AI Winners and Losers Emerge

Summary

Bloomberg Tech — "AI Winners and Losers Emerge"

Date: July 30, 2026
Host: Ed Ludlow
Summary by [Your Podcast Summarizer]

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Overview

This episode centers on the diverging fortunes of major technology and AI players amid a turbulent earnings season. Ed Ludlow and a lineup of analysts and executives break down the latest quarterly results and strategic moves from Microsoft, Meta, ARM, Qualcomm, Apple, as well as notable developments in space infrastructure. Discussions focus on who is best positioned in the rapidly evolving AI landscape, analyzing growth and setbacks in cloud infrastructure, AI monetization, and hardware, along with investor sentiment and big bets for the future.

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Key Discussion Points & Insights

1. Microsoft: Cloud Growth & AI Monetization

• Microsoft’s Earnings Blowout

  • Stock up almost 15% — largest jump since October 2008. (02:31)
  • Highest cloud growth in years, moderating spending, increasing Copilot adoption.
  • Strong signal that AI investment is yielding tangible ROI.

• Gabriella Borges, Goldman Sachs:

  • “There are a couple of really interesting dynamics this quarter… you're seeing more breadcrumbs around Microsoft's ability to pull varying levers on the monetization side that perhaps were not nearly as obvious before.” (03:21)
  • Copilot seats grew from 20M to 30M in a quarter.
  • Enhanced product integrations (e.g., Work IQ, semantic search, Cowork Edition) improving user value, reinforcing momentum.

• Satya Nadella, Microsoft CEO:

  • “We have reduced DR. lifetimes for new GPUs in our largest regions by nearly 50%... added another gigawatt of capacity this quarter and remain on track to roughly double our overall capacity in just two years.” (05:31 - 05:43)

• Monetization Nuances:

  • Shift in focus from raw CapEx to extracting maximum value from software platforms layered atop new infrastructure.

• Market Leadership Position:

  • “Microsoft has been in this penalty box for a number of quarters now... but there's a lot of discovery value to unlock as we learn more about the progress they're making on their strategy.” — Gabriella Borges (07:16)

• AI Utility for Consumers:

  • Period of experimentation; product-market fit for AI apps (like Copilot across devices) is maturing but not uniform yet. (08:26)

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2. Meta: High AI Spend, Investor Skepticism

• Earnings Results:

  • Stock down 8%, biggest drop since October. Revenue up 28%, but expenses up 55% (09:58, 10:28)
  • Investors unsettled by unclear AI monetization pathway and large CapEx commitment ($145B ceiling for the year).

• Mark Zuckerberg, CEO:

  • “Our investments in AI are accelerating every major part of our core business...helping our teams build new experiences and ship faster... developing new personal agents that will be the foundation for our next wave of products...” (09:58)

• Analyst Insight — Riley Griffin:

  • Despite ad business strength, “The funding coming from the core business to fuel this AI race is just not going to be enough. And investors really want to know—when are we going to see that return?” (10:28)

• Shweta Kajura, Wolf Research:

  • On Meta’s strategy: “...they want to be vertically integrated and offer value to larger enterprises...against which they need to build that muscle as well as SMBs over time.” (11:44)
  • Growing ad revenues thanks to AI-driven targeting, but AI spending outpaces current financial returns.

• Risks & Cash Flow:

  • CapEx for next year could require a significant capital raise.
  • Free cash flow is declining, eliciting investor impatience. (13:30 - 13:41)
  • Regulatory hurdles/one-time legal charges remain a concern.

“They do get credit. It’s just that they’re spending a lot more than what they can afford to spend right now.” — Shweta Kajura (14:48)

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3. ARM: Sluggish Smartphone Royalties, Datacenter Hopes

• Tim Schultz, Rothschild & Co Redburn:
  • “Optically an inline print, nothing really to get too excited about… guidance is pretty pedestrian.” (20:01)
  • Royalties remain heavily reliant on smartphones, which are now challenged by memory price inflation and slowing sales.
  • Datacenter royalties are growing (doubling year-on-year), but base remains too small to move the needle significantly. (21:54)
  • Margin pressure from rising memory/component costs persists across the industry.

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4. Semiconductors & Mobile Hardware: Market Forces

• Samsung:

  • Massive surge in chip profits offset by ongoing memory shortage—a factor impacting mobile device makers across the board. (19:00)
  • Apple expected to report strong numbers but faces similar cost pressures.

• Markets Snapshot:

  • NASDAQ and the Philadelphia Semiconductor Index (SOX) rally strongly after big tech results, particularly buoyed by Microsoft. (24:55)
  • Noted as a volatile, “elastic band market” — sharp rebounds after declines. — Ryan Vasilika, Bloomberg Equities Reporter (25:47)

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5. Amazon & Apple: Next in Focus

• Amazon:

  • High expectation for positive CapEx and AI narratives, especially in warehouse logistics and AWS.
  • AI spending is more easily tied to operational returns, compared to Meta. (26:53)

• Apple:

  • Labeled the "AI safety trade" — perceived as a defensive play amid AI-driven turbulence because it’s less exposed to risky AI spending and excels at passing on rising costs. (27:47)

“Apple is so dominant in the hardware space that it’s probably better able to weather some of this than some of the peers... And then we have the foldable iPhone later this year...” — Ryan Vasilika (27:47)

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6. K2 Space: Satellite Infrastructure & Space Investment

• Karam Khanjur, CEO:
  • Recently closed $500M Series D at $7B valuation. (29:10)
  • “Space is becoming an infrastructure play... applications like communications and compute going from the ground in the air to space.”
  • Focus on building affordable, high-power satellites to unlock orbital data centers, meeting growing compute demand. (30:09)
  • “Being able to put a lot of compute on orbit fundamentally changes the economics… at a time where we're pretty constrained from a supply perspective on compute.” (30:56, 31:45)
  • Secured over $1B in contracts, driven by government and commercial demand for national security and next-gen infrastructure. (32:42)

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7. Qualcomm: In Transition Amid Memory Crisis

• Cristiano Amon, CEO:
  • Smartphone business under pressure due to “unprecedented memory prices and shortage… the market is down by about 20%. This is not because of demand for phones. This is because…there is not enough memory. The prices are so high.” (37:34)
  • Premium segment holding up better than lower tiers.
  • Transitioning away from smartphone reliance:
    • Forecasts non-handset business to be just under 50% of revenue in FY27 and only 1/3 by FY29, driven by automotive, datacenter, and IoT. (40:40)
  • Data center bookings ($5B in FY27, $15B by FY29) supported by custom chips and accelerators, mainly through hyperscaler partnerships, both in the U.S. and China. (42:12, 43:07, 44:08)
  • Recent Modular acquisition gives Qualcomm a modern, open-source software stack for AI—building credibility for its broader platform ambitions. (45:32)

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8. Apple: Leadership Transition & Strategic Outlook

• Mark Gurman, Bloomberg:
  • Tim Cook’s final earnings call as CEO; transition to incoming CEO John Turner is in focus. (47:57)
  • Apple’s product pipeline healthy; expected to announce foldable iPhone and new Apple Watches in September.
  • Strong cash flow centered on iPhone, which will remain the company’s most important product line under Turner.
  • “They raised prices at the exact time they needed to... price increases may even lead to higher revenues. So margins likely stay steady. Revenues likely to go up. They're going to have their cake and eat it too.” (49:18)

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Notable Quotes & Memorable Moments

• On Microsoft’s breakthrough:
  • “The beauty of what we think is going to happen with the Microsoft stock over the next 12 months is it’s not as bad as people think it is. And it’s actually been pretty significant improvement behind the scenes.”
    — Gabriella Borges, Goldman Sachs (07:16)
• On Meta’s spending dilemma:
  • “Investors are losing patience because they don’t have much to show for it, especially against decelerating advertising revenue.”
    — Shweta Kajura, Wolf Research (13:41)
• On ARM’s challenge:
  • “If your ARM and you’re earning 50 cents or a dollar per core... it’s really hard to generate meaningful revenue that’s really going to move the dial.”
    — Tim Schultz, Rothschild & Co Redburn (21:54)
• On Apple’s resilience:
  • “Apple is so dominant in the hardware space… better able to weather some of this than some of the peers in the hardware space…”
    — Ryan Vasilika, Bloomberg (27:47)
• On Qualcomm’s strategy:
  • “The exciting thing about the company is the new business and how we’re actually transforming the company.”
    — Cristiano Amon, Qualcomm (40:12)
• On the future of AI in devices:
  • “We’re in this period of discovery where by necessity you have to throw a lot of spaghetti at the wall in order to find good product market fit...”
    — Gabriella Borges, Goldman Sachs (08:26)
• On Apple’s future:
  • “I strongly believe the iPhone is going to remain the center of the Apple universe… It’s the cash flow cow.”
    — Mark Gurman, Bloomberg (49:50)

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Timestamps for Important Segments

• 02:31 — Microsoft’s record earnings and cloud growth
• 03:21 — AI monetization and Copilot traction (Gabriella Borges)
• 05:31 — Satya Nadella on capacity expansion
• 07:16 — Microsoft’s “discovery value” (Borges)
• 09:58 — Meta’s earnings and Zuckerberg’s AI ambition
• 14:48 — Meta’s ad business growth versus costs
• 20:01 — ARM’s earnings and royalty dependency (Tim Schultz)
• 24:55 — Markets reaction: NASDAQ, SOX, Microsoft impact
• 26:53 — Amazon and Apple preview (Ryan Vasilika)
• 29:10 — K2 Space: satellite infrastructure vision (Karam Khanjur)
• 37:34 — Qualcomm’s smartphone challenge (Cristiano Amon)
• 40:40 — Qualcomm’s non-handset growth strategy
• 42:12 — Qualcomm’s datacenter roadmap
• 47:57 — Apple’s CEO transition (Mark Gurman)
• 49:18 — Apple’s margin and pricing strategies

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Conclusion

This episode paints a vivid picture of the shifting AI and tech landscape, as cloud and AI winners (Microsoft, Apple) pull ahead with execution and return on investment, while others—most notably Meta—face mounting skepticism over heavy spending and unclear payoff. Hardware, software, and infrastructure innovation are intersecting in unprecedented ways, and investor patience is wearing thin for those who can't clearly demonstrate progress. The race for AI supremacy is on, but the winners are those who can turn promise into profit.

Transcript

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[IBM Representative]

The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slashed repetitive tasks and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM

[Bloomberg Tech Host]

Bloomberg Audio Studios Podcasts Radio News. Bloomberg Tech is live from the heart

[Shweta Kajura]

of Silicon Valley with Ed Ludlow in San Francisco.

[Bloomberg Tech Host]

This is Bloomberg Tech. Coming up, Microsoft soars on cloud growth as its AI gets traction. Meta plummets as Zuckerberg's bets pitch falls flat on high spending Musk Qualcomm also out with earnings and warnings of component shortages and rising costs. We speak with the CEO Cristiano Amon. And then it's all eyes on Apple after the closing bell today as Tim Cook gives his last earnings report as CEO. Let's get straight to our top story earnings and we start with Microsoft. The Stock's up almost 15%, on track for its biggest jump since October of 2008. Bloomberg's Ready for us here. What do we need to know?

[Bloomberg Analyst]

The print really gave us everything you would want. Highest cloud growth in years. Moderating pace of spending. Co pilot seats up. The big theme this year has been all this money the hyperscalers are throwing out. Are they going to see a return? And Microsoft showed us increasing growth and that there is at least an end in sight to this constantly ratcheting up level of spending.

[Bloomberg Tech Host]

All right, Bloomberg's Brady Ford, thank you very much. Let's keep it going and more. Microsoft Gabriella Borges Goldman Sachs Managing Director Senior Software Equity Research Analysis mainly maintains a buy rating on Microsoft, raising its 12 month price target to $640 from 610. Azure Growth at that level, it seems to be the main metric. So let's start there. What do we actually learn about that ROI through the Azure number?

[Gabriella Borges]

Hi, good morning. It's interesting because from the outside in we can certainly see component pricing moving higher, we can see Capex announcements, we can see memory pricing, but we don't always have perfect visibility into the other side of that equation, which is Microsoft's ability to monetize the ROI on the other end in the Azure business. And there are a couple of really interesting dynamics this quarter wherein you take something like GitHub, for example. GitHub is now moved to being able to be monetized on a consumption basis for power users such that as customers get more value out of it. Well, Microsoft directly gets more monetization out of it. And so I think you're seeing more breadcrumbs around Microsoft's ability to pull varying levers on the monetization side that perhaps were not nearly as obvious before.

[Bloomberg Tech Host]

Gabrielle what I found interesting was to look back at Alphabet and say what were the non financial metrics that Google shared about Gemini? And then how did Microsoft kind of do the same? So copilot, 30 million installed seats at the end of the quarter, up from 20 million at the March quarter. Is that useful information to you for how Microsoft's offering and AI is gaining traction?

[Gabriella Borges]

One of the bear cases on this stock for the last six to 12 months has been that Copilot is just not as good a product as it could be. And at the same time we've seen so much energy from Microsoft into making Copilot a better product. I think about things like the work IQ integration from November, where it gives you more context on where you sit in the organization. I think about better semantic search and indexing. And then most recently with the Cowork Edition, you're bringing the best of some of the leading frontier models into the Microsoft ecosystem where they can also benefit from Microsoft security, reliability, all that good stuff. So we've been waiting to see some of the industry feedback get better on Copilot. Industry feedback is getting better on Copilot and to see it in the numbers just sort of reinforces that positive feedback loop on. Okay, we're starting to move in the right direction and momentum that's picking up.

[Bloomberg Tech Host]

We're still zeroed in on capital expenditures, but one of the Things I found really interesting about Satya Nadella and Amy's commentary was them talking about the real world. Let's get a sense of that from, from Nadella himself.

[Satya Nadella]

We were also bringing capacity online faster than ever. Over the last fiscal year we have reduced Dr. Lifetimes for new GPUs in our largest regions by nearly 50%.

[Bloomberg Analyst]

All up.

[Satya Nadella]

We added another gigawatt of capacity this quarter and remain on track to roughly double our overall capacity in just two years.

[Bloomberg Tech Host]

If you believe the demand story, they're moving pretty quick to get the compute on the supply side. They also made, let's call it an accounting change. Right, which, which altered the capex figure. How did you alter your model in response to that?

[Gabriella Borges]

The mechanics on the depreciation schedule is pretty straightforward. We have an estimate of what is long lived assets and short lived assets and you can run that through your model. I think the industry dynamic that I would overlay on the top of this is a little bit of a shifting center of gravity where you're hearing more discussion around being nuanced on the types of algorithms that you're rooting to types of models, whether that's open source, open weights, frontier models, Microsoft's own internally AI model. And the interesting thing about this is yes, on the one hand you have the CapEx, but on the other hand what are you doing from a software platform standpoint to really get maximum value out of monetizing the CapEx? And I think that part is where the industry conversation has really started to change over the last three months.

[Bloomberg Tech Host]

If we put Microsoft, Alphabet, Amazon, and let's throw in a few others in there side by side, purely on stock performance year to date, Microsoft would not be number one. My question to you is where does Microsoft stand in the race in terms of leadership of products, the platform offering that you've just outlined?

[Gabriella Borges]

There's two parts to this question. There is where do they stand on an absolute basis and then there's where does the market think they stand on a relative basis?

[Bloomberg Tech Host]

Exactly.

[Gabriella Borges]

And one of the ways we've been talking about Microsoft relative to its competition is this idea of discovery value. And Microsoft has been in this penalty box for a number of quarters now where you can in any given quarter say, look, Google is ahead with Gemini or Google is ahead with its internal Silicon strategy. Well, the beauty of what we think is going to happen with the Microsoft stock over the next 12 months is it's not as bad as people think it is. And it's actually been pretty significant improvement behind the scenes. And So I would focus on this concept of discovery value. I think that there's a lot of discovery value to unlock in Microsoft as we learn more about the progress they're making on their strategy.

[Bloomberg Tech Host]

Gabriella, to end, I'd love to have a technology conversation with you. You know, I grew up on Microsoft. Learn to use a computer through Windows 365 more recently. And then last week I turned on my smart TV and it was saying, you have Copilot installed in here. And I'm just thinking, what, like I have no idea how to make use of Copilot on my smart tv. Reflecting whether it's within Goldman or like in your own personal life, like, how do you see the utility of Copilot and Microsoft's AI offering at the individual level?

[Gabriella Borges]

We're in this period of discovery where by necessity you have to throw a lot of spaghetti at the wall in order to find good product market fit in order to innovate. And one of the questions that we spend time on with all of our companies is, okay, tell us about the pace of innovation. What are some of the really cool things that you're doing in house us about your engineering culture. And all of this comes full circle. So as a consumer, as an end user, you'll try a lot of different things. Some of the product market fit isn't going to be quite right, but we'll get to a period where you'll be able to see the types of flavors of Copilot and the types of use cases maturing and you'll be able to get good utility out of that. And I have no doubt we'll be in a position six months from now, a year from now. And even as I reflect back on our own experience at Goldman Sachs over the last 12 months, the progress that we've made with being able to see how these tools can actually help in our day to day. There's been a lot of progress, There'll be a lot more progress and I think we still are figuring out where this technology can really take us from a productivity standpoint.

[Bloomberg Tech Host]

Again, this is a big earnings move in the stock up 14% on track for its best day since March of 2020. But at 1 point in the session, on track for its biggest jump since October of 2008, which says quite a lot. Gabriella Borges of Goldman Sachs back on the show, thank you very much. Matter is a very different story. Matter is down 8% on track for its biggest drop since October. Met as disappointing forecast. Increasing pressure on CEO Mark Zuckerberg to Prove that the bet is and will be fruitful. Let's listen to him.

[Mark Zuckerberg]

Our investments in AI are accelerating every major part of our core business. They're improving the experience for people using our apps, driving better performance for advertisers and helping our teams build new experiences and ship faster. Second, we are developing new personal agents that will be the foundation for our next wave of products and revenue lines in the months and years ahead.

[Bloomberg Tech Host]

Bloomberg's Riley Griffin leads our coverage of MATTER and joins us now. What do we need to know? There was so much in this earnings print and earnings call.

[Riley Griffin]

I think the two most important numbers from yesterday are 28% and 55%. 28% is an increase in revenue year over year. Sounds like a lot. Brings up US to 60 billion for the quarter, but expenses 55% increase there. There were a couple of one time charges. But here's the thing. The funding coming from the core business to fuel this air race is just not going to be enough. And investors really want to know when are we going to see that return on its investment and what revenue lines are actually the future. We've talked about cloud business here. He didn't provide a lot of clarity there. We didn't get names, deals, financing timelines and the market really wants that.

[Bloomberg Tech Host]

Right? Griffin, thank you very much and we'll stay with matter. Joining us is Shredded Kajuri A. Wolf Research Manning, Managing director of Global Internet. And I'm going to pick up on what he was talking about. Mark Zuckerberg, and I'm paraphrasing, essentially said sure, we could just rent out GPUs, but the best value on the infrastructure is to build a layer on top of it. And to me that sounded a little bit like bedrock. It sounded a little bit like APIs for enterprise, but we just didn't get that crystallized. What was your interpretation?

[Shweta Kajura]

First of all, thanks, thanks for having me on that particular comment. My interpretation was that while the value is certainly in intelligence and that's where people are focused on, but then over time as they make the model available, what is built on top of that model is going to be incredibly important. And so they'll have to flex their muscle because they don't have competency in the larger enterprise side of it, which he was very upfront about and quite candidly investors are skeptical about. And then the other side of it was also with that they have a huge SMB base against which they can, who they can leverage with this model. So that was my interpretation that they want to make this model available. They want to be vertically integrated and they want to offer value to larger enterprises against which they need to build that muscle as well as SMBs over time.

[Bloomberg Tech Host]

They kept the CapEx ceiling at $145 billion for the year but raised the low end of the range to 130 nothing for next year. How much is that a factor in

[Shweta Kajura]

this market for this year? Not as much. I think it was just a narrowing of the, of the, of the guidance because they have greater visibility. The next year's number is now, you know, people are anywhere from 230 to 260 billion dollars which is a very large number against their operating cash flow which is going to be arguably closer to 100 billion. So the concern here is that there is likely going to be a need for a capital raise, perhaps a 50 to $100 billion of capital raise or more JV partnerships, both of which are a cloud over the stock.

[Bloomberg Tech Host]

A cloud over the stock. And there's been discussion about going to the equity markets. Free cash flow, lowest level since 2022. Does that worry you?

[Shweta Kajura]

Absolutely. The benefit that matter has is that and other hyperscalers like Amazon and Google is that they have very large operating cash flow. So the fundamentals of the business in general because it is an advertising business, higher margin, they can generate almost $200 billion in operating cash flow. So without any capital raise needed at least they can spend that amount of money, flatten out free cash flow for a little while because it's there's demand constrained environment and then sort of show the upswing in free cash flow. When everything normalizes that's what they're playing for. But I guess investors are losing patience because they don't have much to show for it, especially against decelerating advertising revenue. As we now look at the back half of this year, we're back to

[Bloomberg Tech Host]

talking about matters through the financial metrics lens. You know did you learn anything sweater about how AI is making improvements on the outside about meta AI through smart glasses? Anything that shows matters plan for AI is getting traction in the world.

[Shweta Kajura]

Well in there to their the place where they get credit in their advertising business is that their advertising business is still growing at a fairly good clip for a business this size that's going to be as big and or surpass search revenue at Google is very remarkable. And they're growing in the mid to high 20% range. So that in itself is very strong growth rate. Just that that may not be enough against the amount of spend they are doing. So why is that when the overall digital market is growing at call it 11 to 12% and they're growing more than double that clip and it's because of the AI integrations that they're doing that is making the recommendations and targeting a lot better. So they do, they do get credit. It's just that they're spending a lot more than what they can afford to spend right now.

[Bloomberg Tech Host]

Bloomberg's Riley Griffin explained expenses 55% operating margins contracted year on year. And what matter would say is were it not for that $3.6 billion in two different one time charges, then you would have seen operating income rise. Yeah, yeah. What if? Do you buy that?

[Shweta Kajura]

I do, I do. Those were one dime ish. The, the modest pushback that I have is that they are not in the clearing with the regulatory risk that they face from US States Attorney Generals and or eu. And so I'm not sure how one time ish that really is if the risk is ongoing. My hope for them is that they can bring it to a settlement. They make a large one time, actual one time payment and then they are through the clearing. So to the degree that it really is a one off, yes it does make sense because their operating business, the real operating income is growing and they expect that to grow on a full year basis. The challenge is the depreciation spend is 30 to 40 billion dollars, which is. Right. Rising fairly rapidly and that's, that's something that they'll have to address.

[Bloomberg Tech Host]

Wolf Research Managing Director of Global Internet Shweta Kajura thank you. Now coming up, we're sticking with earnings and we're looking at AAM and this is what AAM shares look like, up 6% off the back of strong datacenter royalties and CPU demand. This is Bloomberg Tech.

[IDA Ireland Representative]

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[IBM Representative]

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[Bloomberg Tech Host]

Samsung posted a 250 fold surge in chip profits in the June quarter as the memory crunch showed no signs of easing. In fact, rising memory process prices are creating a challenging environment for Samsung's own mobile device operations. South Korea's largest company says it expects the memory shortages to worsen next year. The comments echo those made by rival SK Hynix as growth fuels demand Sticking with chip shares of arm, this is what they look like. The company reporting slowing smartphone royalties offset in part by data center and CPU demand the Stock Strong up 6% off session highs. Let's discuss with Tim Schultz Merlinda, head of Technology, hardware and Semiconductor Research at Rothschild and Co. Redburn find ARM so interesting because they will tell you well if units are doing this, royalties are doing this. They have a very different business to the fabulous chip makers that we're going to talk about later in the program. Let's start with your your sort of main reaction to the print.

[Tim Schultz]

Yeah, thanks for having me at so at the end of the day, optically an in line print, nothing really to get too excited about and also a guidance that frankly is pretty pedestrian. I think as we look at the earnings season to date, even companies that have delivered stellar earnings and really remarkable EPS revisions for consensus estimates have really struggled to make positive share price moves in the following days and weeks. And so this was frankly pretty pedestrian. I think when we opened up the hood and just looked into the detail, the things that really struck us were some of the themes that have kind of been a challenge for the investment thesis over the last couple of years. The first one, as you point out, is royalty growth this is still a company that is still over indexed to mobile handsets. You reference Samsung there. The memory cost inflation harming their handset sales. That's really going to be a topic in the back half of this year for arm. It's already harming their royalty revenues. It's worse than they expected. They thought it was going to stay at the bottom end of the market. That's actually starting to drift up affecting mid and high end phones. That's going to be a topic tonight with Apple as well. And so there's some licensing revenue offset that helped kind of patch the quarter and is holding the fiscal 27 estimates I think for consensus broadly unchanged. But there wasn't really anything to get excited about in the print whether it's royalties or the AGI CPU outlook.

[Bloomberg Tech Host]

Well quite Tim. The thing that, that Rene Hassan I want us to get excited about is the push into datacenter. You know CPU is a story commentary many at the moment. There's momentum there. Did AAM show real penetration, real momentum in the segment?

[Tim Schultz]

So the one word answer is probably yes. The challenge for investors is that it's hidden, it's hidden inside their royalty revenue disclosures which are generally pretty opaque. And the data center part of that business is actually still, even though it's doubling year on year still relatively small. And so it struggles to move the needle. And that's really the problem in a, in a data center and an AI world where you know we're talking about hundreds of billions of dollars of spend. If your ARM and you're earning 50 cents or a dollar per core and maybe you're earning somewhere in the region of 80 to 100 bucks a chip. It's really hard to generate meaningful for revenue. That's really going to move the dial.

[Bloomberg Tech Host]

Tim tees up for Apple tonight. You know the big watch for you beyond Tim Cook's farewell call.

[Tim Schultz]

Right. Look, it's going to be super interesting. One of the peculiarities of the last quarter has been that price rises and cost inflation others has actually helped Apple's relative performance. So they've actually had a really good June quarter. All eyes on what they do into the September quarter, the step into foldables. How do they refresh the Apple intelligence as you say Tim Cook's kind of farewell quarter and the maiden quarter guidance which John Turner is going to be reporting on in October. I think for us the momentum in the business is good relative to the peer group but that doesn't change the fact that rising input cost inflation makes for a pretty tricky trading environment for everyone.

[Bloomberg Tech Host]

As a clear reminder, Tim Cook's not going far. He becomes executive chair September 1st, but it is his final earnings as CEO. Tim Schultz A. Melander, head of technology, hardware and semiconductor research of Rothschild and Co Redburn, thank you.

[Bloomberg Tech Host (Alternate)]

It's time now for talking tech. I'm your hire on. And first up, Blue Owl data center firm Stack Infrastructure is seeking a $5.9 billion syndicated loan to fund its latest project in Melbourne. That's according to sources. This could be one of the largest such finances in the sector in Australia. Plus three Former NASA researchers and experts say the heat shield that protects SpaceX's Starship vehicle may be a major roadblock to designing a rapidly reusable rocket. The protective tiles suffered a similar significant damage during a recent test flight, which could lead to lengthy downtime between flights and curb Elon Musk's ambitions for rapid reusability. And Disney's new CEO, Josh d' Amaro has instructed his leadership team to think of Disney as Disney plus as the front door for the company's worldwide fans as it plans to add new features to better compete with Netflix and YouTube. It's also bringing Hulu and ESPN content onto the platform while investing in local programing in international markets.

[Bloomberg Tech Host]

At the buyers are back. And look at the NASDAQ 100, up about 3%, two and a half percent in the session. The Philadelphia semiconductor index, or SOX, which is the chip index, is up a lot, 7.4%. But remember, it had been down for the last five days prior to today, a drop of like 16%. So maybe there's a bit of evening out. Microsoft and its earnings are a big factor in this market right now. Microsoft's up like 14%, had been higher still than that and on track for its biggest jump since 2008. All of that is Earnings Digest. And there are more earnings to come. Let's talk about it. Bloomberg equities reporter Ryan Vasilika joins us now. I mean, you and I were chatting this morning. There's a lot going on in this morning's market. Earnings are a factor sector, but the recent downward pressure on technology stocks, clearly that's, that's at play, too.

[Ryan Vasilika]

Yeah, exactly. I would say that's very much the case right now. I have a couple people describing this really as sort of a elastic band market where it's really stretched in one direction and when you get a snapback, it can be extremely volatile going back on the other side. That said, there were a lot of positives, especially in Microsoft's results last night. Very strong cloud growth, very strong adoption of Copilot. And it had some positive comments on CapEx, which really, I think, threaded the needle because they continue to spend, which is positive for the chip space. But this really felt like they did a good job of helping to justify all the spending they're doing. They talked about how a lot of its data center buildings would be useful for 10 years or so. So eventually we are going to see this maybe taper off a little bit, but I think today at least it's positive for the chip space. It was also positive for Microsoft justifying its own strategy, I think.

[Bloomberg Tech Host]

Stocks rallying on big tech results and capex plans. And then there's tonight, where Amazon will talk about all of those themes. Apple's there as well. I know you've been thinking about Apple. You know, how does that fit into the market this week? What we're going to get after the bell.

[Ryan Vasilika]

Very curious to see what Amazon has to say about capex and how the market receives that. Amazon is another company where I'd say there's a lot of optimism that all of this spending is going to pay off, especially as they talk about using AI in its warehouses and for logistics and things like that. That's a very clear way of seeing how all the spending can translate to improved efficiency, improve profits. And because you have aws, which remains the leader in cloud, I think people are expecting a pretty good read there. So that could be another sort of read more in the vein of Microsoft as a big opposed to Metta, which had a disappointing revenue forecast, making it harder to sort of justify all this spending. It's also continuing to spend a lot. That's why you're seeing that stock really pull back today.

[Bloomberg Tech Host]

I borrowed a line from your Apple report this morning on Bloomberg Surveillance and one of the analysts reacted to it straight away, saying, can't believe we're calling Apple the AI safety play or the safety trade. But it's kind of like how the markets treated it.

[Ryan Vasilika]

Yeah, exactly. I think if you look at a lot of the major themes that have been in the market this year, at least as it pertains to tech, Apple is really separate from all of them. So if you are concerned about the level of AI spending, Apple's not doing that spending. If you're concerned about AI disrupting software, it's not disrupting. Apple doesn't really fall into that category either. Now, there are some concerns that people have about Apple, notably the impact of higher memory prices, but I think Apple is so dominant in the hardware space that it's probably better able to weather some of this than some of the peers in the hardware space that are maybe geared towards lower income consumers. And then we have the foldable iPhone later on this year, which is expected to be coming at a high price point that might allow Apple to sort of pass on the impact of higher component costs to the consumer without it being sort of the sticker shock that you might see elsewhere.

[Bloomberg Tech Host]

That's what's happening in technology stocks. Bloomberg's Ryan Valstetta, thank you very much. Let's switch over to private markets where industry interest in backing space firms, particularly following The Space X IPO, remains very high. The latest example, K2 Space, just closed a $500 million Series D round. The firm builds large satellites for data heavy communications, defense missions, etc. The valuation also very big, almost $7 billion. CEO Karam Khanjur joins us for more. Let's start with what is a big backing of your company.

[Karam Khanjur]

Company.

[Bloomberg Tech Host]

A big round iconic is in that Kleiner Perkins, Lightspeed, Capital G Ultimate. The list is long, but those are our top tier investors. What is it that they think they see in K2?

[Karam Khanjur]

Yeah, space is becoming an infrastructure play, right? And you're seeing applications like communications and compute going from the ground in the air to space. And so we started K2 to go build the highest power, most capable satellites that have ever been launched. And I think these investors saw that what we had built was something super different. Really differentiated massive moats from a technical perspective and a really solid book of revenue to build off of. And so yeah, we're really excited to announce this round. It's a, it's a big round for us and we're excited to bring a bunch of those names onto our cap table.

[Bloomberg Tech Host]

So K2 can do quite a lot with $500 million. Because the whole point of the design you have is that you can produce very fast at low cost. Low cost being 50, 15 million dollars per satellite. Is that kind of the play here to get funding to move quick?

[Karam Khanjur]

Exactly, yeah. The, the capability that we're delivering historically was done by $1 billion satellite made by one of the primes. It cost, you know, $1 billion and took seven to ten years to produce. Like our whole play was how do we figure out how to take on all of these hard engineering challenges. Giant solar race, giant batteries, giant reaction wheels. Figure out how to do that in an industrial way. Turn it from something that used to be a science project to something that's mass producible. And if we could do that we could reset how we rolled out infrastructure layers in space.

[Bloomberg Tech Host]

If you're the domain expert in very big satellites with high power requirement to Space X or someone else, give you a call, Karan, and say, look at our design for Orbital Data center.

[Mark Gurman]

Help us.

[Karam Khanjur]

You know, I think people saw the 20 kilowatt satellite that's now flying on orbit today and they're starting to hear about our plans for what we call the 100 kilowatt class satellite. It's actually a bit more than 100 kilowatts but we'll save that for another day. But it's one of the largest, highest power satellites that has ever existed and it's what makes orbital Data centers possible. So while it's not Space X, almost everybody else has been reaching out to us, asking to, to work with us on that capability. Because you know, going high power allows you to put up a lot of compute. Being able to put a lot of compute on orbit fundamentally changes the economics, the scalability of compute, especially at a time where we're pretty constrained from a supply perspective on compute. And so we're excited to be in the middle of that. We're going to be working with a number of different players as we roll out that differentiated capability.

[Bloomberg Tech Host]

It's been nearly four months since you deployed your first satellite. What is the, the learning spin in that time?

[Karam Khanjur]

Yeah, I think at this point, you know, we're like 120 days in and it's been amazing. Like we've learned a ton. The entire tech stack was all brand new. Right. About 85% of the satellite was built in house. We had to design it because these subsystems didn't exist with this capability. And so this was a major de risking moment for the company. We've collected a tremendous amount of data on the performance of the platform across different thermal situations, across different, different power situations, with a bunch of different payloads. All of that has now been fed back into what we call our block to design, which is going to be rolling out next year and launching across two different launches next year.

[Bloomberg Tech Host]

As we scale the company, you know, you have some contractual obligations to the government around Golden Dome, for example. What's the pressure of that to meet deadlines to be able to pull it off?

[Karam Khanjur]

Yeah, at this point we've sold about $1 billion in contracts. Right. We've crossed the billion dollar mark a few months ago and a lot of it was on the back of this successful first mission. We have a number of national security customers that are incredibly excited about this capability and what it could do for future infrastructure and architecture plays that they're thinking about. Right. And so you know, hitting schedule is incredibly important. We did that with this first mission. We've now got a tremendous amount of demand. A lot of what we're using the fundraising for is to to go make sure that we can de risk schedule, de risk the supply chain, de risk the subsystems, mass production, increase the footprint and make sure that we're continuing to execute to satisfy the massive demand that we're seeing.

[Bloomberg Tech Host]

Karam, real quick, your launch provider and what does launch capacity look like for you guys going forward?

[Karam Khanjur]

Yeah, so the first satellite, the 20 kilowatt satellite is made for any 5 meter fairing class launch vehicle. Today we've launched on Falcon 9 and we'll continue to launch on a number of other launches with SpaceX in the future. Beyond that we'll use other players that are building 5 meter fairing class launch vehicles. And in the future the 100 kilowatt class satellite is designed for much larger super heavy launch vehicles like New Glenn and Starship. So we're pretty excited about the new launch vehicles that are coming online. We're excited about what SpaceX is doing and we just want to be able to take advantage of the launch options that are going to be out there over the next 10 years.

[Bloomberg Tech Host]

K2 Spacey Karanga on Bloomberg Tech. Thank you very much. Now coming up, Qualcomm warned of component shortages and rising costs. In this quarterly earnings report we discuss all of that and actually a lot more with Qualcomm CEO Cristiano Amon.

[Ryan Vasilika]

That's next.

[Bloomberg Tech Host]

This is Bloomberg Tech.

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[Bloomberg Tech Host]

Back to earnings. Qualcomm giving a weak profit forecast for the current quarter. Citing component shortages, rising costs. That's a focus on the smartphone market. Shares down, down almost 3%. Qualcomm President and CEO Cristiano Amon joins us now. The way that I think about Qualcomm, Cristiano, is that it's one of the most interesting transition stories in semiconductors probably since Nvidia. Right. The business right now, smartphone is under pressure. The market is focused on that. Let's get it out the way. You know, how long does that pressure rise? What is is the mainstay of the pressure? Is it in production? Is it on the price, pricing side? Tell me what you see.

[Cristiano Amon]

Yes. So look, let's step back a little bit. What's happening with the handset market? And there's a, there's a handsome market and there's a unique Qualcomm thing happening. A handsome market is there are unprecedented memory prices and shortage. I think the price increases are very dramatic as everybody know. I Think you've seen not only Qualcomm talk and you see some other companies talking about. You see Apple talking about it. Therefore 4 I think what happened in the market, the market is down actually project and just when we think about from 26 to 27 the market is going to be down by about 20%. This is not because of demand for phones. This is because of there is not enough memory. The prices are so high. So the units are much lower. Consumers are kind of react to the lower price. The middle and the low part of the market it's significantly contracted. The premium tier has some resilience. But even in the premium tier what we see is a mix change. Consumers are preferring with the new prices that are higher to buy last year phone they buy the entry premium. And I think that's actually causing this change in the market. There's a unique thing about Qualcomm which is well understood which is Apple's coming off the model and is actually coming out faster because of the supply situation. So that is the situation in the short term. That is what's causing this issue. And it came out in the earnings reflected in two things. I think a weakness on. On handsets. We actually did the following disclosure. We talk about it. There's about A$50. A$50 in earnings power that it's now will come back to Qualcomm when hence it's normalized and it is the overall market is down. It's not a demand issue is memory provider prices and supply. So that's the hints of story and that reflected in earnings in two pieces. Right. You saw I think the, the weakness on the guide which is a market weakness. A mixed change. And then there's gross margin. The gross margin is very simple. We're slightly below the operating model of the company because input costs are up in a shortage. And we've seen this in. During the pandemic. The entire semiconductor industry right now is at full capacity. So costs go up. We're adjusting pricing but you have contracts, you have new design cycles. So there's a mismatch in in quarters between the price adjustment and the cost that creates this temporary I think issue on. On a slightly decline on the gross margin. And we're going to go back as prices flow through the model in the handsets. We're going to go back to the operating model. The exciting thing about the company is the new business and how we're actually transforming the company.

[Bloomberg Tech Host]

Let's talk about, let's talk about it. In the past we've called it diversifying. You know, I called it transition. But I read the earnings presentation slides. So you're saying in full year 27 non handset is just under 50% and by full year 29 that handset business which is the majority today is only one third of DataCenter Automotive and IoT what pushes that most?

[Cristiano Amon]

Yes, so this is a great question. So if you, if you actually look what's happening with the company, everybody knew about this, this Apple transition in a handset and then all of the growth that we've been doing with everything we did to transform the company. A couple of things that are actually driving this change we actually talk about from this year fiscal 26 to next year growth is going to be 60% and no handset and the driver is automotive. We actually in the earnings call said we're exit rate now we're about a billion higher for 27 that we actually thought. It's continued to accelerate because of our position. Automotive is getting stronger. We have now more assisted driving and autonomy silicon and evolving over stack. The second thing is the beginning of the data center ramp. We still restated $5 billion in datacenter revenue in fiscal 27. In the IoT it is starting to grow on industrial. You know there's all of this conversation about open weight models, about AI on the edge on industrial and this fiscal year alone we have about 3.5 billion of design win pipelines. So all of of those things are going to go to you know, the projection that we made of $40 billion of known handsets by fiscal 29 and you're going to see a 60% year over year increase on all of those new business. Durable revenue, durable earnings doesn't have the sickle things on handsets. And I think that's, that's really the future story of Qualcomm.

[Bloomberg Tech Host]

This is Bloomberg Tech live on Bloomberg television and Bloomberg Radio and we're speaking to Qualcomm President and CEO Cristiano Amon. It wasn't that long ago we were talking at investor Day where you laid out a $15 billion plus a datacenter opportunity through to 29. How is that going? I know it's been just a few weeks or months, but you know, what progress have you made?

[Cristiano Amon]

Yes, it's, it's, it's going very well. The most important milestone for us right now, I think. Look, we, we outlined that we build a roadmap that is gets products coming over a couple of years. Right. We've been, we're being very clear how the Roadmap is evolving. So the first set of revenues which actually is the majority of the 5 billion that is happening right next year, it's a custom ASIC with two hyperscalers. Everybody asks us about who they are. The only thing I can say at this point is one of the United States, United States one in China. But.

[Bloomberg Tech Host]

Right.

[Cristiano Amon]

But the most important thing is when you think about the composition the 15 billion. He has customized it but he has our accelerator has our new high bandwidth compute which is new memory architecture and it has our cpu. So the exciting thing is we're going to have in a couple quarters with which we have, you know, progressing with the development in a couple of quarters we'll have silicon. On the HBC that we are going to make people will be able to evaluate I think the performance claims and I think, I expect that is actually going to create even more interest than what we have today within the 15 billion.

[Bloomberg Tech Host]

Cristiano, the way that I look at Qualcomm as well like on the smartphone side, Android in China and then when I'm thinking about the data center trying to understand where the biggest opportunity is so geographically China or US and then there's Asics or your own products, try and put them in order for me of priority.

[Cristiano Amon]

Yes, we, when we provided the 15 billion number for fiscal 29, it's kind of well balanced across, you know, custom ASIC with hyperscalers. It's a, you know, for especially for new entrants you should expect a lot of bespoke development is very well balanced on, on the CPU which will start ramping in 2028 and the accelerator in HPC. But also when we talk about HBC and the accelerator, HBC is actually part of some of custom ASICS deployments as well. As far as China, you should expect that our exposure to China, the data center will be very similar as a percentage of datacenter revenue to all of the other semiconductor providers there are in the datacenter business today. You know, China, it's, it's, it's a big market, it's just a function of gdp. And, and when you look at some of the data center, especially the providers of custom asic they have exposure to China. Ours is going to be about the

[Bloomberg Tech Host]

same percentage understood software. You close the acquisition of modular, you have some ownership in the software stack and people don't talk about that as much maybe. But where does that fit in your strategy? Cristiano.

[Cristiano Amon]

Yes, I am super happy about this and one of the reason I'm very happy about this is not everybody understand it so I'll be able to brag about it a few years in the future. But the exciting thing about this is a great team. I think they have an incredible track record. The founder and CEO Andy his co founder have a track record about what they have done in the Apple Swift programming language. The inventor lvm I think the developing the Tesla Autopilot and they put on a mission to create an open platform for AI that scale from edge to cloud. It's a modern stack development and we're very excited about what we'll do for Qualcomm and actually for the whole industry. I think we're really committed to provide that open platform for the whole industry. The interest has been incredible including from other semiconductor companies and we're just going to be executing the good thing about all this ad nobody asked me any more about. I'm worried about your software capabilities in the data center. I think this is an incredible acquisition.

[Bloomberg Tech Host]

Just super quick the second half of this year. Very quick. Smartphone deteriorates or you see signs that it improves over what timeline.

[Karam Khanjur]

Yes.

[Cristiano Amon]

The important thing, what we stated before the Q3 quarter is the bottom for China Android. That's still the case. We will see sequential growth on Android in China. We will see it. Having said that the market is down. I think it's not a demand issue. Consumers actually want there's demand to buy phones. It's just this memory prices and supply. So you should expect the market to continue to be suppressed. Even though I think we called the bottom on Q3 and that is still the case.

[Bloomberg Tech Host]

Qualcomm President and CEO Cristiano Amon back on Bloomberg Tech. Thank you very much indeed. Apple reports after the bell and it's the end of an era. This will be Tim Cook's final Earnings call as CEO with investors watching iPhone sales AI and what's coming next under incoming CEO John Thomas, Bloomberg's consumer tech and Apple Managing editor Mark Gurman is with us now. Where would you like to start? I think let's start with the Tim Cook of it all. And it is a big moment in the history of this company and in the transition to its future.

[Mark Gurman]

Yeah, this third quarter, this is Tim Cook's final full quarter in charge as CEO of Apple. He will remain CEO till September 1, which means he'll be in charge until two thirds of the way through the fourth quarter. And that is all to say that this will be his final earnings call. So you'll probably hear John Turner on the call today. You'll Hear them talk about the transition. Tim Cook is is going to want to reassure Wall street that things are going to remain steady under turn as tell them the transition has gone unbelievably better than expected. You know any way to describe this in a positive way? They'll use today as a forum for that. The product pipeline is extremely strong and we'll see Turner's announce the foldable iPhone, new Apple watches and a few other big things in September. Tim Cook here is handing Turnus a layup. I believe we're floating around a $5 trillion dollar valuation here. The numbers today are probably going to beat Wall street expectations. They're looking for about 109 billion. I'd be surprised if it came in below that. So today's word is going to be transition and the other one is probably going to be continuity.

[Bloomberg Tech Host]

The environment is tough, right? Principally we talk about memory. Where will that show up? Mark, this is a company that handles the bottom line.

[Shweta Kajura]

Well.

[Mark Gurman]

Well, they raised prices at the exact time they needed to raise prices in order to offset things. So even if the memory shortage is going to continue to create headwinds for them, the price increases are going to to erase that when it comes to their margin. And given the demand for the new products in the fall, the price increases may even lead to higher revenues. So margins likely stay steady. Revenues likely to go up. They're going to have their cake and eat it too.

[Bloomberg Tech Host]

What's the one product that's going to be most important in the John Turner's era?

[Mark Gurman]

The one product that's going to be most important in the John Turner's era is going to be the iPhone. And I see say that because I strongly believe the iPhone is going to remain the center of the Apple universe. Internists will need to evolve the iPhone under new form factors under AI over the next 15 years because I believe people will always carry something in their pocket. You probably thought I would say glasses is the most important. Yeah, I do believe that is going to remain secondary to the phone. Maybe it's 1A 1B but definitely the phone is the cash flow cow. This is where they make 200 billion a year. They're going to need to continue doing that.

[Bloomberg Tech Host]

Of the $109 billion of revenue, the iPhone will be about 54 billion. Bloomberg's Mark Gurman. Busy day for you. Thank you very much. That does it for this edition of Bloomberg Tech. More tech earnings are coming and this is what the calendar looks like. Apple, Amazon revision after the bell. Interesting conversations to come. Recap the conversations of today's show on the podcast. You know where to find it on the terminal as well as online on Apple, Spotify and Iheart. Just one more day in a big week for tech. Have a great day. This is Bloomberg Tech.

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