80 Seconds of Big Tech Earnings To Set Market’s Fate

23:51It's a pretty cool concept, a cool idea that makes it more of like a pro point-and-shoot camera. On the software side, you're going to see a revamp to the editing features in the Photos app using Apple Intelligence. So right now you have the cleanup tool, which means you can take your finger, circle something, and remove it from the image. It doesn't work particularly well, but it is there. Three more AI features coming as part of iOS 27 that will be announced in June. The first is the ability to reframe a shot. So if you shoot a picture in spatial, you're able to move the photo to change the perspective.

24:30So if you take a picture of a car and it defaults to the front of the car, you can tilt the photo so the perspective is perhaps the side of the car or even towards the back of the car. There's also an enhance feature coming. You press the button and it uses AI to up the ante in the image, improve the color, improve the pop. And then there is expand, which is similar to a feature that Google has had for years on Pixel and Android, where you can drag the edges of the photo to increase the size of the photo. And then it'll use generative AI to fill in more content around the scene that you captured with the camera.

25:06Mark, go there. A feature that Google has had for years in Pixel. It does feel, again, kind of Apple's playing catch up here. Oh, absolutely. Apple is playing catch up. And it is a bit of a reversal. When they announced Apple Intelligence, they said they only had very limited functionality for AI related to the camera and photos because they believe in art. They believe in people taking pictures. They don't want to put AI at the center of that experience and take away from natural photography. Now, maybe that was their philosophy two years ago. I'd like to bet that that philosophy was only something they came up with because they didn't have those features.

25:42clearly AI is being implemented into every part of technology into every smartphone operating system in every part of the overall package and so you're going to see them try to put AI everywhere that they theoretically can. Mark Gurman fantastic reporting thank you very much indeed look here's another AI application that's picking up steam humanoid robots promising flexibility and the ability to learn and perform many tasks but with billions of dollars invested Can these robots deliver real-world value when they fall short of the hype? In the last few years, there's been a lot of excitement about the potential of artificial intelligence, specifically with the breakthrough of chat GPT, which is a huge paradigm shift in the field of AI.

26:25And so that's the speculation. What is the GPT moment for robotics? Hear more from the team at Bloomberg Originals. And our very own Ed Ludlow's in it on today's episode of Primer, focused on humanoid robots. It's tonight, Bloomberg at 6 p.m. ET and on Bloomberg Originals at 8 p.m. Ed. The robots are coming. And coming up, we're going to come back on what to expect from big tech earnings. They are certainly coming after the market close today. More than$600 billion of CapEx commitments expected. Where is the growth and the other side of that equation when it comes to AI? And this is what markets look like going into it.

27:03We're sort of treading water at the Nasdaq 100 level. chips outperforming, which has been a story for a while. Bitcoin,$76 ,200. Half time. This is Bloomberg Tech.

27:25Welcome back to Bloomberg Tech. It's time for today's big number. And the big number is more than$600 billion. That's just across the four companies that are reporting earnings after the bell, the big tech companies. And it is the CapEx that they've either guided to for this year or that Wall Street has extrapolated out for the balance of the year. And we will keep looking at this, but it is an extraordinary calendar. After 1 p.m. Eastern today, Microsoft, Meta, Amazon and Alphabet, the parent of Google, will report earnings within 80 seconds, 8-0 seconds. That's based on the timing of when they dropped last quarter.

28:05Brace, Caroline. Brace. Alphabet. Let's start there. It's under the microscope today as investors look for proof that its massive$185 billion AI infrastructure bet is translating into real business games. Mandy Singh of Bloomberg Intelligence joins us with their preview and their analysis. You know, in some ways, it's easy. We know the CapEx number there or thereabouts, so you can track how that's going quarter on quarter towards that goal. And then we have Google Cloud growth. Is it as simple as that for Bloomberg Intelligence? No, I think it's more nuanced in the sense that Alphabet is one of the only companies out of the four hyperscalers you mentioned that actually gives their token metric.

28:50And what I mean by that is they have this monthly token trajectory around how much is the consumption of the Gemini model. And from that perspective, they are at least two to three times higher than the other frontier labs like Anthropic and OpenAI. And I think what I would want to know is how does that token metric translate into revenue growth? So it will show up in their search line. It will show up obviously in the cloud line. And the magnitude of the beat will kind of show at what rate are they monetizing their tokens generated versus what we know about Anthropic over the past two, three months and OpenAI.

29:35And from that perspective, I think that token consumption metric, for me, that is the key, along with cloud growth and cloud margins. But you want to see more of that tokens translating into revenue growth for Alphabet. So efficiency. Let's talk about GCP growth, cloud in particular. What could constrain that? There's some notes that landed on my desk today saying flash storage could be a constraint there for Google in particular. Is that a worry for you? Are they bottlenecks? Well, I mean, Google, like everyone else, relies on supply chain, you know, for a lot of the components from TSMC's fab capacity to, you know, getting memory from one of the three players to storage.

30:17So from that perspective, yes, there are a lot of constraints. And if in this environment, if you haven't really prepaid for your capacity for all of these components, you will have a hard time sourcing, even if you are the size of Alphabet. So look, all these things aside, I do think, you know, when Alphabet said their CapEx is going to be around$185 billion, they are, you know, putting the numbers and the, you know, investments in terms of getting that capacity. The question is, how much are they allocating for external use versus what is being allocated across their family of apps? And then external use, we will see that in that cloud line.

30:58But the internal use, the AI overviews, the AI mode monetization, that will get reflected in the search and YouTube lines. And that's what you want to see in terms of ad pricing because Meta is expected to grow top line 30 percent and ad pricing is quite visible over there. So you want to see that getting reflected in Google's results when it comes to search. Greenback Intelligence's Manip Singh, we thank you for pushing us ahead on Alphabet. Another stop we're watching today, not earnings, it's Disney. Take a look at the two-day chart. Shares falling yesterday after the Federal Communications Commission said it would do an early review of the licenses of eight ABC TV stations.

31:39Let's get the latest of Bloomberg's telecoms reporter, Kelsey Griffiths. Now, the context of this is that there is uproar once again coming from the administration directed in particular at one particular host on ABC. Can you talk us through it? Yes, Caroline. So we've seen a clash over the last year between the Trump administration and Jimmy Kimmel on ABC. What's interesting about the latest action from the FCC is that it doesn't mention Jimmy Kimmel at all. It actually says eight licenses that ABC holds in major markets are up for early review because they have potentially been engaging in discrimination internally.

32:24So this review is based on a letter that FCC Chairman Brendan Carr sent over a year ago to the Disney CEO investigating some of the hiring and employment practices inside of the company. So that's really what this review is about on paper. Internally, I am hearing that a lot of people do suspect that this is in fact related. Kelsey, there's an individual at the heart of this, which is Brendan Carr. Lucas was on the show yesterday and we went through the kind of specific incident of the last week and then what happened at the end of last year. What role is the FCC chair? Does he play in this? What power does he or the actual committee actually have to do anything about it?

33:10The FCC chairman is all powerful in terms of what gets done by the agency. So Carr definitely knows about this probe. Nothing gets done without his knowledge and his consent. So that is one thing to keep in mind. The FCC would then kick off review of these licenses in a semi-judicial process. This could either play out in front of the full commission, where the commission essentially holds court and investigates whether the stations have been behaving in the public interest. And then it could also go to an administrative law judge internally at the FCC. Either way, the FCC chairman has a lot of oversight about how this process plays out.

33:53Bloomberg's Kelsey Griffin. Thank you very much indeed. Now coming up, the courthouse showdown between Elon Musk and OpenAI continues with another day of testimony from the Tesla boss we're going to discuss next. This is Bloomberg Tech.

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36:52It is day three in the trial, putting some of the biggest AI players against each other. Elon Musk, you'll remember, is suing OpenAI, its co-founders, and Microsoft over the AI startups pivot from a charity to a not for a for-profit business. Let's get the latest Bloomberg's AI reporter, Rachel Metz. Rachel, look, Musk started his testimony yesterday. Remind us what we learned yesterday and what we can expect today. Sure. I mean, yesterday, it was a lot of talking through the founding of OpenAI, what happened in the early days, and Musk's feelings that this was a company that was created as a charity and that it cannot do this transaction that it has already done, which is to turn into a for-profit company.

37:38And we're going to see a lot of that. Right now, we're seeing a lot of that happening again today, a lot of talking to Musk. He's on the stand. He may be there through most or even all of today talking about right now the early days of OpenAI is what they're getting into, how the company was set up and why he says it was intended to be a charitable organization. We're watching pictures of Mr. Musk yesterday going through the metal detector several times, it seems. His principal kind of opening argument was that he needed to file this suit to stop Sam Altman looting OpenAI. Explain a little bit about what he meant and actually the core issues of this case.

38:19Sure. As OpenAI moves from being this company that had a pretty complicated structure but was chiefly considered a company that was a nonprofit to a company that has a for-profit entity. Musk is saying, hey, you can't do this. It was meant to be a nonprofit. So he's fighting against that. There's also a lot of other background and backstory there. There's been a long time acrimonious relationship between Musk and some of OpenAI's founders, chiefly Sam Altman and Greg Brockman, who Musk has filed the suit against. and Musk also has his own AI company that he wants to advance. So you've got a lot of competing opinions and ideas here about what should happen to OpenAI.

39:07OpenAI faces other lawsuits. Some of them are pretty emotive. One of them we understand regarding a mass shooting in British Columbia. Rachel, can you just talk us through what's being focused on there and what it means? Sure. So this morning, seven lawsuits were filed against OpenAI by families of victims of the Tumblr Ridge mass shooting in British Columbia. These are lawsuits filed by families on behalf of children who were killed in the shooting in February and also an educator and one child who has so far survived and is in ICU. What's at stake here is potentially OpenAI being considered responsible in some ways for the shootings.

39:52Supposedly the alleged killer was using ChatGPT in the planning of the massacre and was kicked off of ChatGPT, but then got back on and the company did not report it to authorities. So that's all a part of these lawsuits that have just been filed. OpenAI issued us a statement for the story, which you can read in Rachel's reporting. They have a zero tolerance policy for using tools to assist in committing violence and that they've already improved their safeguards. I go read that and Rachel's reporting. Bloomboast, Rachel Metz, thank you. Now, sticking with OpenAI, AWS announced a partnership with the AI startup a day after it ended its exclusivity deal with Microsoft.

40:30Amazon also plans to sell AI-powered productivity software for the office. We caught up with AWS CEO Matt Garman ahead of Amazon's earnings coming out later today. Well, we're quite excited about the partnership that we're announcing with them today. So, yeah. So, for a long time, when we built Amazon Bedrock as a way for our customers to access frontier models and access AI models, we've always started with the position that we wanted to offer choice. And we wanted to offer all of the best models available out there. And today we're excited to be bringing OpenAI into Bedrock. I think it's something that our customers have asked for for a really long time.

41:09And we're talking specifically about frontier models, not just open-weighted models, which was the extent of the relationship. That's right. We've had open-weighted models for a while, but yes, this is the frontier model. So starting in preview today, we have OpenAI's model 5.4 and 5.5 is coming in the next couple of weeks. We're also collaborating on a new offering, which we called Managed Agents, featuring OpenAI, which is a complete managed agent capability so customers can really easily make stateful agents and build agentic applications together with Bedrock and OpenAI. And it's really just the start of a long-term partnership that we've established together.

41:47As the teams have gotten together, we see opportunity for us to really invent new capabilities for our customers to go and build interesting applications together. And really excited about working together with the OpenAI team and unlocking more things that customers can build on AWS. We are in a strange situation where OpenAI models can now run on AWS, but Microsoft will benefit financially because of the latest terms of their agreement. They've ended exclusivity, but OpenAI continues to make payments to Microsoft. Yeah. How do you think about that? That's okay. Look, Microsoft has benefited from the growth of AWS since the very early days, in fact.

42:30We've supported Windows licenses, as an example, I think since 2007, 2008. I can't remember the exact year. So Microsoft has benefited. They build great software. They have good partnerships, and they should benefit from those. but customers really want to use those technologies. SQL Server is a good example that runs great on AWS. In fact, many of our customers tell us that SQL Server runs better, way better on AWS than it does on Azure. And so for those customers, running in AWS is where they get the best reliability, the most security, and the broadest set of features. And so that's great. And if Microsoft benefits because their software or their partnerships or their licenses are being used inside of AWS, that's great.

43:08And in this case, we partner with Microsoft, just like we partner with Oracle and other providers that build software. And we want to make all capabilities available on AWS for people to build. The world of frenemies. It was a great interview, Ed. That was AWS CEO Matt Garman. Now coming up, more earnings. We'll discuss what to expect from Microsoft, Amazon, Meta. That's next. This is Bloomberg Tech.

43:41Let's get back to tech earnings. Investors in Amazon and Microsoft expected to pay close attention to cloud capacity and cloud growth. Bloomberg's Matt Day covers both companies. I don't know how you're going to do that after the closing bell. Let's start with Amazon. You and I spent time yesterday with Matt Garman, the AWS CEO. It is probably AWS where there will be a lot of focus. What are we bracing for? So Amazon Web Services is going to accelerate a little bit from the past quarter, looking like the fastest growth rate in three years. I think the big question is going to be when we start to see the fruits of all these new partnerships they've struck with OpenAI, as you mentioned, their growing business with Anthropic.

44:21When does that sort of materialize? This cloud revenue is going to be one of the big questions this afternoon. People really felt that Amazon managed to get its ownership over its supply chain in many ways, and particularly when it comes to power, that's something that Andy Jassy has been speaking about for a long time. When you're looking at Microsoft, The fact that GitHub has paused Copilot's sign-ups, what does that reflect in terms of Microsoft's capacity, supply versus demand? Microsoft has been struggling for more than a year now to get enough stuff up and running to power everything, both its commitments to OpenAI, its own software, its subsidiary GitHub, as you mentioned.

44:52They're just racing to put as much power in chips and data centers up as they can right now to meet that demand. They're still growing at a pretty healthy clip cloud-wise, but it's certainly been clear for several quarters now They could be doing more if they'd had a better pipeline coming up. And what a share price drop we saw after their last quarter's earnings. We'll see if the 38 % lives up to expectations today for Azure. Matt Day, thank you on all things Microsoft and Amazon. AI is also like to be a focus when we get Meta's results. Minna Smiley, senior analyst covering social media at eMarketer, is here to talk us through AI and plus some other things.

45:26There's a lot about the business model that's under scrutiny. But AI, CapEx, is that going to be where everyone looks? Oh, yeah. Yeah, I mean, the funny thing about Meta these days is that that top line revenue growth number is actually like the least interesting thing about its earnings, right? I mean, we expect it to have growth once again. It's been posting double digit gains for years now because of its investments in AI that are helping it with better engagement, better advertiser targeting and stuff like that. But I think the real number people are paying attention to these days is that CapEx number.

45:54We do know that Meta has been spending exorbitant amounts of money on AI. I think that last we checked, it was$135 billion for the year was what they were expecting at most. So that's the number that we are seeing investors and onlookers really pay attention to and really try to get a sense of if there are going to be any changes or further comment on that spending. Comment also on how it helps fuel the flywheel effect to the business model, a business model that's been under some scrutiny in the courts. how do you think Mark Zuckerberg will react to that, some of the court losses that he's had in the United States?

46:29Yeah, it's a great question. I think people will really be hoping that they shed some sort of light on not only their reactions to these lawsuits, but sort of where they're going and how they're going to address some of this. Because I think the reality is that with these lawsuits, it's still too early to really say how much Meta is ultimately going to have to pay, both literally and figuratively. I think we're still too early in the game. But there really is this sense that, like, something's got to give at some point, right? We're seeing this groundswell of lawmakers and parents and educators and, you know, all sorts of people really trying to argue that these meta and these other social platforms are dangerous for children.

47:08The fact that, you know, both juries found meta liable does not look good for them. And so I think in the call today, it's going to be less about the numbers and more about how are they kind of viewing this sort of almost existential crisis to the business that could happen. I mean, it's hard to say to what extent it'll play out anytime soon. But three, five, ten years on the line, how are these issues going to play out and ultimately affect what these products look like? Minda, there are two big news stories about Meta that happened either in the quarter they're about to report or more recently.

47:41the release of MuseSpark as a model, and then the layoffs that Bloomberg reported last week. How do those factor into this bigger conversation about how much Meta spends versus what they get as a result of that spending? Yeah, it's a great question. I mean, with MuseSpark, I think with the launch of their AI model, I think on the one hand, investors will be happy to kind of see the fruits of their labor, so to speak. We saw last year they spent so much money and time trying to, you know, kind of relaunch their AI business. And so, of course, having a new Spark finally be here, getting a sense of, you know, what it looks like is definitely going to be comforting to some extent.

48:21But there are still so many questions around, you know, how is it going to make money? How is it going to compete with these more established players? So while it's something, I think it still leaves a lot of room for questions, certainly. And then, yeah, with the layoffs, I mean, that's another great question. I think there's been a lot of talk around, you know, to what extent is this AI washing? I also do wonder, you know, going back to the regulatory conversation we had earlier, I mean, could they perhaps be reorienting their business and trying to lay off certain people and hire new ones to kind of really address some of these scrutiny and these regulatory and legal concerns that could become a much bigger problem for them down the line?

49:00You know, Minda, it's so interesting. We're about four minutes into this conversation. None of the three of us have brought up the word advertising in the context of Meta. Why? Why not? Because at the end of the day, every quarter, it still comes down to advertising. Yeah, exactly. And it is a good question. It is wild to think that Meta, a company that makes most, if not almost all of its money from advertising, that's kind of why I think investors have been really kind of on edge about all of this CapEx spending. It's sort of like at the end of the day, meta is a social media business. So when you compare it to these AI competitors like OpenAI, like Anthropic, even Google, I mean, it's just, it's fundamentally different.

49:40And that certainly gives it some advantage, but it also brings about a lot of challenges. It's just, it really is a different beast. Compare it to the competition, YouTube, TikTok, where our eyeballs are going at the moment. Yeah. What are you seeing from the data? Yeah, I mean, our data shows, you know, by many accounts, meta is still, you know, I mean, we can see it in the revenue numbers, right? The fact that it's seeing double-digit growth. It's still, its platforms are still incredibly popular, namely Instagram. I mean, Instagram actually, by some accounts, is more popular than TikTok, at least here in the US.

50:10And so we are seeing time spent there, tick up among users. Facebook, I think people kind of often kind of like, you know, it's sort of an afterthought, but it's still a massive platform that a lot of people use. And we actually are seeing Meta kind of reinvest in it a little bit, try to make it more relevant again. There's a big push right now to get more creators on Facebook. Marketplace is still huge. So, I mean, yeah. I mean, of course, TikTok and YouTube, they are a huge platform that are doing very well. But like, yeah, Instagram, Facebook, WhatsApp, they're still quite popular. Minda Smiley from eMarketer.

50:42Awesome. Thank you very much. Looking ahead to crazy earnings afternoon. That does it for this edition of Bloomberg Tech. We're off to get a few coffees because we've got a few hours to go. The excitement doesn't stop. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart. Tune in after the closing bell. Thick and fast, this is Bloomberg Tech. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges.

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