Oracle Slides by Most Since January on Mounting AI Spending

Summary

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Bloomberg Intelligence Podcast — Episode Summary

Episode: Oracle Slides by Most Since January on Mounting AI Spending
Date: December 11, 2025
Hosts: Paul Sweeney, Scarlet Fu (Isabel Lee sitting in), Bloomberg Intelligence Team
Guests: Anurag Rana (Senior Tech Analyst), Geetha Ranganathan (US Media Analyst), Madison Mueller (Bloomberg News Reporter), Lindsey Dutch (Consumer Hardlines Analyst)

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Episode Overview

This episode of Bloomberg Intelligence explores some of the hottest topics across tech, media, healthcare, and retail. The focus centers on Oracle’s stock drop after increased AI-related capex, questions about its massive OpenAI backlog, and evolving cloud strategies. The episode also covers potentially transformative entertainment M&A, groundbreaking weight-loss drug developments at Eli Lilly, and key trends among US consumers and retailers.

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1. Oracle’s Steep Slide: AI Spending, Cloud Growth, & OpenAI Deal (02:23–07:39)

Main Points

• Oracle missed cloud infrastructure growth expectations

  • Consensus was 69% YoY growth, Oracle posted 66% — even tiny misses are “not good” given sector expectations.
  • Investing heavily in AI CapEx: increasing from $35B to $50B, spooking Wall Street.

• The OpenAI Backlog Conundrum

  • Oracle’s $500B+ cloud backlog is “over $300B” tied to OpenAI — but OpenAI’s annual revenue run-rate is only ~$20B.
  • “How are you going to spend $300B just with Oracle?” (Anurag Rana, 03:30)

• Industry Context & Competitive Concerns

  • OpenAI’s future is less certain with Google’s Gemini now catching up.
  • Concerns about whether Oracle’s massive backlog will convert to revenue.

• Operational Constraints

  • Data center, networking, and even power supply remain bottlenecks.
  • Management didn’t fully address these during their call, adding uncertainty.

Notable Quotes & Timestamps

• On missing growth targets:
  “In the cloud world missing by even 1 percentage point is not good. There's a very logical reason about it...converting that backlog into sales is an issue.”
  — Anurag Rana (02:50)

• On OpenAI-Oracle backlog skepticism:
  “Everybody is saying, okay, if you have revenue of 20 billion, how are you going to spend 300 billion just with Oracle?"
  — Anurag Rana (03:30)

• On next moves:
  “They need to create a special purpose vehicle where they can raise funds with private equity… keep that off Oracle's balance sheet and that will help pacify fears.”
  — Anurag Rana (04:47)

Important Segment Timestamps

• [02:23] Start of discussion: Oracle’s results and stock drop
• [02:50] Why did Oracle miss? Backlog and data center/power issues
• [03:30] OpenAI contract skepticism
• [04:47] Speculation on financing backlog (SPVs/private equity)
• [05:21] Where does OpenAI get its money?
• [06:35] Leadership and expansion plans
• [07:10] Circular deal risks discussed

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2. Media Megadeals: Warner Bros. Discovery Sale & Netflix/Paramount Drama (11:03–15:28)

Main Points

• Potential $90 billion M&A trade for Warner Bros. Discovery (WBD):

  • Netflix and Paramount are the rumored suitors with significantly different approaches.
  • Political figures (including former President Trump) have commented, especially concerning CNN’s fate.

• Why the Deal Is So Polarizing:

  • Industry fears of Netflix acquiring WBD: could disrupt the theatrical model, risk legacy media streams, and concentrate content ownership.
  • Talent and creators are wary that “licensing from one of the studios could be completely folded into Netflix's operation.” (Geetha Ranganathan, 12:50)

• Paramount’s Approach:

  • Promises to maintain the studio, increase theatrical output — seen as less disruptive but involves significant new debt.

• Financial Risks:

  • Paramount’s bid would bring the combined company to $80–90B in debt, but promises huge increases in EBITDA ($16B annually projected).
  • Street skepticism on whether those “aggressive” synergy targets can really be met.

Notable Quotes & Timestamps

• On the Netflix deal’s risk:
  “If Netflix gets a hold of Warner Brothers Discovery Studio, it kind of totally changes things, right? It could potentially disrupt the theatrical model as we know it.”
  — Geetha Ranganathan (12:50)

• On Paramount’s leverage:
  “Yes, they might have about $80 to $90 billion in debt, but their whole argument is that we can support it… given the amount of EBITDA that we're going to be generating.”
  — Geetha Ranganathan (14:38)

Important Segment Timestamps

• [11:03] Warner Bros. Discovery M&A, CNN questions
• [12:28] Why is this deal so divisive?
• [14:20] Paramount’s potential debt load

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3. Pharma Innovation: Eli Lilly's Obesity Drug Breakthrough (18:52–24:20)

Main Points

• Stellar results for Eli Lilly’s obesity drug pipeline:

  • New drug trials deliver up to 23% weight loss — “the most of really any of the shots we’ve seen yet.” (Madison Mueller, 19:19)
  • Positive knock-on health effects — 62% reduction in knee pain.
  • The potential pill format: easier to take and cheaper, broadens access.

• Obesity Drug Market Outlook:

  • Market projected to hit $100B by 2030.
  • More than aesthetics — insurers interested because drugs also improve outcomes for heart, kidney, and liver diseases.

• Affordability & Access:

  • Trump administration deal will cap prices, and pharma companies are lowering direct-to-consumer pricing.
  • Pills expected at $150/month starting next year.

• Risks & Side Effects:

  • Drugs in development face the challenge of matching or exceeding current efficacy and minimizing new risks (nerve pain, GI side effects).

• Expanding indications (Addiction, Women’s Health):

  • Drugs being researched for uses including addiction and hair loss.
  • Gender-neutral approach to some new therapies.

Notable Quotes & Timestamps

• On drug performance:
  “Up to 23% weight loss in a study, which is the most of really any of the shots we've seen yet.”
  — Madison Mueller (19:19)

• On broader impacts:
  “Most people associate it with vanity… For others, it could really mean health changes and lifestyle improvements.”
  — Bloomberg Host (20:14)

• On accessibility advances:
  “Part of the Trump administration deal was also that the lowest dose of the pills… will start at $150 a month.”
  — Madison Mueller (21:44)

Important Segment Timestamps

• [18:52] Eli Lilly’s new obesity drug data, market impact
• [20:14] Non-cosmetic benefits
• [21:44] Price reduction and market access
• [22:40] Risks and side effects
• [23:44] Hair loss drugs, gender considerations

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4. Retail & Consumer Health: Resilience, Innovation, and Gen Z Trends (28:14–34:29)

Main Points

• Hardline Retailers Post-2024:

  • Consumer remains surprisingly resilient – especially higher-income consumers.
  • Most retailers are hitting upper end of guidance, beating “doom-and-gloom” forecasts.
  • More newness/innovation in stores is driving sales and transactions up.

• Promotional Intensity:

  • Promotions have remained flat YoY, with some brands (Williams Sonoma, Pottery Barn) sticking to limited deals.
  • Retailers ready to adjust based on demand surges or softness.

• Resurgence of Brick & Mortar:

  • More store openings than closings
  • Gen Z strongly prefers in-person shopping — contrary to digital-native assumptions, driving real estate demand.

• Beauty Category Outlook:

  • Ulta, Elf, and Sephora continue to perform well, especially in fragrance and skincare.
  • Exclusive offerings and services (salons, wellness) are levers to drive ongoing growth as comps get tougher.

Notable Quotes & Timestamps

• On consumer resilience:
  “Results have largely been better than expected… that consumer has stayed pretty resilient.”
  — Lindsey Dutch (28:55)

• On the innovation driver:
  “This is the first year that we’ve seen more newness. And newness is really a key driver to getting consumers in the store.”
  — Lindsey Dutch (29:56)

• On Gen Z shopping:
  “Best Buy has talked about Gen Z's preference for in store shopping, so has Ulta Beauty… we're definitely seeing that, especially [with] that younger generation.”
  — Lindsey Dutch (32:01)

Important Segment Timestamps

• [28:14] State of the US consumer, retailer outlook for 2025-26
• [29:56] Surprise at the power of new product launches
• [30:44] Promotions, pricing strategies
• [32:01] Brick and mortar resurgence; Gen Z in-store preference
• [33:18] Beauty category forecast for '26

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Memorable/Miscellaneous Moments

• [20:03] Joke on weight-loss drug effectiveness:
  “23%. Wow. You can make John skinny again.”
  — Paul Sweeney

• [23:39] On pharmaceutical prioritization:
  “Hair loss drugs. When's that? That's got to be the next one.”
  — Paul Sweeney

• [24:00] International options for hair loss:
  “They can go to Turkey.”
  — Madison Mueller

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Conclusion

This episode delivers a comprehensive look at financial markets, corporate strategy, and market-moving trends through the lens of major public companies — from Oracle’s AI-induced volatility and OpenAI risk, to giant media M&A and health innovation. Listeners are treated to in-depth, often skeptical, analysis and real-time reactions from Bloomberg’s top sector experts — all delivered in the show’s fast-paced, informed, slightly irreverent style.

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Transcript

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[Paul Sweeney]

Oracle taking it on the chin today. You know they put us a big revenue numbers I thought. I mean 30% here, 60% here, but not enough for the street. And at the same time you jack up your capex and I think the street gets a little bit nervous about that. So the stock is trading down pretty big. Let's check in with Anurag Rana. He covers all the technology space. Senior Tech Analyst for Bloomberg Intelligence. So Anurag, why do you think Oracle selling off so much today?

[Anurag Rana]

So there are a few things to keep in mind. You know the number one thing is cloud infrastructure growth. Consensus was 69%. They came at 66. I know it's a very big number. However, in the cloud world missing by even 1 percentage point is not good. So that's first thing. But there's a very logical reason about it. Everybody can see the backlog, so it's not as if they don't have a business there, but converting that backlog into sales is an issue. Everybody knows that there is a capacity constraints out there, whether it's data center, whether it's networking, etc. Power is a very big issue, for example, so that's one area of it. But although I would say the management did not harp on it as much as we would wanted them to be that to explain why the, why, why the growth can improve going forward. So that's one factor. But I think the biggest question is something that we had discussed earlier also is everybody is questioning that out of their big backlog, which is over 500 billion right now, 300 plus billion of that comes from OpenAI. Now OpenAI currently, or the order book is from OpenAI by the end of this year OpenAI will have a revenue run rate of about 20 billion. So everybody is saying that, okay, well tell me, if you have revenue of 20 billion, how are you going to spend 300 billion just with Oracle? So there's a big question mark, but then your question is, well, why didn't this happen when they first announced it? Well their model was at the top at that point and right now Google's Gemini has caught up. So people don't know what will OpenAI's future look like two years from now, three years from now and so forth. So there are multiple factors that are going into this equation and not to mention something you just remarked, that capex is going to go up by 15 billion, so 35 billion going to 50 billion. So it's a big, big change across four or five different vectors that are having an impact on the stock.

[Bloomberg Intelligence Host]

So the cloud strategy of Oracle continues to evolve. What is the next major inflection point for you when you see these cloud companies really move towards more AI driven efforts.

[Anurag Rana]

So the big thing is that 500 billion of backlog needs to bleed into revenue. For that they need to open new data center, but to open new data center they need more cash. So the big catalyst for them is they need to go out. Most likely they need to create a special purpose vehicle where they can raise funds with the help of private equity investors, private credit, and basically keep that off Oracle's balance sheet and that will help PACIFY this fears that they actually have the way, a way to finance this big order book that they have.

[Paul Sweeney]

All right, you mentioned OpenAI. Can you refresh my memory? Because I have no idea. Where do they get their money? Do they like, where are they getting the money to? I don't want to do all this stuff.

[Anurag Rana]

So the single biggest is the consumer app right now. That's where most of the money is coming in. Because, you know, if you want the best model, you're going to pay $20 a month. I mean, you can get the free version of it, but that's one area. They have over 900 million users right now, but only small portion of them are paying customers. So that's. One second is if you as a company, let's say you're, you know, let's call a hypothetical bank and you're creating a chatbot which needs intelligence or a large language model, you're going to use APIs from OpenAI and that gets embedded intelligence into whatever system that you're creating, your chatbot, that becomes smarter. They get paid from that. So those are the two, I think, big elements or the big sources of revenue for them. And there is a huge, you could say ahead, all the enterprises around the world will have some intelligence into their core applications and they're going to use model from somebody, whether it's Google, whether it's anthropic, whether it's OpenAI.

[Bloomberg Intelligence Host]

How are you thinking of the leadership in this company? How will the company's direction be affected down the line?

[Anurag Rana]

I think they really need to talk a little bit about their expansion plans. I think this concept of, you know, he went out and talked about, I'm going to spend a trillion dollars in data centers. Then he went to the government and say, well, is that a backstop to this? And needs to be a little bit more clear on its expansion strategy. Because if he goes out and say, you know what, I'm not spending a trillion dollars, maybe 100, 200 billion or so, I think they need to tone down that rhetoric a little bit. But otherwise. Or he has to show a lot of revenue growth over the next one year to pacify this particular uncertainty that has cropped up right now.

[Paul Sweeney]

Anurag, 30 seconds left. Does this Oracle news kind of highlight the risk of some of these circular deals?

[Anurag Rana]

See, I think it's not so much the circular deal when it comes to the entire space, but there is a question mark between what OpenAI is doing along with Oracle and Nvidia. So it's this, this three people for this particular aspect of it that people are questioning whether this is going to lead any issues. Whether it's Microsoft and AWS and Google, I'm not concerned about those three.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[Paul Sweeney]

Isabel Lee sitting in for Scarlet Fu. I'm Paul Sweeney. Life here in our Bloomberg Interactive Broker Studio streaming live on YouTube. We're still waiting to see what's going to happen with Warner Brothers Discovery. We're Talking about a $90 billion enterprise value M and a trade going to hit the tape, but we got two suitors out there and I'm not sure what the seller wants to do here. Geetha Ranganathan joins us. She's a US Media analyst for Bloomberg Intelligence. Geetha, I guess the only new thing I saw was President Donald Trump kind of weighing in here and he says, hey, whoever buys this thing, you got to sell CNN or something like that. What do you make of that? I mean, CNN's like not even really relevant to the entire company, is it?

[Geetha Ranganathan]

Not really. But I think obviously Donald Trump has a huge history with cnn, has despised the network always. So naturally he's kind of laying down this condition. But what we think is it obviously complicates the deal a little bit for Netflix. Remember, Netflix is only buying the streaming and studio portion of Warner Brothers Discovery. So obviously if they are going to go with Netflix, the WBD team will have to find some way of offloading cnn, which I'm not so sure how it's going to do that. It obviously complicates the process with Paramount. That's not going to be a problem because Paramount is buying the whole company. That includes the studio, the streaming platform as well as the TV network's business.

[Bloomberg Intelligence Host]

Talk to us why this deal is so polarizing. To Paul's point, the president made a comment. Actress Jane Fonda spoke out against the Netflix deal.

[Paul Sweeney]

She's still mine.

[Bloomberg Intelligence Host]

Yes, she is. Both policymakers from both aisles are also.

We will discuss that comment later. I'm also interested. But, Geeta, why is it so divisive?

[Geetha Ranganathan]

It is divisive because this really will change or reshape the whole media landscape, Isabel. So I think majority of the content community, you know, writers, actors, talent, they're really worried that if Netflix gets a hold of Warner Brothers Discovery Studio, it kind of totally changes things, right? It could potentially disrupt the theatrical model as we know it. You know, all of the legacy media revenue streams are at risk. It. It could potentially reduce output. Licensing from one of the studios could be completely folded into Netflix's operation. So there are obviously a lot of very many different risks, very tangible risks that, you know, could materialize in case Netflix goes after or they're already after in case they win the Warner Brothers studio asset. Now, with Paramount, I think people generally see that more of a status quo, just a continuation. They've obviously committed to keeping the studio. We know David Ellison loves movies. He's made a huge commitment to increase theatrical output. So I don't think people necessarily view that deal as that much more disruptive than the Netflix deal. The other political issue there is obviously with cnn again, that's definitely very polarizing considering, you know, it's. It's always kind of been a little bit of an anti Trump kind of platform. Again, everybody has a view on this deal from many different angles, I would say. Isabel.

[Paul Sweeney]

Hey, Keith, I've been reading some of the research from your colleague. Stephen Flynn is a credit analyst for Bloomberg Intelligence. Looking at the media companies from the credit perspective, man, if Paramount wins this thing, they're going to have a lot of debt on their balance sheet, like a lot. Is that the equity folks, are they concerned about that?

[Geetha Ranganathan]

So the way that Paramount has really framed this whole argument, Paul, is they're talking about a lot of synergies. Okay, so they're talking about $16 billion in EBITDA. So remember, next year, Paramount, Skydance, standalone, is going to generate about three to three and a half billion dollars in ebitda. If they do succeed in getting Warner Brothers Discovery, they are promising about $16 billion in EBITDA. So where we're talking almost, you know, taking this five fold, which is why this deal is so transformative. So, yes, they might have about 80 to 90 billion dollars in debt, but their whole argument is that we can support it just kind of given the amount of EBITDA that we're going to be generating free cash flow, generate conversion from EBITDA is going to also be robust. So that's their whole argument. Of course, I'm not so sure the street is necessarily convinced because those synergy targets could be pretty aggressive.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence Coming up after.

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[Anurag Rana]

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[Paul Sweeney]

One of the stocks always been following today's Eli Lilly. Some more good news on some of their obesity work there. The stock's up 3.4% today, up 33% year to date. I forgot this thing's got a monster market cap. Eli Lilly, $970 billion market cap. So just extraordinary there a big winner. Madison Mueller, she is Bloomberg News reporter. She's been following this space. Madison joins us here in our studio. Madison, what's going on with Lilly here? They got some more good news today.

[Madison Mueller]

More good news for Lilly. That's sort of been the theme of the last year. I mean, Lilly has really surpassed its rival Novo Nordisk in terms of developing these next generation weight loss drugs that can be potentially easier to take, easier to manufacture, elicit more weight loss than Wegovy and Zepbound, which are the shots that are currently on the market. And so Lilly has a shot or a pill potentially coming next year. And then this shot, retatrutide, which is a triple agonist, it relies on three different hormones rather than just two or one like GLP1s that we all know so well. And so great results this morning for them. Up to 23% weight loss in a study which is the most of really any of the shots that we've seen yet.

[Paul Sweeney]

I'm doing the math here. 23%. Wow.

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[Paul Sweeney]

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[Bloomberg Intelligence Host]

I know.

[Madison Mueller]

It's like it's quarter of someone's body weight almost. It's pretty incredible.

[Paul Sweeney]

There's going to be unintended consequences there. I just feel like it, I don't know.

[Bloomberg Intelligence Host]

It does. In Madison's story, it said that participants on the highest dose experience a more than 62% reduction in knee pain. And I feel like when people think of weight Most of them associate it with vanity or just looks. But for others, it could really mean health changes and lifestyle improvements.

[Madison Mueller]

And totally, that's a really important part of this.

[Bloomberg Intelligence Host]

And the market in your story also, you say that it's expected to hit $100 billion by 2030.

[Madison Mueller]

Right. And a lot of that is exactly what you were saying, that this is more than just, I mean, for some people, they are going out there and looking to lose a couple pounds. But in terms of, you know, reasons for why insurers should cover these drugs and reasons why these drugs are expected to be such a big market is because they are helping people with other, you know, important health issues like heart disease, knee pain. Lilly's studying this drug in liver disease or kidney disease and heart disease and all of these other things that are linked to weight loss. But there is also potentially some weight loss, independent reduction of inflammation and things like that. So these drugs are working in pretty incredible ways. They're also studying them now in addiction and things like alcohol use disorder. So there's just so much here, and that is a really important piece of this.

[Paul Sweeney]

So I guess the end all be all for these pharmaceutical companies as it relates to this particular area is, I guess, to get it into a form that more people can use, that is a pill, maybe reduce side effects, but most importantly, at an affordable cost. Is there an expectation that those three things can happen at some point over the next several years?

[Madison Mueller]

Yeah, and I mean, they are starting to happen. That's one of the things. The Trump administration actually struck a deal with Novo and Lilly to lower the cost of some of these medications beginning next year. There's also efforts from the pharmaceutical companies themselves, themselves, to lower the direct to consumer cash pay prices so that people who don't have insurance coverage for these drugs, which is still a lot of people, can get them at a more affordable price. So that's brought down the cost from over $1,000 a month to more like 200, $300 a month. And so there are some of those efforts. Part of the Trump administration deal was also that the lowest dose of the pills, which are expected to start rolling out within the next couple of months, next year they'll start at $150 a month. So that's also a pretty steep reduction from where the prices are at currently.

[Bloomberg Intelligence Host]

We see investors really cheer this move today. But how high are the stakes if they fail? Because it's experimental, and I'm not the expert on this, but it's still experimental.

[Madison Mueller]

Exactly. And the stakes are high. And We've seen because the drugs that are currently on the market, wegovy and Zap down are so good and they work so well that the stakes for developing next generation drugs are higher. I mean, you have to get more weight loss than the drugs that are currently on the market. And at the same time the safety risks are really real. We don't want drugs that are going to give someone even more health problems. I mean, of course, always, but the sort of risk benefit analysis with weight loss drugs are different. And that's one of the things that we begin to see too with some of these next generation compounds. Amgen, for example, has a drug that had really high rates of, of side effects. It's supposed to be a one once monthly drug, but investors haven't loved that one because of the high rates of side effects. In Lilly's trial today, there were pretty high rates of side effects as well. People were having some weird like nerve pain, tingling sensations and then the classic nausea, vomiting, constipation that are seen with these drugs. And so that's a really important piece to watch as well.

[Paul Sweeney]

30 seconds. Asking for a friend. Hair loss drugs. When's that? That's got to be the next one.

[Madison Mueller]

I mean they're kind of starting to be out there already. A lot of these companies too, like Hims and hers, and a lot of these telehealth companies are really going hard on the hair loss drugs. Wow.

[Paul Sweeney]

I mean, I went to like had a dinner with some of my high school buddies recently. It was grim. It was grim. I mean, I'm just laying it out.

[Madison Mueller]

They can go to Turkey.

[Bloomberg Intelligence Host]

Yeah. Are the hair loss drugs, do they, are they gender neutral? Is that the right phrase?

[Geetha Ranganathan]

Yeah, yeah, yeah.

[Madison Mueller]

And there are some, I mean Hims and Hers has some products that they've developed specifically for women and they have different formulations like shampoo, whatever. So people are, you know, more comfortable with.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

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Network.

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[Bloomberg Intelligence Host]

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

[Paul Sweeney]

Let's take a look. One of the questions that I think the Fed has, I think investors have is how's the US Consumer doing out there? And there's a lot of ways we try to get to that. We talked to Michael Halen. He covers all the restaurants for Bloomberg Intelligence. We've talked to analysts who cover different parts of the economy and see how their companies are kind of talking about the consumer. One of the folks we like to talk to is Lindsay Dutch, consumer Hardlines senior analyst for Bloomberg Intelligence. Think, you know, think companies like Best Buy, Dick's Sporting Goods, that kind of thing, the hard lines. Lindsey, talk to us about how your stocks performed in 2025 and what's the expectation for 2026 for some of those hard line retailers.

[Bloomberg Intelligence Host]

Hi, Paul. Thanks for having me. I think if you look at the guidance for the rest of the year, I think a lot of these big hardline companies are baking in a lot of un certainty with the consumer. But the reality is if we look back, you know, to performance to date and results to date, results have largely been better than expected. And, and a lot of these retailers are sort of tracking to the upper half of their guidance range for the year because that consumer has stayed pretty, pretty resilient. You know, we see strength, you know, continuing to come from that higher income consumer while the lower income might be continuing to pull back a little bit. And if you think about companies like Best Buy, Ulta Beauty, Williams Sonoma, Dick's Sporting Goods, you know, they are bringing, you know, premium products, new products, exclusive products to that consumer and the consumers are willing to pay up for that. What was the one trend that shocked you this year? Now that you look back, I think a lot of the trends have been a continuation of what we've been seeing. I think, you know, if we go back to late 2022, that is when the first pullback in that discretionary spend has been but this is the first year that we've seen more newness. And newness is really a key driver to getting consumers in the store and to fueling transactions. So the best retailers are getting both transaction and ticket growth. But I think Those innovation pipelines that, that maybe were, you know, settled down a bit during COVID they've picked up again and bringing more newness is driving those transactions.

[Paul Sweeney]

How promotional do you think retailers will be in 2026 to kind of drive the consumer to the store or to the mouse to click.

[Bloomberg Intelligence Host]

So promotions are very important to, to bringing shoppers in to the store. You know, especially for someone like a Best Buy, you know, promotions are very key. Especially around holiday. We seen that promotions are about flat, you know, in 25 versus 24. And I would sort of expect a continuation of that in, in 26, unless we see a huge spike in demand, in which case the retailers might be able to pull back on that promotional lever a little bit. But this year so far it's been about flat. You do see companies like a Williams Sonoma, very select promotions. This has been a strategy coming out of COVID They sort of have stuck with it. They're even sticking with it, you know, through this season, going into next year. Pottery Barn was a big focus for them. You know, they need a rebound in that brand and growth is slowly coming back, but they are staying steadfast in keeping those promotions very limited. I was going through your notes and then I read that many retailers are resuming or accelerating brick and mortar expansion plans because this leads to in store and online sales. And that's just kind of the reverse trend that I was expecting. But you made a point that Gen Z shows a strong preference for in person shopping. Can you talk to us more about that and how each generation is different?

Sure, yeah. In store shopping is definitely back and just meeting the consumer where they are. So retailers I think are more focused on all channels, whether it's whether they have an app, their online site, there's their brick and mortar stores. But brick and mortar as a whole, you know, we are seeing more openings than closings and that has been a trend for the past couple of years. But when we think about sort of the retail real estate market, the demand has been solid coming out the of COVID and so vacancy is starting to get low and there's really no new properties being built. So these retailers looking to expand, which is great for their businesses, you know, they, they really have to work hard to do so and find good space to open stores because there's just not that much of it. But Best Buy has talked about Gen Z's preference for in store shopping, so has Ulta beauty and, and so we're definitely seeing that across, across the board, but especially that younger generation there's plenty.

[Paul Sweeney]

Of retail space on Lexington Avenue and 58th Street, Manhattan. Lindsey John from the Highlands writes in and he wants to ask about the beauty segment. Atlantic Highlands, Atlantic.

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Don't confuse the two.

[Paul Sweeney]

The Atlantic Islands, Ulta Beauty, Elf Beauty, Sephora. How's that category look for 2026?

[Bloomberg Intelligence Host]

So demand has showed a strengthening sort of in the back half of 25. I think that momentum can continue into 26. I think for Ulta in particular, they have done a great job, you know, bringing elevating their assortment and bringing on exclusives and that has really helped them. Comps are going to get tougher next year and they need to continue to drive growth. And I think for them, you know, leaning into their salon services could be a key way to do that. Leaning into wellness is a key, a key way to do that. There's multiple levers that they can pull. The categories that are showing the most strength is really fragrance and skin care and we would expect that demand to continue into next year. This is the Bloomberg Intelligence podcast, available on Apple, Spotify and anywhere else you get your podcasts listen live each weekday 10am to noon Eastern on Blue, 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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