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Bloomberg Intelligence
Instant Reaction Earnings Roundup: Microsoft, Meta & Tesla Deliver Results
00:33:13
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Narrator/Announcer
Ditch the complexity.
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Anurag Rana
Intuit Enterprise Suite delivers AI native ERP.
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Narrator/Announcer
That is intuitive and intelligent. Scale faster with advanced control.
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Kurt Wagner
Getting started in days, not months.
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Narrator/Announcer
Learn more@intuit.com Enterprise and get the power you need. Support for the show comes from Public, the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with holidays, free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com disclosures well.
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Kurt Wagner
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Host (Tim Stanwick)
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Kurt Wagner
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Narrator/Announcer
This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world.
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Host (Tim Stanwick)
Carol Massar along with Tim Stanwick live in our BL Interactive broker studio. As we mentioned those big three of the Mag 7 reporting right now, Metta is up about four and a quarter percent, Microsoft down about 5% off its aftermarket lows. Tesla has also bounced back.
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Ed Ludlow
I want to bring in Bloomberg Intelligence Senior Technology Analyst Anurag Rana. He joins us in Bloomberg's Chicago bureau Microsoft down 5% right now. Taking a look at some of the headlines on Iraq debt crossed. I know you've only had a few minutes to actually look at these. Second quarter Azure and other cloud revenue X effects was up 38% meeting estimates. Second quarter revenue for the company beat estimates at $81.27 billion. Second quarter intelligent cloud revenue beat estimates. We also saw 4300 Microsoft 365. Commercial seats grew 6%. 45% of commercial RPO was driven by open air commitments. Commercial remaining performance obligation $625 billion. What's not to love here? Is it all about capex?
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Anurag Rana
No, I think it's usually high expectations and you know, the fact that they only met Azure growth rates which was 38% I think that's probably weighing on the stock because you know, one would have expected them to blow out that number. It has been around 39% the last couple of quarters. So I think that's where a little disappointment could be. But that could also be because of supply constraints. That's something we have highlighted in our research before. But you know, if you look at some of the other numbers such RPO you mentioned above, 600 billion, that's very impressive and we already know the CapEx was going to go up. So I think in tandem that's the only number that sticks out that they didn't beat by a, by a decent amount.
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Host (Tim Stanwick)
All right, so then I don't know what do we want to dig into a little bit more deeper? It does. Microsoft's quarter includes net gains from investments in open AI. Are we going to get a little bit more of a picture about that and what's going on there?
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Anurag Rana
I think the question I have is, you know, there's a big number that, you know, that 690, 600 plus billion RPO you mentioned mentioned there is a large portion of that comes from OpenAI. So the big question is, you know, how is OpenAI going to fund this thing? Do they have the capital to actually fund, let's say a 200 plus billion dollar commitment? But other than that, what are other clients spending that are not OpenAI? And you know, how is that business going? And if that wasn't the case, how should we look at Azure growth in the coming quarters? I think those are the big questions that we need answered right now.
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Ed Ludlow
I don't remember where I saw this. I don't remember if it was on a program yesterday. I think I might. My brain is mush. I'm sorry on rock, but was it. It was all about Claude from Anthropic competing with Copilot and Claude offering products and services.
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Host (Tim Stanwick)
Mm.
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Ed Ludlow
At a fraction of the cost or even free versus what companies are paying for when it comes to Microsoft. Copilot, how big of a threat is that?
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Anurag Rana
Oh, actually, I mean, to be very honest, right now the entire software sector has been absolute under threat because of a lot of what you are mentioning, whether it's cloud or whether it's open air tools or whether it's open source. I mean, look at the valuations of software companies. They've been completely destroyed over the last six to nine months and a large portion of that is driven by what you just said.
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Ed Ludlow
So. Interesting.
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Host (Tim Stanwick)
Well, you know. Yeah, I mean, so is it in flux still, safe to say, an Iraq in terms of who ultimately are going to be the leaders when it comes to this AI world or will there be multiple big players?
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Anurag Rana
So we are absolutely in flux right now as to who will own the final product. And that's partially the reason when you have these valuations go all over the place. But I would comfortably say when it comes to somebody like a Microsoft's cloud portfolio or Amazon's cloud portfolio or Google's cloud revenue, I think these three companies will dictate a large portion of that market share just because they have the capital to do it. They have massive market shares and they have also the distribution. So these three, I think will remain the way it is. The rest of the industry will shift around. We still think software has a place in this world and you know, there will be some damage, but it's not going to get completely blown up. And then let's see how that shapes up.
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Ed Ludlow
What's the damage that we'll see in your view? What's your prediction?
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Anurag Rana
So if you are just selling a tool out there in the public to the, to an enterprise or a small business, you may not get the same kind of premium that you were before. Remember software, a business with 80, 90% gross margin business. But if you can spin some of that code up, you know, using wipe coding or internally, you may not need some of those tools out there. Now we think at least on the enterprise side, having a core system of record, something like, you know, the one that's sold by SAP or a workday, they're far more important and people are not going to rip them apart and use white coding tools internally out there. But if you are a visualization software or some kind of connector in between, you may not need to have that software. So there is a lot that's going to happen over the next three to five years.
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Host (Tim Stanwick)
You know interesting, interestingly you know looking at Microsoft matter this year and last year, how the stock, the stocks have done, they definitely underperformed some of the other Mag7 names and certainly some of the other large cap tech names. But I'm just curious, you know the concerns have been about the spend and whether it's going to pay off. Signs here for Microsoft Anurag that you're seeing that it does make sense. This spend that Microsoft is doing, the ROI is there.
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Anurag Rana
Yeah, for Microsoft it's definitely there. I mean the only, I would say the long term hang up is you know what happens when the open air relationship breaks through. I mean it goes away. That's the only big risk for Microsoft in the long run. They'll have to figure out their own LM by then. But other than that cloud infrastructure product is pretty good and you know it's gaining market share and according to our calculations it will overtake Amazon in the next, you know, let's say three odd years or so on Iraq.
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Ed Ludlow
Do they really have to figure out their own LLM? I mean how much of open AI do they own?
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Anurag Rana
But it just doesn't matter if they own or not because they have the IP rights only till I think it's 20, 30 to one of those years. And after that they can't use those models after that. So remember that part of it as well, not the financial part will stay but it's the actual engine that is driving co pilots that's driving GitHub Copilot or the Microsoft 365 Copilot that you talk about. You know that's the intelligence that goes into that model.
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Ed Ludlow
How do you do that? How do you do that from just a resources perspective? Perspective if you have, if you have spent so many billions of dollars supporting OpenAI and Chat GPT well they have.
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Anurag Rana
Their own models that are going on. It's just not as good as whether it's OpenAI or Cloud at this point. But they are putting a lot of effort behind and most of our leads that, and that's where we need to see what, what kind of why do we see there and do they actually get their act together over the next few years?
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Host (Tim Stanwick)
All right, I want to go over to IBM which actually outperformed Microsoft last year. It was up about 35% and we are seeing this stock 8.4% following its earnings release here they post revenue that topped estimates. They talked about software gains, specifically its software unit revenue up 12% to 19.7 billion in the fourth quarter. Software business jumping 14% to just over $9 billion. And the company projecting that revenue will grow more than 5% this year. And the company's CEO saying, quote, we enter 2026 with momentum and in a position of strength. I don't know if you've had a chance to look at IBM on. Doug, walk us through what we're seeing with this company.
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Anurag Rana
Yeah, I was a bit surprised, actually. The 9% number on the software side, it is a bit shocking, I mean, for them to be, you know, total growth rate of 9% and software in double digits. I mean, we were not expecting that. So there's a lot to feel in that particular one and go back and see, you know, which segments outperformed now. There's a tiny bit of M and A there. But even, even without that, I mean, I think this is very good. And the big number for us is that the cash flow is going to go up by $1 billion next year. So I think IBM stunned them around very well. I think the strategy is executing well and Arvind's done a good job in.
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Ed Ludlow
This case, the acquisitions, Red Hat, Hashicorp, confluent, that's a big part of the spend. Is that like looking to sort of what Salesforce has done in recent years, growing through these acquisitions?
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Anurag Rana
I think there's nothing wrong in growing through acquisitions. If you don't pay enough for them, if you pay the right amount, and in this case for IBM, every two years they go out and buy something that would help their gross margin, margin, margin margins, that would help their adjusted ebitda, that would help their free cash flow, and they use that cash flow to buy more. But they are already concentrated in certain areas, such as hybrid cloud or the ability to make sure that the internal IT infrastructure of a company or the enterprises is something that they have a good handle on. And I think they're doing executing it very well.
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Host (Tim Stanwick)
Listen, their bookings for their AI business at IBM exceeded 12.5 billion since mid 2023. That's an increase from the nine and a half billion disclosed during its prior earnings report. A bit more than 80% of the bookings come from the consulting unit with the rest in software, according to the CFO in an interview. Their exposure, I mean, this is something that has been, I think, helping the struggling, long struggling consulting division. So are we seeing improvement?
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Anurag Rana
But the consulting division only grew up 1%. So even though they are getting a lot of that, as you said, 80% of those bookings from consulting. It's not driving the entire division up because as we know from some of the other vendors and we'll find out today, also the non ID spending is pretty bad right now throughout the ecosystem. So people are cutting back on that and deploying those funds into AI related services. And that's something that's hurting IBM as well. But imagine and even with consulting growing only 1%, their total company growth rate was 9%. And I think that's something to be proud of.
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Host (Tim Stanwick)
All right, Bloomberg Intelligence senior technology analyst Anuragrana Just stay with us for a moment because we do want to bring in James Choc Mok, partner and chief investment officer at Clockwise capital. With about 70 million in assets under management, a fund that we often talk about owns and invests in a lot of these big cap names. I want to go back to Microsoft, Jim. James, tell us your take on what we got from Microsoft. The stock right now down about four and a quarter percent.
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James Choc Mok
Yeah, it's interesting. Right before earnings came out, I was getting the latest bogey numbers for the Azure number and you know, it remained in the high 30s, around 39%. And that's kind of where the numbers landed right around there. And I was saying telling our team that, you know, this is a pretty lofty expectation, especially the fact that, you know, it's retraced somewhat heading into the quarter. So you know, a lot of high expectations on all these companies. Microsoft right on up there with all of them and the valuation, it is where it is with at double digit times sales, you know you want it. It's great that it's a subscription asset, it's a recurring revenue business. But at the end of the day, you know, you got to deliver the growth and it's all about the growth relative to expectations. And in this case it was just inline on Microsoft.
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Ed Ludlow
James, you own Microsoft in your clockwise US Core Equity ETF ticker time. It's the sixth biggest holding about 4.6% of the fund. It's down 3.6% after hours for 64 roughly. Would you buy at these levels, add to your position?
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James Choc Mok
No, no, I think we're maintaining it. The way we're looking at it is, you know, we're about half the weight of where it is in the nasdaq. You know, we feel comfortable being underweight. That and that's on a gross basis. We actually have hedges within the ETF as well.
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Anurag Rana
Right.
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James Choc Mok
Where we're short the the NASDAQ and the S and P. So the net weight is actually closer to 4%. So, you know, it is a top, top 10 weight within the fund. But, you know, we think that, you know, where you want to be overweight is outside of big cap. You know, we're looking at small cap, we're looking at continue to look at commodities. We think that's where the money's going to go.
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Host (Tim Stanwick)
James, we're going to broaden out. But safe to say you're not that impressed with micro soft. It sounds.
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James Choc Mok
It was, it was a ho hum, you know, kind of what we expected. It just didn't surpass expectations. But does the, the results do not warrant a change in our view?
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Host (Tim Stanwick)
All right, we're going to broaden out in just a moment. I want to bring in Anuragrana back from our Bloomberg Intelligence team. He's senior tech analyst. Just a final thought. James isn't impressed.
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Guest Analyst (possibly Steve Mann or another analyst)
Should he be?
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Anurag Rana
Well, the thing is, think about it this way. The backlog is up and the capex is up. Then why isn't growth accelerating? And I think that's the biggest question for all of us. I personally think it's a supply problem, but it's a temporary problem. But as you know, we know right now, people, the trade is to sell software and buy semis. And I think, you know, I don't see that changing tomorrow morning.
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Host (Tim Stanwick)
All right, we're going to leave it there. Hey, listen, we'll be checking out your research. Anurag, thank you so much. Bloomberg Intelligence senior technology analyst Anurag Rana. James Schachmark there still with us. Us right now. We want to get more metal platforms. Bloomberg News senior technology reporter Kurt Wagner with us. He is author of Battle for the Bird, Jack Dorsey, Elon Musk, and the $44 billion fight for Twitter Seoul. He's out there in the Bloomberg San Francisco bureau. Take it away, Metta. What jumps out for you? Because right now we're looking at a stock that's up here in the aftermarket.
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Kurt Wagner
Yeah, I mean, it's, it's pretty much all good news, especially if you believe in this AI vision that Mark Zuckerberg has. The Q4 holiday quarter sales were a beat. The Q1 projections were a beat. The real, maybe surprising thing was just how high the capital expenditures are supposed to be in 2026. I think the estimate was around 111 billion. Met is forecasting between 115 and 135 billion. But again, if you are a believer in this sort of AI world that we're living in right now, that's an exciting thing. I mean, this is A company that is going to absolutely full steam ahead into AI. And you know, I think those numbers.
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Ed Ludlow
Reflect that, not into the metaverse. We should note that Medicares extend their gain to more than 5% right now. So there are a lot of people out there, Kurt, who, who are believing this story. It's not like this, though. Every quarter there, there have been quarters of late where meta platforms, I almost said Facebook comes out and says, we're spending more money than you want us to spend and you. And then investors do not reward them for it. What is different this time?
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Kurt Wagner
Well, not just quarters of late. How about just last quarter?
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Ed Ludlow
Right.
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Kurt Wagner
This is exactly what we talked about in Q3. They didn't have these specific numbers, but they basically said, hey, our capex is going to increase meaningfully. In 2026, the stock went down 14%. Everyone was very concerned with this added spending. And yet today, when the numbers come out and they're. They're higher than estimates, estimates is presumably built in that commentary from last quarter. It doesn't seem to be as much of a problem. My guess is that they are seeing, you know, this Q1 revenue, for example, which is going to come in 2, 3, $4 billion higher than expected. They're just seeing this ads business that is completely churning money out. And so if you feel that you have the money coming in, maybe you stomach those higher numbers than you would have expected.
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Host (Tim Stanwick)
Yeah, I mean, on the live blog, you guys, I think you put this out, Kurt. Family daily active people 3.58 billion. An increase of 7% year over year. And then the average price per ad increased by 6 to 9% year over year for the fourth quarter and full year, 2025, respectively. So, I mean, this is showing that they're investing in AI. We're seeing it on the platform, we're seeing it in the ad dollars.
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James Choc Mok
Yeah.
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Kurt Wagner
I mean, my guess is that we're going to jump on this earnings call here in a minute or two and you're going to hear the company talk a lot about how AI is impacting the ads business. Because that's what they need to do to sell this right now. Right. It's hard to say, are they right?
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Host (Tim Stanwick)
Is it like, are we seeing it in the numbers?
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Kurt Wagner
It is in part because you see that that rise in average cost per ad. That's because people are getting more granular, more targeted. They're spending less to create some of this ad copy because I can do it for them. There's a bun of ways that I can truly improve the ads business. You just don't. It's not as sexy, right? It's not as obvious, maybe because a lot of it's happening incrementally behind the scenes. That is a story and a narrative that this company needs to sell. Because if you're just simply saying, trust us, are building a $50 billion data center in Louisiana and you'll see the returns of that in seven years, that's a hard pitch. But if you say, hey, look, check it out, the ads business is growing quarter after quarter because of these ad improvements, these AI improvements we're making. That's the narrative are going to want to sell to people today.
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Ed Ludlow
Kurt Wagner, you got to go. You got some work to do. I want you to, I want to let you get back to that work. Thanks so much for joining us. That's Kurt Wagner, senior technology reporter who covers social media. He's the author of Battle for the Bird, Jack Dorsey, Elon Musk, and the $44 billion fight for Twitter's Soul.
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Host (Tim Stanwick)
All right, right now we're looking at Meta shares. They're up about 6.2% as we speak. We've got Microsoft down about 3.6%. Tesla is up three and a quarter percent. And then check this out. IBM, been around for a while. It's up about 8% here in the aftermarket. All right, James Chalkmark, we're talking with him, partner and Chief Investment officer at Clockwise Capital with us from Miami. He is not going anywhere. Ed Ludlow, also with us, Bloomberg Tech co host on Bloomberg Television. He's out there in the Bloomberg San Francisco bureau. He has been glued to his phone and computer watching all of the results since he did his broadcast earlier on btv. Hey Ed, what's jumping out? You know, I don't know. Where do you think we should start with whether it's Meta, Microsoft or Tesla. Tesla.
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Guest Analyst (possibly Steve Mann or another analyst)
I would start with Tesla, but only because, you know, the story that jumped out wasn't the story we were prepared for. And I think that it's important to be honest about that. And that is Tesla pulling the trigger on a $2 billion investment in X I. If you guys remember, this was a non binding shareholder resolution in November as part of the annual shareholder meeting. And the outcome was kind of weird because a lot of shareholders abstained from voting. That told us that that even though the board wasn't bound to the outcome, a lot of shareholders were like, do we really want to go down that route? Well, Tesla's done it. Not only are they investing $2 billion in through Xi's recent series round, but they now have an agreement in price, what they call a framework to work on technology and product together.
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Ed Ludlow
Okay.
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Guest Analyst (possibly Steve Mann or another analyst)
And it's this like closer intermesh of Elon Inc. Right.
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Ed Ludlow
So what's the sales pitch to investors in Tesla as a car company, in Tesla as a robotaxi company, and Tesla as a robot company that says, you know, this is in the best interest of shareholders to make an investment in Elon's AI company X?
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Guest Analyst (possibly Steve Mann or another analyst)
There are like 10 different answers to that. I mean the first thing to state is that this was, believe it or not, double check the Bloomberg, the first annual revenue decline that Tesla's ever had. So revenues, overall revenues from all its divisions dropped 3%. And they blame that on lower vehicle deliveries and sales and lower regulatory tax credits. So that's kind of interesting. But this shareholder deck is about the future where Tesla doesn't sell vehicles as its principal line of business. It does physical AI through robotics and through robotaxi. And as it relates to X I, there were definitely two schools of thought. There are the Tesla bulls that basically said, said if they invest next, all of this stuff will happen quicker because XI is so good at the software side of AI. There are very bullish Tesla shareholders that were like, whoa, this XI is a company that burns billions of dollars a quarter. Do you want Tesla to be the entity that's propping that up if Tesla's already doing work internally on software? So this was a really interesting deck. The quarters numbers got the quarter gone. I mean it doesn't really mean anything at this point.
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Host (Tim Stanwick)
James Chocmo, come on in. And you know, highlighting that Tesla agreed to invest about 2 billion in Elon Musk's AI startup. We talked with you a little bit about Tesla before a small position in your fund. What's, how significant do you think that is? Does it make it more interesting, the Tesla story here?
- [22:40]
James Choc Mok
Yeah, I mean it adds another element to the story. But you know, that's not why we're investors in it. I don't think that that's going to be something that's, you know, factored in, in a material way, one way or another at the, at the current time. So you know, we're looking at it from a long term standpoint. The optionality on all those areas that you listed invested from robotics to self driving, autonomous driving and you know, that's where the opportunities lie and that's why we're invested in it. But at the valuations that it's at and you know, question marks around, you know, the Demand side. And given the macro backdrop, you know, we just think, you know, it's prudent to be cautious with it, but still maintain a small position in the portfolio.
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Ed Ludlow
But keep that small position and not get, not make it any bigger.
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James Choc Mok
At this time. I got to listen to the call, see, see what happens. I mean, but you could hear, you.
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Ed Ludlow
Could hear something today. You could hear something today that would make you change your mind if and.
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James Choc Mok
Only if it provides a change in my estimates. Because really one of the things that I focus on, I prioritize is what is the degree of the change in the estimates in absolute terms and also what is the percentage change in absolute estimates and what is the percentage change in the rate of growth. Because these companies with these valuations, you have to be able to show the sustainability of those growth curves. Without that sustainability, then you come into questions about the sustainability of the valuations. And with these valuations being where they are, not only from a stock perspective, but the market perspective, one little thing can cause things to break.
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Host (Tim Stanwick)
Break.
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James Choc Mok
I mean, you saw what happened with intel last week, down 17% on that quarter. And you know, this is a company that the White House is backing. So you know, it doesn't take, it takes an instant, you know, to break the valuation, even though it takes a long time for that valuation to expand. So you got to be careful.
- [24:48]
Host (Tim Stanwick)
All right, we got to run. Hey, James, thank you so much hanging around with us for about 45 minutes. Really appreciate going through all these earnings with you, James Choc Mok, Partner in Chief Investment Officer at Clockwise Capital, joining us from Miami. Still with us, of course, our own Ed Ludlow, Bloomberg Tech co host on Bloomberg tv. You know, Ed, I was thinking about what you were talking about with X. What would you want to ask? What, what do you hope is asked on the call with the company here?
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Guest Analyst (possibly Steve Mann or another analyst)
Oh, just that. Why they decided to go ahead. What like the more specific rationale was. So you know, the concerns were well stated. The worry that Tesla would be kind of the cash cow to fund a loss making business. Business. But they have explained in detail, you know, that there's a plan for them to work both on products and technology sharing and that. And that was, you know, those that were more. Sorry guys, Chelsea have just taken the lead in the 84th.
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Ed Ludlow
The only thing. The only thing. The only thing get your attention away.
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Steve Mann
That's funny.
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Guest Analyst (possibly Steve Mann or another analyst)
If the boss, if the bosses are watching. I'm really sorry, my phone's going ballistic. As it means we qualify for the next phase automatically. Anyway, you know what Your guest was just talking about though, like the thing that Tesla's done in the shareholder deck in a lot more detail than it's done before, is talk about how these future products are currently contributing to top and bottom line. Tesla has always done the plus and minus columns of revenue and profit, but actually they started giving a bit more data. So for example, as of the fourth quarter there were 1.1 million FSE paid subscribers, active subscribers, drivers. Okay. And in the profit column they are saying that our profit has been boosted by those revenues, by those software revenue sales. And so like extrapolate out to X AI you can just envisage a world like I drive every day using FSD to work and in the cockpit of the car I use the GROK voice assistant to communicate. Like how do they monetize that? You'd expect them to talk about that kind of stuff on the coin.
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Ed Ludlow
Think this is, this is okay, this is what I'm interested in.
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Host (Tim Stanwick)
Well, sure. So let's wait. You know what, we want to throw another voice into this. Do not go. Do not leave us at Ludlow. We want you still here. I think our own Steve man of Bloomberg Intelligence, Global autos and industrials research manager is here with us as well. Steve, come on in to. Hopefully you've been listening to what Ed has to say. What, what jumps out for you in this Tesla result?
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Kurt Wagner
Results?
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Steve Mann
Well, I think on the car side, nothing, nothing of surprise. You know, margins a lot better than we expected, but that's only from higher production. But what's really interesting for us is really now, you know, Elon Musk been talking a lot about rolling out Robo Taxi. It was just talk, but now it's kind of codified in the, in the presentation now that they're going to roll out in nine cities beyond Austin. So I think a lot of the investors are expecting, you know, the timeline of that scaling up on Robo Taxi and I think we're seeing that.
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Host (Tim Stanwick)
But, but the only thing is like I'm going to go to our live blog and Ed, come on back in here. I'm looking for it on the live blog. But how that they have made promises before to kind of roll out and I mean it's like it just hasn't happened.
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Ed Ludlow
That's par for the course for Elon.
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Host (Tim Stanwick)
No, I know. And we used to have a clock thing I think on the Bloomberg like tracking, you know, Elon and his promises.
- [28:15]
Guest Analyst (possibly Steve Mann or another analyst)
We, we did an episode of Wall Street Week last month on Robotaxi. Right. And the opening line was, you Know, five years ago, Elon Musk promised that there would be robotaxis all over public roads by the end of that year. And here we are at the beginning of 2026, and in a very limited 10 vehicle pilot, Tesla has just removed the safety monitor from those vehicles that are in Austin, Texas for Robotaxi. Waymo, by comparison, has many hundreds more than that on public roads, charging a fare. No human in operation. The thing is that your last guest alluded to this, Tim. You're like pressing him on why he had the conviction in this, this thesis, but for lots of people it's the idea that Elon Musk makes many projections and gives many timelines and even though he misses those dates, he often gets there in the end. And I suspect that I've said that sentence to you verbatim many hundreds of times before.
- [29:08]
Ed Ludlow
So, Steve, man, come on back here. Does he, does he get there this time with the Robotaxi rollout? Is, are we going to be riding in robo taxis when we go to visit places apart from Austin anytime soon?
- [29:20]
Steve Mann
Yeah, I mean, I think the fact that he's putting the plan on paper is, says a lot from my perspective. It's not just talk anymore. He's making a big commitment to the investors and that's what the investor expecting. So, yeah, nine cities, mostly down south, I think, Look, I think the rollout will continue to be slow. I mean, Tesla is a big name. They don't have much room to make a mistake, so they're going to take it slow. They're probably going to have safety drivers in those cities initially, similar to what Waymo has done. And then some start removing those safety drivers and once they can gain confidence. But at the end of the day, the point is we're expecting scaling up of that business and to drive a new revenue stream for the company. And it looks like it's happening sooner than later now.
- [30:19]
Host (Tim Stanwick)
It's fascinating. I feel a little managed. Ed Ludlow, come on in here. I mean, it's just amazing that we're talking about Tesla and really not focusing on a less expensive car.
- [30:30]
Ed Ludlow
You to say focusing on Chelsea versus Napoli.
- [30:32]
Host (Tim Stanwick)
No, no, no, no, no. But I just know you, it's fine. It's part of what we love about you. But I mean, it's just interesting that we're like, okay, it's, it's these taxis and it's robots and it may take a while, but we're in, we're in. And we talked to Cathie Wood and she's like this Is the company going forward?
- [30:51]
Anurag Rana
Forward?
- [30:52]
Guest Analyst (possibly Steve Mann or another analyst)
Yeah. I mean, you know, I don't want to speak on his behalf but Steve's point is echoed by by many that either are bullish or bearish on on Tesla. They've put this in the shareholder deck. It's in writing the explanation of what they plan to do plus some timeline in it, plus the impact to top and bottom line that you know, it's in there that Steve wrote in his January 12th research without putting him on the spot that that 26 is the year that Tesla pivots to physical AI for many people that that is something that started in 2025. But there is still an element with, with Tesla, right. The stock's up less than 3% in after hours. Elon Musk will likely say something on the call that will move the needle and it's about whether investors do or don't believe him. The one little teaser that I will leave with you is there's a line on the deck deck that talks about deeper vertical integration. And you know, Donna whole you know messaged me right away saying did you see that? What do you think that means? Don't know But Elon's talks about all kinds of things building its own chip Fab. Where does space X factor into this? One of the most voted up retail questions because you know, test of fields questions from retail investors is will Tesla shareholders get priority access to a SpaceX IP. All of these things keep people looking to the horizon.
- [32:14]
Ed Ludlow
It depends on where the what where the planets are aligned. I think is the.
- [32:17]
Host (Tim Stanwick)
It's great sort of that this is on our live blog. We will manage the businesses such that we ensure a strong balance sheet, maintaining sufficient liquidity to fund our product roadmap long term capacity expansion plans including further vertical integration and other expenses. And as you said Dana writes would love more details and it sounds like you would would too.
- [32:37]
Ed Ludlow
You didn't even mention. You didn't even hear my planetary alignment joke.
- [32:40]
Host (Tim Stanwick)
Oh, sorry. Okay Ed laugh.
- [32:43]
Ed Ludlow
Thank you.
- [32:44]
Host (Tim Stanwick)
Steve Mann, final thoughts from you. 30 seconds here. When it comes to Tesla.
- [32:49]
Steve Mann
Yeah you guys talked about a little bit about the $2 billion investment in XAI. It totally makes sense for me because look GROK is starting to be integrated into Tesla vehicles. You know especially in the navigational. You can tell Grok basically you know I want to go home but in between I want to stop at Starbucks bucks or stop at a grocery store and actually will help you navigate to those different points. And look that that you know they're testing it out now that that system won't be on the Robotaxi because, you know, there's no driver there. So, so if you take a step back and look at this thing, this whole Elon Musk AI thing, I wouldn't be surprised if there's going to be more kind of of cross investments between the companies that are all going to be tied together on this endeavor.
- [33:41]
Host (Tim Stanwick)
Wait, did I hear circular financing again?
- [33:43]
Steve Mann
I don't know.
- [33:43]
Host (Tim Stanwick)
I don't know. Anyway, fascinating, Fascinating. Steve Mann, thank you so much. Bloomberg Intelligence, global autos and industrials research manager joining us here. Hey, real quickly, Ed, 30 seconds for you. Go anywhere. Whether it's Metta, which is rallying about 9% in the aftermarket market. Microsoft down 5%, Tesla's up 3%. Where do you want to go?
- [34:03]
Guest Analyst (possibly Steve Mann or another analyst)
Like the stories are really straightforward. Matter said that revenue growth strong and then they boosted the capex range for the year. Beyond consensus, it's a simple formula. We're repeating Microsoft's Azure cloud unit growth 38% in line with estimate consensus. But at the top end, people were like, where's my 40% growth? And they told us about their capital expenditures and those kind of exceeded and still the market was disappointed. It's a very high bar on a simple formula that we've discussed endlessly. Spend more on investment and infrastructure, but show us very strong top line growth as a direct result of it.
- [34:39]
Host (Tim Stanwick)
You rock. Go back to the match. All right. Of course, that's Ed Ludlow. As always, he is co host of Bloomberg tech on Bloomberg TV. Catch him at 11am Wall street time Monday through.