Carol Massar (2:26)

Ed Ludlow, come on in here again we got a great round to lead. Ludlow, Bloomberg Tech Co Host that was Anurag Rana, Bloomberg Intelligence Senior Analyst who we just heard from. In a minute we're going to bring in Ron Westphal Hyperframe research infrastructure and networking VP and practice leader. Ed, what's on your radar, how hard

Anurag Rana (2:43)

it is to follow an Iraq is this.

Carol Massar (2:45)

I gave you a little time. I gave you a little time.

Anurag Rana (2:48)

Yeah, look, I go with it logical that the US growth Amazon Web Services is the number one position in cloud computing. 28% is the highest rate of growth for about 15 quarters. That's, that's the severity of the performance. So going into this I'm trying to get a common thread between Alphabet, the parent of Google US and Microsoft. We looked for the growth rates of cloud because the swing factor in the market has been capital expenditures. Investors have been willing to look at the capital expenditures even if those numbers get bigger. But in return they want to see outperformance in cloud computing growth driven by AI and also they want to see some kind of forward guidance boosted forward guidance. And so in these statements we have the numbers on growth for cloud. We don't have a capital expenditures figure for us that's any different from prior guidance. Matter does have a new capital expenditures figure and I would just suggest we go to that next.

Carol Massar (3:44)

Well, that's exactly where I want to go.125 to $145 billion increase from a prior range of 115 to $135 billion. As a result we're seeing shares of metal platforms Carol, down by 6.3%.

Ed Ludlow (3:56)

Yeah. Kurt Wagner, tech reporter on the Metal Live blog. From the Release, we anticipate 2026 CapEx including those principal payments and finance leases to be in the range of that one 25 to 145 billion. So increase from that range, just to reiterate. So that's a problem, Ed.

Anurag Rana (4:14)

Well let's just do the calculation. Right. So we know that CapEx is going up. What is the outlook for growth revenue in the current period? Second quarter will be 58 billion to $61 billion. Consensus was 59.6 billion. That is right in line. And we went into this knowing, based on a summary of the sell side and of the buy side that if the capex numbers get higher they want to see growth also going up in terms of guidance going forward. And you know this second quarter guide on matter sales, it's very in line with expectation.

Carol Massar (4:48)

I want to bring in Ron Westphal, Hyperframe research infrastructure and networking VP and practice leader. I want to stay on what Ed was talking about Ron. And that's Metta Met as capex estimate. We're also seeing some headlines. Headwinds in the EU and US could significantly impact results. The company sees scrutiny on youth related issues as well. Shares of Metta platforms right now down about five and a half percent. But it does seem like more important is that CapEx number 125,245 billion increase from that prior range of 115 to 135 billion dollars. What are your thoughts?

Ron Westphal (5:24)

Sure. I like to start with looking at the bigger picture. See Matter as certainly benefiting overall despite the recent dip from the overall overall market expectations. That is the total addressable market for Matter alongside the other of four that are coming out this week is a total addressable market of up to $11 trillion. And so I think that's going to definitely enable Matter as well as the other players to continue with the upswing in CapEx. And yes, that's causing concern. But I think what we're looking at is when you look at the group earnings, they're projected to grow 20% year over year and that is outpacing the overall s and P 500 14.5% growth expectation. And so as a result I'm anticipating that MATTER will definitely be looking pretty solid over the course of the year and further out because not only is it upping its capex expenditures, however, it's also I think benefiting from trading at a relatively conservative forward P E ratio of the lower to mid-20s. As you know, that fluctuates on a daily basis and they're definitely benefiting from the fact that they're monetizing AI more rapidly than some of the other MAG7 thanks to their social platforms, certainly including Facebook as well as Instagram. And so I think that's something that will definitely be something to definitely look at as we find out what Matter is really going to do for the rest of the year.

Ed Ludlow (7:04)

All right folks, I want to go over to Amazon. A couple of things also popping up 59.3 billion year over year rise in purchase of property and equipment. They say the increase in purchases reflect investments in a I they also say Ed Fred free cash flow fell to 1.2 billion for trailing twelve months. Come on back in. Ed Ludlow.

Anurag Rana (7:23)

Yeah, so this is exactly what I've got on my screen. So the story financially for each company is slightly different. But if we focus on Amazon, it's spending so much on infrastructure that trailing 12 month free cash flow basically falls from $26 billion to $1.2 billion. Operating cash flow rises. Amazon's a complicated business, right? You know, US largely accounts for most of operating income, but increasingly like ads is important on the E commerce side. And I'm hoping that Anurag will kind of talk a little bit out that this is kind of a classic building cycle signal though, and to this point. And you know, maybe one of the other guys can weigh in on this. I'm just busy. Journalist, Smart one. You know, the market has been really sanguine about negative free cash flow or the prospect of it. You know, it's not something that everyone's like freaked out over, basically. That's a very simple way of putting it.

Ed Ludlow (8:22)

Ron, come on back in. Ron Westphal of Hyper Frame. How do you see it in terms of what Amazon's up to? I like that idea and this concept of you got to spend to build for future revenue. But how do you see it?

Ron Westphal (8:36)

I think US is definitely benefiting Amazon's overall prospects. And I think that's underlined by the fact that the US revenue run rate has already gone past $15 billion. And that's linking to the fact that growth is projected to accelerate toward 25.6% following its landmark $100 billion infrastructure deal with Anthropic. So clearly that's something that I think will create not only positive perception, but I think it's giving the hard numbers that needs to continue with these CapEx expansions. Also, I think it's important to note that capacity is selling out immediately. And so that's supported by a massive $244 billion contracted backlog as well as high margin revenue from its Trainium and Graviton chips. And these, I think, are offsetting concerns around the large margin pressure from the $200 billion billing planned in capital expenditures for the year. And so you take this together, I think net positive is what Amazon is going to bring to the table. It's definitely, I think, something that applies to all the hyperscalers. And Amazon, I think, is definitely positioned to improve on its performance as a result.

Ed Ludlow (10:02)

We got to go to Alphabet, which is up three and a half percent here in the aftermarket.

Carol Massar (10:05)

Yeah. The company reported quarterly revenue and profit. It beat projections. It was fueled by strong growth in its cloud computing unit. It signaled that the Internet giant's unprecedented investments in AI infrastructure are beginning to pay off. The company said that first quarter revenue, excluding those partner payouts, was $94.7 billion. That compares to the $91.6 billion expected on average by analysts. That's according to data compiled by Bloomberg.

Ed Ludlow (10:30)

All right. Still with us is Ed Ludlow, a Bloomberg Tech co host on Bloomberg tv. Anuragrana Bloomberg Intelligence Senior Technology Analyst Ed, as we continue to go through these numbers and results, where do you want to go?

Anurag Rana (10:43)

Yeah, I think you guys have done a masterful job. You know, the, the cloud growth rate, if we put matter to, to one side for a minute is really interesting because all things are relative. So you know, Anurag pointed out if you, if you focus on Google Cloud 63% growth, you know, AI is, is for them also boosting search. Right. And they have this kind of dual benefit which is really interesting. They reported a metric that we've kind of not skipped over but there's so much news it gets buried which is and I for enterprise. In other words, their AI tool that businesses pay for saw its active user base grow 40% quarter on quarter. So there was a big jump in that and the reason I flagged that is important is that that's the standard to which we hold open AI. Right. And, and anthropic, you know. But the markets of earlier this week were spooked by the Wall Street Journal report of open Air missing its own internal metrics. One of them was the active user base of Chat GPT which isn't universally an enterprise product. It's consumer. But I find that to be really interesting and you know, shows tangible growth on the other side of people actually using this, this the Gemini tool in the real world, you know.

Ed Ludlow (11:58)

Right. Which we all keep talking about. We need to see. Right. To kind of justify the spend. All right, we're going to continue with Ed Ludlow and of course Ron Westphal in just a moment. As we mentioned, Alphabet is Now up about 5.8% here in the aftermarket. We're looking at Amazon down about 2.4% Metta a decline of 5.3%. And then we've also got Microsoft out with its results and we're seeing this one. It's been under pressure in the aftermarket right Now, Tim, about 1.8%.

Carol Massar (12:27)

Hey, we were talking about metal platforms. We have spoken quite a bit about Amazon, Qualcomm and more. I want to bring Alphabet to our attention 6.6% higher. In the after hours, the company reported quarterly revenue and profit that beat projections. It was fueled by strong growth in its cloud computing unit. That cloud computing unit reported sales of $20 billion with a quote, meaningful acceleration in growth driven by demand for its AI software and infrastructure. I want to bring it back in. Ed Ludlow Bloomberg Tech Co Host and Ron Westphal Hyper Frame Research Infrastructure Networking VP and Practice Leader Ron, I want to start with you And Alphabet, because we are seeing shares surgeon in the after hours, the company reported earnings per share of $5.11 compared with Wall Street's $2.62 per share estimate. The cloud growth is certainly top of mind. We should remind everybody that, you know, it competes against us and Microsoft's Azure. This report though, what sticks out to you?

Ron Westphal (13:26)

Yeah, I think it's pointing to that Google is making more inroads in terms of capturing mindshare amongst the hyperscale competition. And I think what we saw is that when you look at Google Cloud specifically and reporting over 20 billion revenue, well, that basically beat out the analyst estimates. And that is, I think, a remarkable 63% year over year growth rate. And so that by itself is congratulatory. And when you look further down it's like, okay, why are the cloud margins expanding to nearly 30% up from just 20% six months ago? I think what is resonating is that the company is making the right moves. Certainly its acquisition of Wiz, which closed just last month and has already become integrated, it's making Google Cloud a more attractive choice for enterprises that are requiring sovereign and highly secure AI environments. And that is certainly a hot topic in our conversations. And that is sovereign AI is something that will underpin confidence in the ability of enterprises to adopt the hyperscale AI services and so forth. And certainly that comes to inferencing and that is, you know, ensuring that their proprietary, proprietary data never falls into the wrong hands. That, you know, it's not going to be something that will be exposed out in the public cloud at part of it. And I think what's also important is that what we saw at Google Cloud next just, you know, last week is that when it comes to, you know, the TPU silicon, Google is coming up with innovative ways to augment the Nvidia capabilities they have in house. Certainly they use their TPUs to train their own models in house. That includes Gemini for example. But I think they're smart about how they're now diversifying their AI chip sets to stand out. That is now they have TPU, what they're calling T8. That is, that is a specific for training only. But now they also have the TPU 8i, which is for inferencing. And so what we're seeing is a fundamental shift more toward inferencing, that is, you know, the AI capabilities being used in play, that is the ability to use handsets and other capabilities that take what has already been trained and actually apply it to real world scenarios. And so as a result, I think this is why Alphabet is definitely making inroads with winning more cloud business. Yeah, and if you look at Alphabet overall, I think also it's important to note that when it comes to diversifying revenue streams, that they're a waymo unit is definitely making, I would say waves. And that is, it's already scaling up to 1 million rides. And so that I think is something that will definitely continue the revenue generating capabilities moving forward.

Ed Ludlow (16:34)

Well, we're definitely seeing it shine in the aftermarket now, up about 6.2% here. I mean, listen, to be fair, Alphabet's definitely been hustling when it comes to AI. Amazon right now though, down about 1.9%. We want to get a little bit more on Amazon. And with that, Matt Day, Bloomberg news technology reporter follows the company joining us right now. Matt, walk us through what you think is important for our audience.

Matt Day (16:57)

You could go back to what Jeff Bezos said was important. His favorite metric, free cash flow. If you look at Amazon the last 12 months, it's not zero, but it's pretty close to zero and it's a whole lot closer than it was last year. So the reason for that, obviously it's, it's AI spending its data centers, a whole lot of property and equipment that they're, they're spending money on these days. The cloud revenue is good, it's going up, it beat expectations. But just a reminder for Amazon investors, they're spending a whole lot to get a seat at this table.

Carol Massar (17:25)

Is that spending paying off?

Matt Day (17:29)

It looks like it. If you, if you roll things back. A few months ago, folks were really concerned about Amazon's position in cloud. You know, we just talked about Google. Microsoft was also really hot and it kind of looked like they might be sort of a third place cloud of the era to boil it down. Since then they've done these big mega deals with OpenAI with anthropic and it looks some of that is starting to filter into there at their cloud results. They've accelerated the last couple of quarters.

Ed Ludlow (17:52)

Anything you're scratching your head over here, Matt?

Matt Day (17:55)

The market reaction, honestly, they beat on so many things. That feels like a lot of these big tech names have been going between capex freak out to, you know, oh, AI is the future and quarter to quarter, it's kind of hard to tell. What folks are sinking their teeth into is the.

Ron Westphal (18:10)

Yeah.

Carol Massar (18:10)

Oh, go ahead, Carol.

Ed Ludlow (18:11)

No, go ahead.

Carol Massar (18:12)

The, the investing that Amazon has done in open air and anthropic, it's committed that to spend more than $100 billion on services in the coming years between those two. How do investors look at that? Because it's, do they look at it as venture capital, like the company's making a bet, like a venture capitalist bet? Or does it look like the company's trying, you know, guaranteeing business by making these investments in exchange for US usage?

Matt Day (18:47)

And some of it is clearly buying business a little bit, right? Making sure that you've got a tight enough relationship with Open Air that they want to spend. But I think there are some long term questions. You know, Oracle has seen versions of this, Microsoft have seen this where, you know, investors start to discount. Okay, Sam Altman has pledged to spend, you know, $1 trillion plus all over the place. How much of that is going to materialize? Right? So now Amazon's in a position where they've definitely got a slice of that alongside anthropic spend. So the question is, you know, when does that materialize? Where do you start? Put that on the calendar. And how much of a sure thing does that become?

Carol Massar (19:18)

I want to bring back Ron Westphal, Hyperframe research infrastructure networking VP and practice leader. He has been with us for about an hour as the slew of earnings came in at thanks to Ed. We know at 71 seconds for all of these companies to report that we're still, you know, breaking or making our way through all of these. I weigh in on, on Amazon, what we've heard from Matt, what we've heard from Ed as well because this is a company where, you know, certainly us is, is the star, but it also, and that's what moves the needle, but it also gives us a good idea of what Americans are paying and how American consumer spending is holding up, even though that's not really what moves the stock.

Ron Westphal (20:01)

That's, it's amazing. I think when you're looking at, okay, what is Amazon doing that is continuing these organizations as well as consumers to, you know, use their, certainly their services. And I think when you snapshot, for example, nws, that is, you know, the enterprises are using Amazon bedrock and that is underlined by their training to Inferentia chipsets. And if you look at that, that chipset business alone is reached $20 billion in annualized revenue run rate. And so I think this is pointing to that Amazon is making the right bets across its entire portfolio. It's not just about, okay, how can we improve the Amazon experience, but also how can you meet business needs across the board basis. And I think when it comes to fundamentals, when we're looking at Amazon and Amazon advertising is on track to exceed $70 billion in revenue just this year. And that is tied to the fact that there is so much high intent purchase data information that they're able to leverage that it's improving their capabilities. So that is again, underlying why AI is making a difference in terms of their business model. And I think it's also reflected in what we talked about in terms of meta. Hey, guys, this is something I think will improve.

Ed Ludlow (21:33)

No, this is all good stuff, really good stuff. We could go on and on. Hey, we've got about two minutes before we have to wrap up this segment. I'm just curious for each of you, what do you think was kind of the most important headline or narrative from this drop of 4 result? And Matt, let me start with you. I know Amazon's your jam, so maybe go there or go anywhere.

Matt Day (21:57)

Oh, there's a good spot. I mean, it's, it's that Amazon's got a seat at the table, right? They've, they've got, all the big models are on awb. And so now, you know, there was a first leg of this competition was, you know, who's going to have the exclusive tie up. This one looks like you can get most just about anything anywhere. So who's got the better mousetraping cloud? Looking forward to seeing how that transpires.

Carol Massar (22:15)

All right, Ron, your turn. Come on in here. Just the most important bit of info you got from any of these companies that reported after the bell.

Ed Ludlow (22:22)

And you can't say all.

Ron Westphal (22:23)

Yeah, I think they both, yeah, they're demonstrating the runways there that this capex is all justified. And I think we're seeing that it's having an impact already. We're seeing that the companies that have integrated AI into their operations are seeing cash flow margin expansion at roughly twice the global average. So yes, it is now making a difference. The ROI is there and we're seeing the results.

Ed Ludlow (22:46)

All right, good stuff, Ron, thank you so much. Ed, come on in. Same thing for you. I know you kind of love all these. I mean, it's, it's hard to have a favorite child here. But I'm just curious, as you look at these headlines and you're thinking about your show tomorrow, is there a narrative, a headline that really just sticks with you?

Anurag Rana (23:01)

Yeah, I think, you know, across all four, and it includes matter, which is a slightly different company, AI demand is running ahead of their ability to supply. That's not a new sentence or idea. People have been saying that for a little while. And so across the four, it's interesting to see those that they believe and those that they don't. This isn't profound selling in matters case or in Amazon's case, it's not severe buying in alphabets either or, you know, so I think the idea is proof points, you know, like tangible new pieces of data. Google gave many of them and investors have kind of cheered that. But it's about AI in the real world. And that might sound abstract, but that's what the market's been asking for.

Carol Massar (23:41)

Okay, well speaking of AI in the real world and just push us ahead to tomorrow afternoon when we hear from Apple, Tim Cook, John Turner, what's 32nd ins on what you expect from Apple?

Anurag Rana (23:53)

This is the first earnings and earnings call since Tim Cook announced he'd stepped down to September 1st. And John Turner has become CEO September 1st. And I think whatever Apple says about handsets or software, that it will just be about those two people.

Ed Ludlow (24:08)

All right. Unbelievable. 60 Minutes on here on Bloomberg Businessweek Daily. Guys, thank you so much. So appreciate our own Ed Ludlow, co host of Bloomberg Tech. Catch him on TV 11am to 12 noon, Monday through Friday, Wall street time. Ron Westphal, thank you so much for all that time. Hyperframe research, infrastructure networking, VP and practice leader out there in the Twin Cities and of course out in Seattle watching Amazon. Our own Matt Day, Bloomberg News technology reporter. Incredible stuff.

Ron Westphal (24:41)

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Ron Westphal (25:56)

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