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- [00:00]
Paul
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- [00:37]
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- [01:15]
Paul
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- [01:47]
Podcast Host
Bloomberg Audio Studios Podcasts Radio News. 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 podcasts or watch us live on YouTube.
- [02:08]
Paul
It is earnings season and Paul, you gave a stat earlier of 170 companies have reported yes in the S&P 500 the banks are all done. Most of the Mag 7 is done but we still have a couple of stray names reporting this week and then of course Nvidia is not till much later but all the spending on I continue yes it and Oracle is the latest one. I mean it's it's been in the headlines for a while now but we're learning that it wants to raise up to $50 billion in debt and equity this year that's a tremendous number here for Oracle. So we needed to bring in Mandeep Singh, he's our global tech research head here at Bloomberg Intelligence. And Oracle raising up to 50 billion, a big chunk of that, up to 25 billion of it will be through debt is really eye opening given that its credit has not traded as well, meaning the spreads have widened and credit default swaps on Oracle have also blown out a little bit. They've come back in certainly. But there are a lot of questions over the financial health of a company like Oracle versus say a company like Microsoft.
- [03:10]
Mandeep Singh
Yeah, look, I mean Oracle had given a revenue guide for the next four years. So what they said was we have an $18 billion cloud business that's going to go to $150 billion plus over the next four years. The problem that the street had was there wasn't really explanation of how they would raise the funding, build the infrastructure and how that revenue would come about because it was all attached to OpenAI the $300 billion backlog, which is essentially $60 billion per year just from one company. So now what they're saying is okay, we have visibility to how we are going to build the initial tranche of that AI infrastructure and data centers we need for the 2027 target, which is essentially $44 billion in revenue that they want to have by 2027. So for that to happen they need to invest up to $50 billion plus. So I compare them to the CapEx that Meta and Google and Amazon will be making this year, which is all in excess of 100 billion. Where does Oracle stack up so far the consensus was they would be below $50 billion in capex. Then how do you add $44 billion in revenue when Microsoft is not adding $44 billion in cloud revenue in 2027? And that's where I think they are making that upfront investments you need which all these companies are making. Yes, you have to do it through debt and you're already over levered to your point that their CDS spreads were had widened and that's where you know, they may they're using a combination of equity issuance and debt to raise that money, set up the data centers which in turn will translate into $44 billion in cloud revenue by 2027. So that's where if you believe their plan is going to be successful, which cloud demand is the one thing you know with AI whether or not they are, you know, big applications, nobody knows. But everyone will be consuming compute on the cloud. That's kind of the Part of the business that's visible.
- [05:20]
Interviewer (Paul's Co-host)
All right, tech investors that you've been dealing with for years, they've been used to funding big CAPEX, big R& D out of internal cash.
- [05:29]
Woojin Ho
Yeah.
- [05:30]
Interviewer (Paul's Co-host)
Now that's changed. They need to go to the capital markets, whether it's the debt, capital markets, equity capital markets. This is something new for your investors. How are they digesting it there?
- [05:41]
Mandeep Singh
That's why, you know, there was a panic around Oracle and you saw that 40% drawdown because you're right. In the case of Microsoft, Metta, you know, Google, they generate up to $100 billion in free cash flow in a year. So with an Oracle that generates about $20 billion in free cash flow, how do you make a $50 billion plus capex investment? And that's where, you know, the gap needs to be bridged. And I think they're just maybe thinking too big in terms of how they want to ramp up that cloud business. And you know, right now they are 4% of the overall cloud market share pie, based on the numbers that they have given in terms of the guidance, they would be 15, 20% of overall cloud market, which is growing, by the way, 30, 40% plus and expanding at that growth rate. So that's where I think there was some skepticism around what is it that Oracle can accomplish given they don't have the free cash flow to fund this build out. And it'll be interesting to see how the bond trades when they issue this. And there are a lot of unknowns still when it comes to the Oracle story.
- [06:49]
Paul
Like I said, tremendous numbers here for Oracle. Another story we're following. Mandeep is Elon Musk, said to be in advanced talks to combine Space X with X, his startup AI company. What does this mean for Space X's planned IPO later on this year?
- [07:07]
Mandeep Singh
Well, so I tie it to, you know, the funding needs for building your AI large language model infrastructure and then rolling it out to millions of users. Same thing with X. When you compare X AI Grok to, let's say Gemini or, you know, Open Air, chatgpt, xai, even though they are a frontier model, their user base is like 20, 30 million compared to OpenAI, which is 900 million. So one, they have a much smaller customer base when it comes to the traffic that they are serving. And, and these companies have to constantly invest in training their large language model because the three Frontier models, OpenAI, Anthropic, Gemini, are going forward in terms of the capabilities that they're adding. So XAI doesn't have A choice but to keep investing. Problem is, because of their smaller user base, no one wants to keep funding X AI with another 10 billion round or 20 billion when they don't have free cash flow either. So it's the same problem that Oracle has and they don't even have that user base. That's where combining Xai with SpaceX does make sense because SpaceX is a much bigger entity. At least they have EBITDA margins of around 50% even though it's a very high fixed cost business. So the ROIC is much lower for an entity like SpaceX. But combining it makes it more palatable for anybody who is putting money in that combined entity and saying, okay, at least you've got two entities where I'm ready to put some money as opposed.
- [08:45]
Paul
To just XIA and Space X also has visibility. I mean it's got these projects with the government so it can project out.
- [08:51]
Interviewer (Paul's Co-host)
What do we have any sense when that IPO might happen? Because they're suggesting this year.
- [08:55]
Mandeep Singh
They are suggesting. I mean even OpenAI and Anthropic want to go public this year. So this year could be huge in terms of, you know, ipo.
- [09:03]
Interviewer (Paul's Co-host)
And by the way, the underwriters can't write research on these companies, but who can?
- [09:08]
Mandeep Singh
Yes, Bloomberg Intelligence, we'll be ahead.
- [09:10]
Interviewer (Paul's Co-host)
And so what happens is we write the definitive research report on these big IPO companies.
- [09:17]
Mandeep Singh
They already have primers on OpenAI anthropic.
- [09:20]
Interviewer (Paul's Co-host)
Stay with us. More from Bloomberg Intelligence coming up after this.
- [09:25]
Paul
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- [09:49]
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- [09:52]
Paul
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- [09:53]
Interviewer (Paul's Co-host)
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- [10:44]
Sponsor Voice
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.
- [11:02]
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Mandeep Singh
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- [11:22]
Paul
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- [11:34]
Podcast 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 podcasts or watch us live on YouTube.
- [11:48]
Paul
Let's talk about the media companies because Disney has just reported results and the company reported record revenue in the last quarter which jumped 6% to a record $10 billion. But its outlook this quarter? Not so great. Geetha Ranganathan is our US Media Analyst here at Bloomberg Intelligence. And Geeta, how do you square this idea that the forecast it's given is kind of tepid, saying that it expects international tourists to perhaps not show up at its different parks when revenue did very well in the quarter ended? Is this a case of Disney lowering expectations for a new CEO that it plans to name pretty soon?
- [12:30]
Geetha Ranganathan
Could very well be Scarlett. I mean this is your classic case of, you know, when good is, you know, not good enough, I guess. But yeah, they absolutely, I think performed very well in the quarter that they just reported. They have been citing some headwinds when it comes to international visitation at domestic parks, but I think they are, as you just mentioned, setting the bar a little bit lower, not coming out, not raising guidance for the full year even though they had a really strong fiscal first quarter. Remember, we do expect, I mean we think that they will be a lot of international visitation this year just because of the World Cup. And you know, who knows, maybe there could Be some tailwinds there for Disney too. But other than that, if you just look across the board, I mean you look at the parks overall, yes, there has been some slowdown in attendance here and there, but they are undertaking investments across the board. So even in this quarter alone, we're going to see this big opening of World of Frozen which will almost double the size of Disneyland Paris. That's a huge investment again. Yeah, we're going to see some pre opening costs which is why we're seeing that tepid outlook in the fiscal second quarter. But I think if you look at the long term thesis, that is still very, very much intact.
- [13:40]
Interviewer (Paul's Co-host)
Scarlett and Geetha, looks like we're going to get a new CEO for Disney. Tell us how that may take place and who this person may be.
- [13:49]
Geetha Ranganathan
Yeah. So there have been, you know, two frontrunners for the job, Paul. It's been internal candidates. Josh d' Amaro, who heads the parks division and Dana Walden who came to Disney from Fox and who heads up all of Content now. As you know, Dana Walden, she's a huge hu. She has a huge presence in Hollywood. I mean stars absolutely love her. She's. She's got a great presence within the creative community. But I think, you know, there has been obviously rumors that Josh Tomorrow is in the leading position right now. And I think that just really reflects how the company's, you know, earnings position has completely changed. I mean, a few years ago, as you just pointed out, you know, a while ago, this was really a TV networks company and that has completely changed now with this being really the biggest theme park operator in the world, attracting about 150 million global visitors each year and only poised to get stronger and stronger. So they're already making about 60% of company profits come from just theme parks division alone. And as we kind of look forward, Paul, I mean you look at all of the new cruise ships, they're planning to basically double, triple capacity in the next three to four years. You look at all of the park expansions, you know, park profit could very well be three quarters of, you know, total company profits in the next few years time.
- [15:03]
Paul
What is your confidence, GitHub, that they're going to get the succession right this time around because not so long ago they appointed Bob Chapek, who also headed up the parks division to succeed Bob Iger and that lasted for no more than a year. Was it? I don't know. Whatever it was, it didn't last very long. Bob Iger ended up coming back. Why is it different this time around?
- [15:23]
Geetha Ranganathan
I think it's different this time around because the company isn't, you know, I think they finally got their priorities straight. I think at that point, Disney was really striking. Trying to still figure out what it was. Was it a TV network company? Was it a Disney plus streaming company? Was it really a theme parks company? Was it a film studio? So I think there were just so many different, you know, they had so many different balls up in the air. But I think right now and streaming, obviously they were kind of in the early innings of streaming, chasing subscribers at all costs. And that's the game that kind of Bob Chapek played, but didn't play very well because he was not very, you know, obviously not very well versed. But the content part of the business ended up really overpaying in terms of content costs. We saw Disney pay something like $32 billion in content costs, which led to about, I think, $4 billion in losses for the streaming unit alone. They've come down from $32 billion in content costs to 23 billion under Bob Iger. So that was a lot of, you know, the right sizing of costs, really righting the ship, you know, course correction, all of that happened. So I think definitely the company is in much, much better shape right now. And again, this is now, I think people who are kind of underappreciating the theme park portion of the business now really look at this as mainly a parks company and y streaming. And yes, we can see some upside from streaming and films, but this is really a theme park operator.
- [16:41]
Interviewer (Paul's Co-host)
Oftentimes when the board picks a CEO, the person who did not get the role leaves the company. What's the risk here that Dana Walden, again, as you mentioned, so widely respected and important that she would leave the Walt Disney Company?
- [16:54]
Geetha Ranganathan
Yeah, definitely, definitely possible. But they do have a deep bench. I mean, along with Dana Walden, Alan Bergman also heads, you know, the content. So he's been overseeing some of the film and TV businesses as well. So, you know, obviously there is the risk of her leaving, but at the same time, I think they do have a deep bench that could, you know, fill her shoes, hopefully.
- [17:13]
Interviewer (Paul's Co-host)
Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public 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 high 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 completely customizable and based on your thesis, not someone else's. 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.
- [18:09]
Sponsor Voice
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@public.com Disclosures Are you a.
- [18:28]
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- [18:39]
Paul
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- [18:41]
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- [18:58]
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- [20:01]
Podcast 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 podcasts or watch us live on YouTube.
- [20:15]
Interviewer (Paul's Co-host)
The big global pharma companies reporting earnings. We got a couple down a couple More to go. San Frazelli joins us. He's the director of research for Global Industries. Have no idea what that means. I know him as the senior pharmaceuticals analyst at Bloomberg Intelligence. He's over there in London ostensibly, but he's always traveling around the world, you know, checking out all the latest drugs and that kind of stuff. That's how those folks get smart. Hey Sam. Sanofi Roach, Roche. I know I'm pronouncing incorrectly. They reported some results here. What did you see from the big, some of those big pharma companies?
- [20:47]
San Frazelli
Yeah, thanks Paul. I think, I think the most interesting of the company of everything so far that there are three companies so Sanofi, Roche and Johnson. And Johnson who reported so far was the fact that nobody really seemed to be saying much about. I mean people ask about MFN and the impact mfn, but numbers were in line and growth is as expected. So somehow these companies are managing it. I mean we're going to have to wait and see what happens to the European countries, drug sales, etc. As they come on. But nothing in there. And the one thing that specifically stood out in the, we talked about Johnson and Johnson last time was Sanofi where they called out the vaccine sales in the U.S. remember they still traditional vaccines, not MRNA. So it's not like it could be something that people don't like. And they're still calling for a down year in 2026, which is interesting in that we have another company, Moderna, that does make MRNA vaccines and they're saying that they're looking for an up year in 2026. So there's some differences there that I think need to be ironed out between the companies, you know, and that's, that's, and it's not a good thing that we're seeing less vaccine use in the U.S. right.
- [22:00]
Paul
We need to figure out if this is a company specific issue or something that tells us about the take up in the US can they make up these vaccine makers? Can they make up that potential loss of Business in the U.S. in other parts of the world?
- [22:14]
San Frazelli
Well, that's the thought potentially for Moderna. I mean Sanofi, you know, I mean there, the volume of vaccines that are sold the rest of the world, the prices are not anywhere near as strong as they are in the US So they can maybe work on the margins. But I think there's vaccine hesitancy across the board. I mean why do we have quite a few European countries who've lost their measles elimination status too? Not just the U.S. problem, Sam, this.
- [22:43]
Interviewer (Paul's Co-host)
Most favored nation's status that President Trump is talking about, what are the companies saying? Are they saying, hey, this is real, this is going to happen? And are they quantifying the potential costs? Where are we in that whole process?
- [22:57]
San Frazelli
I mean, the cost is potentially coming from them repatriating or moving some more investments into the U.S. what exactly that number is? Time will show a lot of these companies give big numbers, 50 billion, 55 billion over the next five years. But that includes their standard R and D, a lot of which is actually already spent in the U.S. so what that incremental increase of manufacturing, et cetera, in the US Is I don't know. And I think you might have seen in numbers recently that came at manufacturing headcount isn't going up. In fact, it shrunk. So unless pharma is such a small part of the overall manufacturing numbers. But coming to the latest numbers that we saw that came out last week, it didn't go up. So something's not quite working out here. And maybe it's just going to take a year, two years before these sites are operational before we see those numbers go up.
- [23:48]
Paul
Yeah, it feels like there's a lot of room to be vague in those big, big committees. Right. And we know this administration likes big, big numbers, so if you can kind of include everything under the sun, all the better. So. So let's talk a little bit, Sam, about Eli Lilly, which will be reporting earnings in two days on Wednesday. The outlook right now is for a pretty broad guidance for the full year. Walk us through the different things that Eli Lilly needs to contend with as it offers up guidance.
- [24:16]
San Frazelli
Yeah, it's not, by the way, it's not just really both Lilly and Nova reporting on the same day. That makes it more fun for I think Wednesday is an awful day for large pharma reporting. Or fun or wrong is 6, 7. Well, hopefully things that you have to call, you know, you need everybody on the desk to be, to be listening to these calls. So I mean there's a few things that we're looking for for both of them, frankly. And remember Novo is the first one that's launched a oral drug that's out there, oral begovi. And the prescription volumes for that that you can check out on the terminal are going one of the strongest diabetes obesity launches that we've had in I think maybe even ever. So that's looking pretty strong. What the therefore timing of war for Glyfron that's coming from Lilly. I think that's expected into Q. Maybe a little update on that. When exactly to Q? Everyone wants to know early is the current date. We're also looking to see how these deals that they've done with slightly lower prices. You might have seen those with the Medicare prices, etc. Are they beginning to show an increased volume? The theory is if price comes down, volume should go up, right? Because this is an insatiable market. And then lastly, one of the tough things to keep an eye on is ex us. We have prescription data for US Pharmacies, but it is much harder to follow. So people are going to be looking to see how these obesity drugs are doing outside of the United States. That's the key thing.
- [25:40]
Interviewer (Paul's Co-host)
Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public 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 high 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 completely customizable and based on your thesis, not someone else's. 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.
- [26:35]
Sponsor Voice
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@public.com Disclosures Are you a.
- [26:54]
Sponsor Announcer
Parent who feels guilty about screen time?
- [26:56]
Geetha Ranganathan
No.
- [26:56]
Sponsor Announcer
Well, no, not you sweetheart, but your mommy and daddy do.
- [27:00]
Paul
Why?
- [27:01]
Sponsor Announcer
Because too many apps are filled with AI garbage, inappropriate videos and random content.
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Paul
Like a dancing potato or worse.
- [27:09]
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Paul
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- [27:30]
San Frazelli
Fomosynthesis.
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- [27:40]
Paul
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- [27:49]
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- [27:54]
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- [28:56]
Podcast 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 podcasts or watch us live on YouTube.
- [29:10]
Interviewer (Paul's Co-host)
Well folks, the experts continue to tell us we're in the early, early innings of this AI story here and a lot of investors continue to look for ways to play it, as do we. Fortunately, here in Bloomberg Intelligence we got a lot of technology analysts who covered all parts of the tech stack and that includes Woojin Ho, senior technology Analyst for Bloomberg Intelligence. Talk about the global communications and networking equipment space. What to look for in 2026. Wuj, thanks so much for joining us here. When your conversations with investors and they say wooj in your space, in the communication space, the network equipment space, what's the best way to play AI? How do you kind of shape that conversation?
- [29:49]
Woojin Ho
Yeah, hey, thanks.
- [29:50]
San Frazelli
Thanks Paul.
- [29:51]
Woojin Ho
So it's fairly straightforward, right? It's a very, fairly concentrated space. The AI networking space is expected to grow 91% on the switching hardware alone to $21 billion. Right? The way to play it is fairly straightforward. It's three Cs, an A and an N. Right? That's my new networking fang. Cisco, Celestica, Corning and Sienna. So 4Cs Arista and Nvidia. Right. And those are going to be the leading beneficiaries for the networking space in AI.
- [30:25]
Interviewer (Paul's Co-host)
So give us a sense of kind of how investors should think about the investment cycle for AI. I mean I'm going to say we're two or three years into it. I'm just not sure. How do you guys think about the duration here?
- [30:39]
Woojin Ho
Yeah, you know it's quite odd right, because you know, some of us say it's two, three years into it. Michael Dell had this interesting quote a couple of weeks ago saying what, what inning are we? And his response was we're just entering the stadium. So he still thinks it's early on in terms of the investment phase. You just had Mandeep on and he was talking about the Oracle investment and look, $50 billion is a massive amount of money and it's, and it's all going into the infrastructure space and, and networking is going to be one of the leading beneficiaries of it.
- [31:13]
Interviewer (Paul's Co-host)
So how are the networking equipment companies that you follow, how are they financing some of their, their capex? Because again I think most of us grew up when technology companies had so much cash flow that they could self fund their R and D, their CapEx, that type of stuff. Now they're a, many of them need to come to the capital markets.
- [31:32]
Woojin Ho
Yeah, fortunate for the, for the networking guys it's a low, low CapEx type of business. Right. We're talking about sub 10% of the cash flow to CapEx or 10% CapEx ratio to sales. So it is a fairly self funded business and it's also high, high margin business as well. As long as the hyperscale cloud providers as well as the tier 2 cloud providers like the NEO clouds are funded, they'll be able to buy the network working gear.
- [32:03]
Interviewer (Paul's Co-host)
So how do you, I mean it's interesting here, think about the tech space and its hardware, it's software, the networking equipment here. Who's kind of driving this, this AI thing is are your networking and communications companies, are they kind of dependent upon, I don't know what the hyperscalers are doing or what the chip makers are doing, who's kind of leading this.
- [32:25]
Woojin Ho
So at the end of the day it's how quickly and how fast and how large of the investments that the hyperscalers are making on the AI side. I will tell you, as these language models grow and the scale of these compute investments grow, you actually need a lot more networking. And networking is, if you think about it as the arteries and the veins of a human Body networking is probably at the center of that right now and that's why you're having a lot of investment on the networking front.
- [33:00]
Interviewer (Paul's Co-host)
Who are, I mean, how are they dealing with again, these networking companies? I think of these big global companies. Is the manufacturing dispersed around the globe? Is there a pressure to bring it to the us how are they dealing with some of the changes we've seen in global logistics? Whether it's tariffs or just, you know, most favored nation status, those types of things.
- [33:20]
Woojin Ho
Yep, that's a fantastic question, Paul. I will tell you there's a couple of things right. If we had that when we had the tariff situation, number one, and also the COVID situation a few years back, the companies have actually done a good job rearranging the supply chain. A lot of manufacturing is happening out of Mexico. There's some manufacturing that's happening in Taiwan as well as in Canada. So we're bypassing some of the tariff situation and quite frankly to tariffs have become a non story for the majority of my networking guys. And on top of that, the DRAM story is inconsequential for the networking names as well.
- [33:55]
Interviewer (Paul's Co-host)
How are the stocks performing here? We've seen so many parts of the tech space just rip. How have your stocks been doing?
- [34:03]
Woojin Ho
I will tell you if you know, if you looked at the Celestico two years back, you're seeing a, a 10 time performer to where it is right now. You know it has slowed down because I think people are starting to catch up to the name Arista, it's a double from, from two to three years back. And Cisco, I mean we've finally got back to its 192001 highs because the business has actually stabilized. So the stocks in itself has done, have done well. The multiples have actually gotten a little bit rich.
- [34:39]
Podcast Host
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