Tech Earnings Show Heavy AI Spending Continuing

Summary

Bloomberg Tech – “Tech Earnings Show Heavy AI Spending Continuing”

Episode Date: October 30, 2025
Host: Ed Ludlow, Caroline Hyde (Bloomberg)
Guests/Analysts: Brent Silvan Jefferies (Jefferies), Dave Bazooki (CEO, Roblox), Kelsey Griffith (Bloomberg Entertainment), Oscar Deshkai (Swissquote), Ryan Vistelliker (Bloomberg Equities)

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Episode Overview

This episode of Bloomberg Tech dissects a jam-packed week of tech earnings, focusing on the “heavy spending on AI” by giants like Alphabet, Microsoft, Meta (referred to as “Matter”), and Roblox. The show explores investor reactions to surging capital expenditures (capex), especially in datacenter construction, infrastructure, and cloud computing, and examines implications for the broader tech sector. Additional segments cover Amazon and Apple’s anticipated earnings, Comcast’s ongoing broadband struggles, and the geopolitical backdrop of US-China tech tensions.

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Key Discussion Points & Insights

1. Tech Giants’ Earnings and Surging AI Spend

Alphabet (Google):

• Capital expenditures guided between $91–93 billion, with particular emphasis on growth from generative AI products.
• Revenue from products built on Google’s AI models grew by over 200% YoY.
• Despite market concerns, Alphabet shares rose after results, contrasting with declines at peers.

Notable Quote:
“Revenue from products that are built on Google's generative AI models grew more than 200% from a year earlier...they have better AI underneath the hood than they're articulating.”
— Brent Silvan Jefferies [06:37–07:45]

Meta (Matter):

• Spending set to increase “notably” in 2025–2026, but no detailed long-term sales outlook provided.
• Investors spooked by margin compression, despite CEO Mark Zuckerberg’s insistence that under-investing in AI would be more damaging.
• Analyst sees recent stock drop as a “buy on the pullback.”

Notable Quote:
“So yeah, it doesn't have anything to do with the fundamental position. It's: are we going to see margin compression and then when does that return come back? But we already know that they have a return...this whole concept that AI doesn't pay off is silly.”
— Brent Silvan Jefferies [04:52–05:14]

Microsoft:

• Azure cloud revenue up 39% YoY, but company unable to keep up with AI demand due to capacity constraints.
• Market underappreciates Microsoft’s massive backlog and bookings growth (over 50% in RPO/backlog, more than 110% commercial bookings).

Notable Quote:
“I don't understand the market because they just put up over 50% RPO or backlog growth and...commercial bookings. Those numbers are insane. And that didn't even include OpenAI's $250 billion incremental dollars.”
— Brent Silvan Jefferies [08:50–09:27]

Market Reaction:

• Investors are favoring companies demonstrating direct AI-related revenue growth (Alphabet) over those only increasing capex without short-term revenue visibility (Meta).
• Rotation observed from tech to infrastructure, energy, and “enabling” sectors.

Notable Quote:
“We're in a momentum market...if you have capex going this high, the pushback is: why do I invest in Internet and software right now? I should be invested in energy and land and all the enabling infrastructure.”
— Brent Silvan Jefferies [05:35–06:10]

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2. Roblox: Growth vs. Infrastructure Spend

• DAUs reached 151 million (+70% YoY), bookings almost $2bn for Q3, but shares down due to rising costs.
• Significant investment in safety and cloud infra, including new AI-driven facial age estimation for user safety.
• Vision: grow Roblox to 10% of the global gaming content market.
• Claims robust content ecosystem and technology that supports diverse experiences and devices.

Notable Quotes:
“With all of this growth...we are going to be spending on infra...But the final thing I want to generate is the cash flow that we generated on the platform...over $440 million of free cash flow in Q4.”
— Dave Bazooki [11:59–12:50]

“With new advances in AI, we’re going to use facial age estimation...I’m really optimistic. This is the long-term good play for Roblox...”
— Dave Bazooki [13:24–14:08]

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3. Upcoming Earnings: Amazon & Apple

Amazon:

• Skepticism about Amazon Web Services (AWS) keeping pace in the “AI era.”
• High expenditures on both datacenter and logistics cloud buildouts; margin concerns remain primary focus.

Apple:

• Strong iPhone 17 sales, with upgrades driving optimism despite lack of new AI features.
• Valuation at $4 trillion prompts the question: “Is all this optimism justified?”

Segment Quote:
“There's absolutely people looking at the results we saw last night from Microsoft and Alphabet and kind of extrapolating into what we could expect from Amazon.”
— Ryan Vistelliker [30:04–30:20]

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4. Macro & Markets: Rates, Risk, and Capital Allocation

• Analyst Oscar Deshkai (Swissquote) highlights the necessity for tech giants to outspend to avoid future capacity constraints—“over-investing” seen as less risky than under-investing in the face of exponential AI demand.
• Meta’s $25bn bond sale seen as evidence of tech’s appetite (and ability) to tap debt markets instead of equity.
• Blend of monetary policy (Federal Reserve doubts about near-term rate cuts) and capex anxiety feeds short-term volatility but not a “bubble pop.”

Notable Quote:
“These companies must spend in order to keep up with demand...not keeping up with the demand or risking to head into capacity constraints is worse than over investing right now.”
— Oscar Deshkai [33:12–34:21]

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5. US-China Tech Tensions & Nvidia

• Trump/Xi meeting offered a short-term “trade truce,” but fundamental tech/national security issues unresolved.
• Nvidia’s new Blackwell chip: no progress toward sales to China; US remains opposed.

Report:
— “It certainly dampens any speculation that Washington would go on to approve the sale of such chips to China.”
— Tyler Kendall [22:45–23:30]

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6. Additional Noteworthy Stories

• Comcast: Slowing rate of broadband subscriber losses, focus on content, and possible Warner Brothers acquisition.
• OpenAI: IPO filing rumored for 2027, at potential $1T valuation.
• ServiceNow: CEO Bill McDermott shares that 90% of back-office work at his company is now handled by AI agents.

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Notable Quotes & Segment Timestamps

| Quote | Speaker | Timestamp | |---|---|---| | “The investments in AI are paying off and they just need more of them...” | Brent Silvan Jefferies | 03:51–04:51 | | “...Google is demonstrating...they have better AI underneath the hood than they're articulating. And it's now coming out, you can see it.” | Brent Silvan Jefferies | 07:00–08:00 | | “The market's got this wrong, honestly...you got to look at the backlog. The backlog is leading indicator of health. The reported Azure number does not matter.” | Brent Silvan Jefferies | 08:50–09:27 | | “We made a commitment...to what we believe will be the gold standard for safety on platforms like Roblox, and...we're going to use facial age estimation...” | Dave Bazooki | 13:24–14:08 | | “If you do not invest today...you might head into bigger capacity constraints...these spending plans have been almost entirely put out there. So...this is not a surprise coming in right now.” | Oscar Deshkai | 34:35–35:42 |

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Conclusion

Theme:
This episode offers a deep dive into the current dynamic where tech’s “Magnificent Seven” are aggressively investing in AI infrastructure—sometimes to the worry of short-term investors. There’s a clear message that in this AI arms race, not investing is riskier than overspending, with demand for compute expected to double every 9–18 months. Yet, markets remain highly reactive to any signals of uncertain ROI or longer payback periods.

For Listeners:
Expect continued volatility in tech stocks as companies report rising capex and race to roll out AI products, but underlying fundamental growth and market opportunity remain strong for those able to keep up. The episode concludes with anticipation for Apple’s and Amazon’s earnings, all while watching geopolitics and macro policy for clues about the sector’s next moves.

Transcript

[Host]

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[Oscar Deshkai (Senior Markets Analyst, Swissquote)]

Tech is live from coast to coast.

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With Caroline Hyde in New York and Ed Ludlow in San Francisco.

[Ed Ludlow (Bloomberg Tech Co-Host)]

This is Bloomberg Tech Coming up Alphabet, Microsoft and Meta all out with results shop showing heavy spending on AI and.

[Host]

Datacenter construction plus Roadblock CEO Dave Bazooki joins us to discuss the company's earnings as users are jumping but so it.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Costs and we'll break down what was said during the meeting between President Trump and China's Xi Jinping. What wasn't discussed Nvidia's Blackwell chips let's.

[Host]

Turn our attention to these markets though and after record high after record high we take a breather. The NASDAQ 100 under pressure off by almost a percentage point. This is we think about the Fed maybe not baking in that December cut as much as the market had anticipated anticipated. You add to that some concerns about spending. You add to that a China US trade detente for a year that many felt were priced in Ed and we just come down some across all asset classes but you're looking under what's in the equity moves.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Yep. Let's get through the top stories. Nvidia is down 2%. Blackwell, its latest processor was not discussed in the meeting between President Trump and Xi Jinping. Later in the show out to South Korea to get the details of that meeting. Then there's earnings. Microsoft 39% top line growth in Azure, the cloud computing unit, the only unit that mattered but the stock selling off high bar for investors. Alphabet is the one that's higher. It told us what its capital expenditures are this year but it also told us about growth. A real number on AI or generative AI related products. Then matter. It is the biggest decliner and the biggest drag capital expenditure concern. Then this morning coming to market with an up to 6 part bond sale maturities ranging 5 to 40 years. The 40 year note 1.4% over treasuries, above Treasuries. There's a lot to discuss in is capital requirements and then what it has to show for it. Let's do that with Brent. Phil Jeffries, analyst, joins us right now. Let's start with Matter. That's kind of the equation, right? Okay. Capital expenditures will be higher next year than they were this year. Then what? Give us more, give us some longer term outlook. There just wasn't a formal guidance. Is that what spooked the market?

[Brent Silvan Jefferies (Analyst)]

Yeah, Matter was just in a period of being really comfortable. Zuck had had been very comfortable. The company had executed, they had invested and they were harvesting those investments and now they're going back into investment mode. So I think at the beginning of the year advertisers were saying that that was more sheltered because they didn't know what Google was going to do with AI and we didn't know what was going to happen to TikTok. And then halfway through the year everyone realized hey, Google's got their act together. And I and we know that TikTok now has more of a foundation. So I think as I call it, there's less of a tailwind for matter. It's not a headwind but it's less of a tailwind that they had at the beginning of the year when you talk to advertisers. And I think what Zuck said last night on the call was the investments in AI are paying off and they just need more of them because everything they built they felt like they had overbuilt and they sold out of what they built.

[Host]

Yeah.

[Brent Silvan Jefferies (Analyst)]

So they have more. And so yeah, it doesn't have anything to do with the fundamental position. It's are we going to See margin compression and then when does that return come back? But we already know that they have a return. We've saw with Microsoft, they've given us margin expansion even in the face of AI. So this whole concept that AI doesn't pay off is silly.

[Host]

You've already seen. But the stock move is so big that we question. Yes, we see Zuck on the call saying, look, I'm worried about underinvesting. We hear once again from Susan Lee that they're going to make notable investments. Everyone knew capex is going to go up and to the right. Why is there such an air pocket on this day, do you think?

[Brent Silvan Jefferies (Analyst)]

Well, I think the outperformance of Google, I think you have money chasing. We're in a momentum market. I mean look at yesterday before any earnings, everything in applications went down. Anything in AI went straight up in infrastructure. So if you have capex going this high, the pushback is why do I invest in Internet and software right now I should be invested in energy and land and all the enabling infrastructure infrastructure goes up every day. Look at all the energy names. They're all ripping. And so I think there's a common pattern with tech investors right now. Broader investors are moving their investments to other categories and then they're chasing momentum. It's just the market's so narrow and you're seeing this. So there was nothing that was fundamentally offline. They're, they're making the investment. They've done this before. How many times have we seen Matt to do this? And then in return the stock goes higher. They're going to do $30 earnings power, put a 30 multiple on it. You're $900 on the stock. It's a buy on the pullback.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Brent, the name with momentum is Alphabet and Google, right. They gave us two data points capital expenditures, 91 billion to $93 billion. But revenue from products that are built on Google's generative AI models grew more than 200% from a year earlier. That second part, your reaction to it.

[Brent Silvan Jefferies (Analyst)]

I mean, is working. And I think the fear that investors have had is what happens when I go from a world of search to AI and think Google is showing they can do the high wire act very well between search to AI. Everyone thought search would implode. In the last two quarters they beat the search number this quarter they accelerated their search number. So what they're seeing is that search can be anywhere, it can be inside AI, it could be in their own search engine, it could be at YouTube, it could be across different properties and I think what Google is demonstrating and we've said this kind of for a while, they have better AI underneath the hood than they're articulating. And it's now coming out, you can see it. We said, you know, they kind of pull up to the Iris, you know, on a Toyota Camry body, but they have the biggest engine and they pop the hood. And I was like, whoa, this is incredible. And so I think everyone is realizing when you look at Gemini, I mean we ran bench test, it's almost equivalent to ChatGPT. And and then you look at the breadth of their offering and again, remember they own the world's Internet data so you need data users and capital for AI to work. And they have all of those almost better than Meta, Microsoft, many of the others, they have more data on, on anything in the world than anyone. So I think they're proving that this engine is working. The body didn't look great, you know, they're upgrading the body, but the engine look is really, really good.

[Host]

But what's so interesting is clearly Microsoft is still working. When you're looking at azure growth of 39% that was better than the market unanticipated, sure it might not be much of a growth uplift, but what was it? What was the fly in the ointment for Microsoft? Amy Heard again is saying my issue is supply, not demand.

[Brent Silvan Jefferies (Analyst)]

I don't understand the market because they just put up over 50% RPO or backlog growth and 110, 111% commercial bookings. Those numbers are insane. And that didn't even include OpenAI's 250 billion incremental dollars. So I think the market's got this wrong, honestly, that you got to look at the backlog. The backlog is leading indicator of health. The reported Azure number does not matter. When you're putting those backlog numbers up, that tells you their capacity constrained. You can't book that kind of revenue and not take it to Azure. And the differential is they just can't get the capacity up right now. But their customers want to spend and their customers are spending and they know that when Microsoft has. So I think this is a common pattern where you're seeing massive backlog growth commitments to AI from their customers, but Microsoft can't literally physically provision it fast enough. When we talk to Microsoft offline, like the Azure number would be way higher if we now have the capacity constraints. So this is not a demand issue, this isn't a competitive issue. This is an issue that the industry is facing right now across the board is they can't get enough of it to their customers. That number have been way higher because you can't describe the math of the backlog being so high and in Azure where it's at. So I think again we look at it. It's important. Wall street cares. I gull street should care more about backlog and bookings. This is again what all Oracle trades on. They don't care about revenue. Why does everyone just care about revenue now? So I think again, I think the Street's got it wrong.

[Host]

Street's got it wrong. Brentville Jefferies putting it right. We thank you so much. Coming up, more about earnings Roadblocks CEO David Zuki joining us to discuss the company's numbers daily active users for the gaming platform topping 151 million.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Let's look at core we've shares down more than 6%. Core scientific investors have voted no on call. We've acquiring the company. You remember that Core we've tried to buy Core Scientific in July for $9 billion and the advisory firm said that undervalued it by reacting saying it actually won't impact operations of cor. We've put another headline on the terminal as soon as that vote was decided. Core weave to buy Marimo Terms not disclosed. Maybe a sense that it's moving on very quickly. We'll have more when we can. This is Bloomberg tech.

[Host]

Grow a guard 99 nights in the forest still a brainrot. 3 games propelling roadblocks to its highest level of daily active users. The company also posting nearly $2 billion in bookings in the third quarter. Still shares of the company trading lower after the earnings. Let's talk through all of this with Dave Bazooki, founder CEO of Roadblocks. And Dave, this growth, this real playing commitment comes at a cost and infrastructure cost. And we see costs go up because of safety that you're enacting but also the cloud compute. How do you start to monetize to make up for some of those costs?

[Dave Bazooki (CEO, Roblox)]

Yeah, thanks for noting the amazing quarter we did just had both bookings. Growth was up 70% year on year at 1.9 billion. And as you noted, our daily active users passed 150 million which is up 70% year on year. In addition to those three games you mentioned, we had seven games on Roblox in the last quarter past 10 million daily active users and a really healthy content ecosystem. Five of those seven exposure experiences were created in the last year. We've hit some really peak numbers. We had 45 million concurrent players all at the same time. What we said on the earnings call is with all of this growth, which is cumulatively averaging 37% over the last two years, we are going to be spending on Infra. What we said is the continued decreases in cost for Infra. We may slow that down a bit as we spend. But the final thing I want to generate is the cash flow that we generated on the platform. We generated over 440 million of free cash flow in Q4.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Dave, looking forward then, how are you managing out some of the technology plays that you made age verification technology in a way that doesn't impact or slow the growth of both activities users in the bookings?

[Dave Bazooki (CEO, Roblox)]

We, we made a commitment a while back to what we believe will be the gold standard for safety on platforms like Roblox and throughout the industry with new advances in AI, we're going to use facial age estimation to estimate the age of everyone on our platform. And in addition to the text filtering, we do the critical harms monitoring the prevention of any image sharing. We're going to use that to help gate who communicates and who they communicate with. I was just in an executive staff meeting on Tuesday playing with the rollout of this product. It's really elegant and we of course want to highlight there may be some friction but I'm, I'm really optimistic. This is the long term good play for Roadblocks which is really establishing the standard of how we believe safety and civility is going to run in the.

[Host]

Future and that your CFO made the point that's going to have long term value for shareholders. You make it again. Dave, talk to us therefore about the new technology not just in with safety but also in how you build games and high fidelity feeling of a game. But some of these big winners that we've had and we just them at the top, they are kind of more old school feeling in many ways but they're the ones breaking records. Grow a garden more classic and blocky. How do you compromise on that?

[Dave Bazooki (CEO, Roblox)]

We've highlighted our vision of getting the 10% of all the global gaming content market running on Roblox. In this quarter we passed 3% so there's a lot of room to go. We have an enormous amount of new technology coming to support more diverse experiences, to support different types of avatars, to support competitive gaming in genres like racing or sports, to support role playing games and other types. And we really do have a vision for genre expansion but in a really future looking way and that when creators make experiences on Roblox they Run well either on low end Android devices like a 2 gigabyte Android phone or on high end gaming PCs and they run around the world. So we're optimistic with the new technology, our economics and discovery, we're going to see a diversification of the types of experiences we see on our platform.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Dave, you want 10% of the gaming content market. That changed in the quarter. I saw layoffs at Amazon and Microsoft's gaming divisions. Electronic Arts elected to go private. The big publicly traded pair that you have private with, the Saudis react with your interpretation of what that signals for the market you're trying to grow in.

[Dave Bazooki (CEO, Roblox)]

Well, people estimate the global gaming market somewhere between 180 and 200, 200 billion. What we've seen on on Roblox is, is really a future forward optimistic look at gaming. We've seen new types of genres given the Roblox platform, the ability to play with friends on different devices, you know, dress to impress. Last year was a whole new type of experience. People competing in a fashion show grow a garden I'm really proud of because hitting those top numbers, making new records for over 20 million concurrence is literally a game you can play either while you're there or when you're not there. Your garden keeps growing when you're not playing. So I think the way to think about this is not just protecting against the history of gaming, but looking at whole new types of games that are going to be built on platforms like Roblox and accelerated with AI as every game starts to have access to AI as well.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Dave Bazooki Roadblocks CEO, thank you very much. Let's stick with earnings in tech. Comcast was also out before the bell this morning with the company managing to slow the tide of broadband and cable TV customer defections in the third quarter with help from an Internet price lock guarantee and some bundle plans. Let's get out to Bloomberg's entertainment reporter Kelsey Griffiths in D.C. give us the need to know on Comcast.

[Kelsey Griffith (Bloomberg Entertainment Reporter)]

This is Comcast 10th straight quarter of broadband losses. So the company came into this quarter knowing that they had to do something to start stemming this tide. Like you just said, they did in fact succeed in kind of slowing some of those losses. Even though those numbers weren't positive necessarily. They were losing customers at a slower rate than than usual. And so the executives were saying that some of the changes they've made over this year earlier seem to be working.

[Host]

Seemingly working, but the share price is still lower. And what's interesting, maybe in some of the analysts notes there is a concern that maybe they'll spend more, particularly when they think of making a bid for parts of Warner Brothers. What do you make of that?

[Kelsey Griffith (Bloomberg Entertainment Reporter)]

Kelsey that's right. Warner Brothers is one piece of the strategy that Comcast said they're looking at, although they didn't express a really high level of interest. They said when something like this in our industry comes on the market, it is something that we have to take a look at. But look, we're good with our content strategy even without M and A. They just succeeded in luring Taylor Sheridan over from Paramount plus and he is going to be a really big part of that content landscape going forward for them. They also have NBA TV rights and those are things that they're really excited about in the nearer term.

[Host]

Great roundup. Kelsey Griffith, we appreciate you on Comcast. And let's just stick with the Warner Brothers story a little bit more because CEO David Zaslov said that the board would need a higher bid to justify a sale of the company. He said those comments during a town hall meeting for employees yesterday, according to sources. Now, Zaslav also told the staff that the board had rejected three offers from Paramount.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Skydance said okay, Coming up, President Trump and China Xi Jinping attempt to ease trade tensions inside the high stakes talks on the future of the global supply chain. We have all the details next. This is Bloomberg Tech.

[Host]

When your data goes dark, Veeam turns the lights back on Partner with Veeam to increase your data resilience and get the right data recovery options for any kind of disruption so you can undo the unpredictable and get your data back so fast you won't even have time to miss it. With Veeam, it's all good. Keep your business [e-mail] that's v e a m.com being a small business owner.

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[Dave Bazooki (CEO, Roblox)]

We did discuss Jimson.

[Brent Silvan Jefferies (Analyst)]

He's going to be they're going to.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Be talking to Nvidia and others about taking ships. We're not talking about the black one that just came out yesterday.

[Dave Bazooki (CEO, Roblox)]

But a lot of chips, you know, a lot.

[Brent Silvan Jefferies (Analyst)]

Of the ships and that's good for us.

[Ed Ludlow (Bloomberg Tech Co-Host)]

That was President Trump speaking to reporters on board Air Force One after a meeting with Chinese President Xi Jinping saying chips were in discussion, but Nvidia's latest Blackwell was left off the table. Bloomberg's Tyler Kendall has been traveling with the president and joins us from South Korea. What is the absolute latest? What do we need to know about that came out of those talks between Trump and Xi Jinping?

[Tyler Kendall (Bloomberg Reporter)]

Yeah. Hey Ed. Well, when it comes to Nvidia chips, it certainly dampens any speculation that Washington would go on to approve the sale of such chips to China. President Trump went on in that gaggle on Air Force One to be asked specifically whether or not anything was brought up about the potential for a downgraded version of the Blackwell processor. He said that it was not, but that ultimately in video, the company itself is going to continue direct talks with Washington. As you well know, Nvidia has been trying to regain market access in China since 2022 after going from a 95% market share peak down to zero. But I have to say this was welcome news in Washington this morning for those defense hawks who have previously advocated against such sales over national security concerns. Which brings us to the broader issue of the general trade talks. Because while we are getting this easing in tensions, our own analysts at Bloomberg Economics say those more fundamental issues, including national security, were not ultimately addressed. But Ed and Caroline, of course, welcome news that we are seeing what appears to be at least a year extension when it comes to the broader trade truce.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Bloomberg's Tyler Kendall, thank you so much. That's the latest from South Korea. Let's get more news.

[Host]

Carrie yes. Time now Ed, for talking tech. And first up, OpenAI is said to be preparing to file for an IPO as soon as next year that could value the company at $1 trillion. But it's all according to a report from Reuters. The company is said to be considering filing the paperwork with regulators soon in the second half of 2027. Six plus Microsoft says its cloud services are recovering from an outage that disrupted workplace software products and impacted several companies. But the outage prevented people from checking into Alaska airline flights for example and disrupted features in Microsoft's own Copilot AI. Meanwhile ex consultants from McKinsey from Bain from BCG are recently contracted to train AI models on entry level consulting work for OpenAI. Now Bloomberg is looking learned that Argentum project is run by the same third party firm using ex bankers to train OpenAI on financial models at okay coming.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Up we have more magnificent seven earnings coming up after the bell today with Apple and Amazon and we're going to have what to expect from those giants next. Apple up treading water 3 10% Amazon down 910 of 1% maybe there's more read through there from the other cloud names and what that might or may might not spell for Amazon or at least investors attitude towards it elsewhere we know what the story is and the top stories of the day. Stocks moving in different directions on the Earnings context matters down 12% really interesting, notably higher CAPEX in 2026 and 2025. Alphabet gave us the same number CAPEX but they also told us how revenues directly tied to AI are growing and right now the market's rewarding that. With the Google parent up 5%. This is Bloomberg Tech.

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[Ed Ludlow (Bloomberg Tech Co-Host)]

Welcome back to Bloomberg Tech. Let's recap the three magnificent names that already reported last night. Different Stories Microsoft down 3% Azure growth was 39% above consensus, but it was a high bar quarter. Same story across all three of them. As we know, the capital expenditures environment matter told us that capital expenditures would be notably larger next year than they were this year, but the investor base is spooked a little bit because we don't have this kind of longer term outlook for how that translates to sales apart from we do from Alphabet, the parent of Google. They told us what the capital expenditures picture looks like but also that their products that result from investment in datacenter capacity AI models generative AI grew 200% year on year and that name is up 5% in direct reaction. And there are so many more earnings out there.

[Host]

There are and another one on the rise is ServiceNow and it gave an outlook for strong revenue growth. Said of course is helping the company reduce its own costs. We spoke with ServiceNow CEO Bill McDermott a little while ago.

[Brent Silvan Jefferies (Analyst)]

The most important thing is to reinvent all of these back office operations and companies. So for example in our company, whether it's IT support or customer support or security and risk, 90% of this work now is being done by agents but not at the expense of people. The people in our company now have an AI teammate on their shoulder to do the things that they'd really never really liked very much.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Earnings season continues with both Amazon and Apple reporting. Later today let's talk about what to expect. Bloomberg's equities reporter Ryan Vistelliker. Let's start with Amazon then it's down a percentage point. Maybe this read through from like what we learned about cloud computing from the three that went last night. What are we expecting?

[Bloomberg Reporter]

Yeah, absolutely. I'd say there's absolutely people looking at the results we saw last night from Microsoft and Alphabet and kind of extrapolating into what we could expect from Amazon. I will say that there has been some growing concern about the strength of us. That's Amazon Web Services, the cloud computing business. There some concern concerned that it is falling behind, maybe losing some market share not as quite well positioned for the AI era. And maybe the fact that we saw such strong results especially out of Alphabet maybe indicates that maybe it's going to be on the back foot a little bit here. There also continues to be a lot of focus on how much these companies are spending. Amazon of course has very high capex levels not only with building out its data center and cloud business but also its logistics operations. I'll be very curious to see there if we get any sort of improvement on the margin front, especially when it comes to commerce. I'd say that those are the two major things people are looking at there.

[Host]

I use deployment all about for Amazon almost for Apple it's ignored. We're just wondering how iPhone 17 and Air are doing.

[Bloomberg Reporter]

Yeah, absolutely. So so far it seems like the iPhone 17 is selling pretty well, especially the higher end model. So that is a tailwind, especially when it looks at average selling prices right there. People I spoke to have said that maybe a lot of people who bought phones during the start of COVID and the pandemic five years ago, maybe they're just at a point right now where they're starting to upgrade even without AI features, even without the foldable phone that's expected next year. So there is a lot of optimism that the strong iPhone sales that we've been seeing indications of so far, maybe there's room for this to grow over the coming quarters, especially as we get new designs, more AI features and so forth. Course now the question is you have a stock that's valued at $4 trillion. It's in hitting record levels. Is all this optimism going to be justified by the results that come out this afternoon?

[Host]

I mean, while Amazon languishes only about two and a half trillion. Bloomberg, Ryan, Stella, thank you very much. Let's just talk about where investors heads are at how they're reacting to this really busy week of earnings. Ibek Oscar Deshka is with us. Senior markets analyst over at Swissquote. We had Brent Silvan Jefferies on the top of the show and he said he doesn't understand the market right now. Do you understand the market if you're looking at Matter being sold off so hard? Alphabet rising after earnings. We'll get back to her in a minute. Technology on technology shows and this many years into Zoom, sometimes we don't press the right button. But really I do think the bond sell coming from Matter is a key one to be discussing because we have got this bifurcated market where we're selling off certain names in particular when we're worried about capital expenditure. But what more is better to do? 26% growth in terms of revenue record numbers. We are also thinking about what therefore that pushes forward to Amazon and how much they have to vindicate the spend on capital expenditure too.

[Ed Ludlow (Bloomberg Tech Co-Host)]

Yeah, one thing I'd say as we go back to Deshkai, who I think is now good and back with us, is with respect, do investors have short memories because Matter told us in the prior quarter that capital expenditures would be higher in the next fiscal year. They used a different language this time around, which was notably larger in fiscal 26 and 25. But maybe it's what they didn't say. They didn't tell us what top line or bottom line growth directly from investments looks like. What's your read?

[Oscar Deshkai (Senior Markets Analyst, Swissquote)]

Well, actually for Meta, the investments look more riskier than they are for Microsoft or Amazon, who do have these data centers and they say that if we over invest, we will have the option to sell this excess capacity. I feel looking at the market reaction and the mix reaction there, we also think that the macroeconomic context is here is very important. Important in the sense that just before these earnings came out yesterday, the Federal Reserve said that they're not sure that they will be cutting the interest rates by 25 basis points. So I think that that also dampened the mood just before the earnings came in. Looking at the spending, these companies must spend in order to keep up with demand. And Microsoft has been very clear about the fact that they have not been able to catch up with the significantly higher demand. So they must invest. They do have the free cash to invest. If they do not invest and miss the turn, the air turned out that would be worse for investors than seeing them over investing. So I think that in the, in the context of the actual growth, these companies must invest and it doesn't really bother us as long as there are no concerns about oversupply. And this is not the case right now.

[Host]

You know, Matter said if they have too much compute, they can start selling it to others. So is this an air pocket? Is this just where people buy into weakness? Or is there going to be a significant pullback and questioning of the market writ large if the Fed isn't going to be cutting come December?

[Oscar Deshkai (Senior Markets Analyst, Swissquote)]

Well, I think that the Fed situation could eventually lead to a certain pullback in valuations. I don't think that that's going to be a bubble pop kind of market reaction because these companies must invest now in order to make sure that they don't get into capacity constraints one year, one and a half year from now. I believe that investors understand that there is a report showing that or claiming that the data capacity computing needs will be doubling every nine to 18 months due to our application. So these companies must keep up with that pace. And again, I believe that these spending plans have been almost entirely put out there. So they have been revised higher. But this is not, this is not a surprise coming in right now looking at the deals and the strength of the demand that we see in the sector, these companies are out there trying to keep up with the demand. And I believe that again as the executives are also saying, not keeping up with the demand or risking to head into capacity constraints. Is this worse than over investing right now?

[Host]

What's interesting is of course perhaps just to show the amount of spend that was necessary, Matter comes to market with a ginormous $25 billion bond sale and talk to us about demand across assets for related companies. Shall we pull back in equities and near record highs? How is demand looking for the bond side of the equation?

[Oscar Deshkai (Senior Markets Analyst, Swissquote)]

Well, I think the bond side is also looking well, especially right now. We have seen that the bond sales have been quite interesting for these companies. I believe that in the actual environment as well the bond sales are going to be interesting. Some investors who are not necessarily willing to take the equity risk at the higher valuations they will be looking into the bond side of the market. You are not expecting them to move separately, you expect them to do to move in tandem. But on the bond side the potential potential of rise is less and the risk that you are taking for it is also less. So this is another way of taking exposure and positive exposure to these companies without however taking the risk of the equity fluctuations.

[Ed Ludlow (Bloomberg Tech Co-Host)]

I pick if I take the earnings statements and call transcripts of all the tech earnings we have so far, run them through Chat GPT and ask GPT to cross reference for a theme that is not capital expenditures, what would I get? What else do you see that they have in common between them?

[Oscar Deshkai (Senior Markets Analyst, Swissquote)]

Well, the couple expenditures are actually rising. I don't know, I haven't asked about what he thinks about it. But what we see is that this is growing exponentially and there is investment worries about that. But if you do not invest today again a year and a year and a half from now, you might hurt into bigger capacity constraints. What's happening right now is if today for Mac1, so for example you are not able to catch up with the demand then tomorrow is going to be harder because you know it will just going diverging because the demand is going to be exponentially rising and that's the main issue. That's why these companies are investing so badly or so highly. And this is I think what Chat GPT will tell you because as AI applications will be up and running, demand for competing is going to rise exponentially. And this is exactly what Nvidia is also not only concentrating today on the applications but all on the networks and intelligent networks as well to make sure that even networks and the pipelines will be able to handle all that data flow down the road.

[Ed Ludlow (Bloomberg Tech Co-Host)]

We did get a Fed cut quarter point for a second consecutive meeting and we did get a warning that a December rate cut is not a foregone foregone conclusion. Oscar Deshkai, Senior Market Analysts at Swissquote Having the earnings and Fed story both.

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