Palantir Jumps After ‘Otherworldly Demand Lifts Outlook

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1:47Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Again, I'm just looking. I'm not I don't really know Palantir technologies that well, but the shares jumped by the most in almost 16 months after the company boosted four year revenue and income forecast as described and described commercial demand for its data analytics tools as, quote, otherworldly. I don't know.

2:24I know Mandeep Singh knows. He covers all this tech stuff for Bloomberg Intelligence. Mandeep, can you just briefly describe what Palantir is and what you took away from their earnings last night? I mean, this is a company pre-AI, before LLMs came to the scene, and they have done a lot of customized work for government entities, large defense companies where it helps make sense of big data. Basically, it goes back to that big data days where if you're dealing with large amounts of data, they can help you create a pretty dashboard that can, you know, give you the insights from unstructured data.

3:05Now, with all the LLMs coming to the scene, they clearly have made a pivot towards incorporating LLMs as part of the solution. And what we have seen is accelerating growth over the last 13 quarters. So this is the 13th consecutive quarter of top line acceleration. And, you know, 93 % growth is very impressive for a software company. But when I look at, you know, the customer base, we're talking about housing customers. So it's very high ASPs, very high monetization at their customer base, which, like I said, half of this is coming from the government. And so from that perspective, a typical enterprise company like Microsoft has got over 100 ,000 customers.

3:54Even a Snowflake or Databricks has got 20 ,000 plus customers. Palantir is just catering to 1 ,000 customers. And that's the real risk for me when I look at the growth trajectory next couple of years.

4:08Scarlet Fu:So you're saying that's a source of fragility rather than a source of strength for Palantir. What could disrupt that? I mean, does that make Palantir more vulnerable to a competitor coming in? Yeah. I mean, the fact that the CEO has been so vocal about Enthropic and OpenAI and how suddenly out of all the companies, Palantir is supporting open source. I mean, this is a company that has benefited greatly from selling a proprietary solution, and now it's coming out and being so vocal about open source support. So that, I think, gives you an indication that they do see the competition coming from the likes of OpenAI and Tropic, as well as the hyperscalers.

4:49I mean, what Palantir did really well was they had this concept called FDE, Forward Deployed Engineers, that were part of their employee base. So when you're installing a solution, the FDEs actually help you get there faster. And now all of these companies, whether it's Microsoft, Amazon, they have this FDE team that they are using to deploy their own LLM. So I think competition-wise, I feel there will be more competition from Palantir, and they can see that, which is why they are being so vocal with open-weight support. And I mean, the growth trajectory, they guided to increase top line growth.

5:31So it was a beat and raise quarter. But to my mind, the growth rates will normalize. And that's where the higher valuation kind of creates a risk. You mentioned Anthropic. Yeah. Because we're looking for a potential IPO maybe later this year. Bloomberg News has got a story that Anthropic has struck a$10 billion deal for computing capacity from a months old infrastructure startup. Okay. making the cloud maker's latest effort to keep pace with demand for its products. What is that all about? I mean, right now, Entropic is just getting compute from wherever they can, whether it's SpaceX or Meta or, you know, these, in this case, this small company, Bitcoin mining company that has compute.

6:13Hold on, hold on. A Bitcoin mining company is now providing compute for an AI play. Yeah, because at the end, it's a data center.

6:22Scarlet Fu:That's the dream for these Bitcoin mining companies. once they make the transition. I mean, compute is agnostic of where, you know, that data center is set up, what purpose it was used for in the past. It doesn't matter. Compute is unique processing capability with life power connected to a grid. That's all you care about. And just to be clear, we never used the term compute before, did we? Not in that way. We used it as a verb. Yes, we never said it as a noun. Yeah, well... See, I just want to make sure. I'm calling these tech people out on some of this stuff. Well, they make up a lot of words.

6:57They do. But I need more compute. Is that what you... That's what all these OOMs need. If you listen to any conference they are on, they'll tell you the world needs 10 times, 50 times more compute than currently available.

7:13Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. This is the Bloomberg Tech Minute brought to you by ChatGPT.

7:53Scarlet Fu:Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

8:36Scarlet Fu:The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower demand routes. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting work mode available on plus and pro plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals.

9:16Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

9:37Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern On Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. It is, of course, the thick of earnings season. And this morning we got indication from McDonald's that U.S. sales perhaps not living up to what was promised or what was expected. Comparable sales in the U.S. coming in a little bit lighter than anticipated. Michael Halen is our senior restaurant and food service analyst and joins us in studio. So, Michael, I thought McDonald's was one of the companies that would benefit from consumers seeking value, seeking perhaps lower costs and more convenient food options.

10:21Scarlet Fu:And it certainly looked that way in quarters past. What happened this last quarter? Yeah, so last year they did a good job of reestablishing themselves as the value leader. They were also lapping really weak comps due to E. coli. And so as a result, they had very strong results last year. This year, we didn't think it was a great idea to just try to lap these really strong comps with just value, A. B, they kind of screwed up the whole value thing. They pulled BOGOs, buy one, get one offers. They took away a lot of discounts on the app, which their lower income consumers use all the time. And they pushed a 10 items for$3 menu that kind of fell flat.

11:08And so all of those changes that happened actually created an increase of prices for their consumers. So that paired with a tough year-over-year comparison showed up in their results today. The company is embarking on a multi-year plan to become more than just a fast, cheap meal, with the aim of being the first choice for family outings and other occasions. How are they going to do that? You know, listen, we'll probably see more tie-ins. You know, last year was the Minecraft meal that was absolutely a monster for them globally, right? So they're going to have to use some more tie-ins. You know, it's going to be tough.

11:51You know, I think what we're seeing is McDonald's kind of taking some of these family occasions away from McDonald's this year. Burger King has remodeled their restaurants, improved the quality of the food, and really done a nice job of building back sales over the last few quarters. And I think McDonald's is feeling it, and that's why they're kind of talking about that segment, because it seems like they may be losing some share there. I think what the real drivers of this will be are beverages. I think beverages is a very good opportunity for them to grow sales in the afternoon, day part. I think they can take sales away from Sonic, who is a big competitor in the beverage space that does a nice job in that 2 to 4 p.m.

12:39lull where the restaurants are staffed. And so they're primed to do more business. It's very incremental sales in that day part. They're going to do some more training, some retraining in the fourth quarter to help boost their operations. I think they're gonna they're not gonna do what they did this quarter Which was just throw too many different marketing initiatives against the wall, right? You have to be more disciplined in today's market because you know These windows Everyone's marketing and everyone's putting out LTOs and new food items and discounts out there all the time Because the low-income consumer is struggling and so what we're seeing now is that promotions are only giving you these chains a lift for one or two weeks.

13:25And then it fades. And then it fades. And so, you know, if you're constantly marketing something new every couple of weeks, you know, it gets confusing for the consumer, confusing for the employees. It just kind of makes a mess of things which happened this quarter.

13:42Scarlet Fu:Yeah, it just becomes noise in the background. A lot of analysts are saying that the results are kind of the secondary story. The bigger story here is a change in McDonald's USA leadership. Joe Erlinger is out and Sky Anderson, who was the COO, comes in. Do you see this changing things dramatically for McDonald's? I don't think so. I mean, Erlinger did a great job, you know. So, you know, that may be viewed as a loss by some. But Sky Anderson has been there for a long time. she's worked very closely with joe and the u.s team uh in charge of operations so um you know she has a long track strong track record at mcdonald's so so i don't expect too much of a change there cyclo what is it again cyclospora yeah what is that uh it's a parasite that um causes you know very very bad diarrhea and so this is something that's impacting the lettuce yes yes this is impacting lettuce there was a pretty big recall of taylor farms is a big and taco bell getting caught up in it and taco bell got caught up there was some news today that wasn't a good look for them right so that it was you know some somebody got a hold of some emails that showed they knew about this this outbreak maybe a couple weeks before they let their consumers know and so uh yeah not a good look for them also there was a couple of deaths i think they were people that were had health issues prior to cyclospora but that's uncommon for cyclospora deaths right that's more of like an e coli thing um so not great for yum brands but you know at the same time they just divested pizza hut people are going to forget about the cyclospora outbreak and you know this company is set up for much much stronger top and bottom line growth over the next 12 months because of you know they got rid of that yolk on its neck so So they just have to get through this period, in other words, you know, with all the bad news and figuring out a solution to this.

15:45Scarlet Fu:I want to go back to something you said earlier, Michael, about how McDonald's is trying to get more people into its stores in the afternoon hours, you know, like with drinks. I think about Starbucks and how it's trying to get more people into its stores through food items. So everyone's just trying to get away to get consumers to come in around, what, 2 to 4 p.m.? That's the lull. And that's like the time of day they've targeted. And if you sell food, then you want to provide drinks. If you sell drinks, then you want to provide food. What did people do? What did companies do with that time slot before this, before this focused attention?

16:19Scarlet Fu:They just kind of gave up on it? No, I mean, you know, it makes a lot of sense because your stores are staffed, right? You have people in the stores, but you don't have a lot of customers coming in. So any of those sales that you can bring in in those types of time periods, they call them the shoulder periods, are very high margin. It's basically all incremental. Samantha writes in and says they need to offer happy hours. That's a concept that works in the bar business. Why not in like a McDonald's or Starbucks? Yeah. Stay with us. More from Bloomberg Intelligence coming up after this.

16:57Scarlet Fu:This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globe trotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seed inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

17:44Scarlet Fu:The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode. Available on Plus and Pro Plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals.

18:23Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

18:48Scarlet Fu:Every sale comes down to a single second. The one between buy now and maybe later. PayPal is built to help your business win that moment. with a checkout experience that feels certain, reliable, and familiar. With a global two-sided network and hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. New markets, new AI-powered selling services. A whole new agentic era where you decide how your business will show up and stand up. PayPal is built to help your business come out ahead. We're built for payments, built for growth, built for Agendic.

19:32Scarlet Fu:PayPal Open, built for all business. Visit PayPalOpen.com to get started. That's PayPalOpen.com. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. or watch us live on YouTube. We also have earnings out from Caterpillar, which normally, you know, it's a maker of earth-moving machines, bulldozers, the like, but now it's become an AI play, not just in a construction and mining equipment company. It's so much more. Christopher Cialino is our senior U.S.

20:15Scarlet Fu:machinery analyst here at Bloomberg Intelligence, and he joins us now with more on these results, which some people have called blowout results, especially the upside to Wall Street estimates for a second quarter profit. Chris, give us a quick read here on Caterpillar's latest results. Yeah, it's hard to refute those comments. It was really a monster quarter. You had, again, pretty lofty expectations heading into the print. You had a really convincing beat and raise, better than expected sales and margins across all three businesses. So it's not just the AI PowerGen business. And actually, I would say one of the more encouraging takeaways from this print was the performance in their construction business, which really suggests that this recovery is broadening out, where you have a lot of this cyclical tailwind starting to kick in and kind of enhance what we're seeing on the secular side with the data center build out.

21:12Orders, again, very strong in the quarter, pushed backlog to another record level. We're north of$72 billion on the backlog. They're already starting to take some orders out to 2030. So above average production visibility. There's really a lot to like in this report. The question now becomes, is this as good as it gets? So we shall see from here. So, Chris, as I understand your coverage of machinery and, you know, the deers of the world, the cats of the world, I mean, I think that is classic cyclical stuff. But these stocks are trading 35 times earnings. I mean, you're like a growth stock industry now.

21:49What's going on with your industry? Is it still cyclical? It's hard to wrap your head around some of the valuations in the space. So we had Caterpillar, if you look over to last year, it's really traded in line with a lot of the AI and hyperscaler names in terms of just the moves and the trajectory. It's been one of the top performers in the industrials world because of that data center exposure in their power generation business. At the end of the day, I still believe this is still a cyclical company. They had just been, you know, fortunately positioned to capitalize on some of this build out with their large engines and reciprocating natural gas engines, which initially were used more for backup power on the data centers but are becoming increasingly used in prime power applications.

22:37But this is more than just a data center play. You're just beginning to see, I think, the fruits of that in terms of the construction and mining recovery, which we think have some legs into 27 and 28.

22:49Scarlet Fu:You know, if Caterpillar has more demand than it knows what to do with and that power and energy unit has grown to be the largest for Caterpillar by sales, For the stuff that it can't take on, who benefits? What other companies are kind of getting some of the business that Caterpillar can't take on? Right. So it's a race to add capacity at this point. Caterpillar is increasing their large engine capacity by 3x through the end of the decade. Turbines by two and a half times through the end of the decade. Cummins, another one of their competitors. They're also significantly increasing their capacity.

23:25Really, it's just a matter of who has product availability as to who's getting some of these contracts right now. The industry really can't add capacity fast enough. That is one of the overarching concerns now where we're adding too much capacity. But right now, I mean, from all indications from this report, it doesn't seem like there's any signs of that slowing down. And in fact, some of their lead times have actually extended this quarter. Like I mentioned, some of their customers are already taking orders out to 2030, which, you know, highly unusual for them at this point.

23:58Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

24:04Scarlet Fu:This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Wan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

24:51Scarlet Fu:The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. available on Plus and Pro Plans.