. This is innately something that they do. So talk to us about that sort of generational shift. How is that going to change the landscape of, I guess, kind of like consumer activity now that we do have this generation that's just, this is just what they do, use AI for everything.

[Matt Britton]

Absolutely. So I've spent my career, you know, I started my career in year 2000 and back then the new consumer was the millennial generation, which was the first generation to grow up with the Internet and household. And then 10 to 15 years later, the focus was on Gen Z, which of course is now known as a social media and iPhone generation, meaning that they never knew a world without social media. In the iPhone Gen Alpha, currently age 0 to 15 years old, is going to be known as the AI generation. They are never going to know a world without AI, without a technology that you can interact with the same way that you interact with other people. So for them, if you think about it, they never will live with the through a world where you went to Google, right? And one day they may look at traditional search engines the way you and I look at rotary landlines. Right. And for them it's going to be just de facto behavior to go to a chatgpt to do research. And what's starting to happen is whether it's perplexity or chatgpt, they are all now integrating commerce functionality into their platforms where now you can actually buy on these platforms as well.

[Paul]

So are brands ready for this? And I think I know the answer there.

[Matt Britton]

Well, they're not and they're trying to figure it out. And the reality is it's just moving so fast. You know, it's really hard to understand how to behave when you have a new large language model coming out each week. For years these brands were focused on search engine optimization. How does your brand come up first when someone's searching in your category? Now the big term is geo, which is essentially optimization for AI models. And brands right now are clamoring to be the first brand that pops up if someone searches for a luxury handbag under $300 for a teenage girl. Right. Every brand wants to be the first brand that chat GPT recommends. And right now, frankly, it's kind of a black box and a mystery of how to get there. But it's going to be, you know, companies that figure that out are going to suddenly find themselves in a very fortunate situation. It's going to create new winners and new losers very quickly.

[Co-Host/Interviewer]

Yeah, well, Matt, just kind of shifting away a little bit from the AI factor here and just kind of in general, kind of some of the emerging trends in shopping at the moment you mentioned live shopping is something that is becoming more of a thing, certainly for younger generations. That's kind of how they shop now. They shop on TikTok with creators kind of going live and telling them buy this product. It's kind of like the home shopping network, but for, for this, it's a new qvc. Exactly. New qvc, exactly. So yeah, tell us more about that.

[Matt Britton]

This year, for the first time ever, the average age of a first time mom in the US is Gen Z, which means the average age of, of a mom who's, you know, head of their household and buying the Tide detergent and, you know, Gillette shaving cream for the home. Grew up looking at their phone. And when they are looking at their phone, they are not looking at content from traditional media networks, but instead content from creators and influencers, people who have built large followings on these platforms through really compelling social media content. For years, these creators were kind of limited to earning money through awareness and impressions, but now they are moving further down the funnel and they are engaging in what you definitely talked about is live shopping, whether it's on TikTok or an emerging platform called whatnot, where they can actually use their audience, use their credibility and authenticity in the space to actually sell products. In some instances, it's products that they actually have an equity stake in or they build on their own, and other instances they're simply an agent earning commission on products that they sell. But I would expect to see more and more of this over time.

[Paul]

Who is or what is the alpha buyer?

[Matt Britton]

Well, the alpha buyer is gen alpha and the alpha buyer is really skipping the funnel entirely. You know, they are essentially going down social video. They're focusing on creator trust. They want instant checkout. You know, they have very low tolerance for any friction in the buying process. So it's a completely new set of expectations that businesses really need to build around.

[Woo Jin Ho]

Yeah.

[Co-Host/Interviewer]

And you know, I guess when you say that, they're kind of skipping the funnel. Exactly right. So this could potentially transform how people shop. Like, we may not need websites anywhere. People, people can just go on TikTok or whichever social media like. Yeah. Are you seeing companies?

[Matt Britton]

I mean, think about it. Think about what, what, what's been the last 10 years. It's like you hear about something on TV or maybe you saw an ad on Facebook or Instagram, and then maybe you go on Google and do more research and you go to Amazon and purchase it. Right. So you're going to a variety of different places, variety of different media channels. But now you can do your research and you can interact and you can over time purchase on maybe just one platform. Right. And that's going to change the entire funnel and it's going to create, you know, the risk there is that you're going to have fewer and fewer companies control more and more of the market, which we've obviously seen with the Mag 7 over time. You know, obviously OpenAI is a new entrant in the space. You have other entrants like Claude which is a large language model. Philanthropic and of course, perplexity have I mentioned. So there are some new players, but it's looking more and more like big tech is going to play a huge role in this shift. What does Amazon do? I think that's one of the questions I have. Because if you can buy over ChatGPT where it has context, what's going to happen with Amazon?

[Co-Host/Interviewer]

This is the Bloomberg Intelligence podcast, available.

[Host/Announcer]

On Apple, Spotify, and anywhere else you get. Your podcasts 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. Look, Santa, the kids left you.

[Co-Host/Interviewer]

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