Disney Taps Parks Chief to be CEO, Palantir Gives Strong Sales Outlook

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, Palantir shares rising after the company exceeded Wall Street expectations with its revenue forecast. We break it down. Plus Disney Parks chief Josh DeMauro will succeed Bob Iger as CEO. Our conversation with Disney chairman James Gorman about the news later this hour. And it's official. Elon Musk is combining SpaceX and XAI in a deal valuing the merged entity at a whopping$1.25 trillion. And their private valuations. Let's go to the public ones right now, Ed, because we're back to the normal state of play.

1:57Stocks are down. Bonds are down. Dollar is down. Crypto is down. I'm looking at 0.9 % lower on the NASDAQ 100. Anxiety abound when it comes to software stocks, when it comes to the implications of Anthropik's latest design in the legal sphere. We've got a lot of pressure to be digging into. But we're also seeing Bitcoin off by another 0.6%. 77 ,900 is where we trade thus far. Look, the moon music just turning a little bit sour on risk assets. What are you looking at? I'm looking at Palantir and the earnings story. The stock up about 4 % right now. Now, at one point in the session, it had been up almost 12%.

2:30It's all about its outlook for fiscal 26. Revenues will be about$7.19 billion. That's almost a billion dollars ahead of consensus estimates for what Wall Street expected from Palantir this year. There is a lot inside of that. Let's get the latest. Greg Moskovitz, Mizzouo Managing Director. They remain neutral on the stock with a revised price target of$195, down from$205. Welcome to the program, Greg. Interesting, right? You know, this outlook for fiscal 26, the forecast, it projects continued growth and confidence, not at the same rate they saw quarter in quarter. You've trimmed your expectations on the stock a little bit.

3:11Why? Well, first of all, thank you very much for having me. This was a stunning quarter, 70 % year-over-year growth. And as you said, the 2026 guidance revision versus where the street was was very substantial. So we're looking at 61 percent revenue growth. The street was at low 40s. They're also forecasting 56 percent free cash flow margins, which also was well above. The very slight price target revision is, quite frankly, has nothing to do with Palantir's fundamentals, which, again, were better than we expected. It's a function of the very significant multiple compression that we've seen across software in recent weeks.

3:49And so we're making an adjustment on that basis. The price target revision in Palantir's case was quite a bit less than many other software companies that we cover because, again, the Palantir fundamentals are quite strong right now. Right. You know, the story we've tried to unpick with Palantir is its present day reliance on the public sector and its growing business in the private sector. What was your interpretation of that story? So what we see from Palantir is where the companies that have bought in, meaning they have signed an initial contract, they've deployed a use case, in many cases they are seeing great success.

4:31They're seeing insights, data-driven insights using AI technology to significantly enhance that, to enhance these outcomes. And that is increasing the willingness of these customers to continue to spend more with Palantir. It is a bit of a tale of two cities. Palantir software is not cheap, Ed. And so what we're seeing is the customers, again, that are bought in, they're seeing successes. is in many cases they are expanding and expanding very materially. The top 20 customers for Palantir have spent, on average, about$95 million over the past 12 months. I mean, that is stunning. There's no other software company that we follow that is doing anything remotely close to that.

5:14Having said that, they are struggling a little bit with getting new customers. So net new customer ads this quarter were about 40 less than the year ago period. So we have seen a little bit of a slowdown there, which is important when we think about longer-term growth. But quite frankly, as long as existing customers are willing to expand anywhere near these levels, you will still see Palantir grow at very strong rates for the foreseeable future. Greg, why are they struggling with new customers? Well, it really kind of comes down to the fact that Palantir is not cheap software. It takes quite a bit to get started.

5:49It is a significant investment. these customers are making a bet that whatever use cases they are deploying Palantir for will unlock significant efficiencies, in some cases, additional revenue. In other cases, it might be insights that they can't get elsewhere. And so that can be a hurdle that is a bit daunting for some of these customers. And so I think that that is sort of the push and pull of Palantir. It's not for everyone. This is not democratized software, but obviously a lot of customers are getting genuine benefits that are significant. It's also slower growth internationally, significantly slower.

6:28Greg, is there any geopolitical angst? I mean, certainly it's a controversial stock, particularly with the fact that it's used by ICE, the Department of Defense, among other governments in the United States. There has been something Alex Karp has spoken to, talking about how they make decisions internally and how I think about their moral compass. But more broadly, is that something you consider about how it futures growth trajectory abroad? It is something that we consider. And you're right that the U.S. growth is substantially outpacing the growth that we're seeing international. That's especially true amongst commercial.

7:04Pound here is actually doing fairly well with international governments that I would say are Western friendly governments such as the U.K. But, you know, we would like to see the international growth be a little bit higher. CARP has also said, including last night, that some of this is a function of where Palantir is placing their investments. And so at this time, they see more complexity getting some of these projects off the ground overseas. And so they're not dedicating as many resources into that. And they have talked about 2026 being the year of the U.S., again, very much kind of a repeat of 2025.

7:41So some of it does seem company specific. I do think some of it, again, to your point, there may be exogenous factors, including geopolitical. But we are expecting U.S. to certainly bear the brunt of the growth in 2026 as well. And what growth it is, annual revenue, more than 60 percent. See if it vindicates those extraordinary multiples. Greg Moskowitz, it's great to have you on from Mizuho. Meanwhile, one corner of tech we still see under intense selling pressure because, look, the rest of the software space, traders are dumping those names in fears that are growing, that AI will disrupt the industry.

8:17Wall Street sentiment has gone from bearish to what one trader calls doomsday. Here with the latest, is Bloomberg Equities reporter, Ron Verstelica. So interesting, Greg saying basically he had to trim the price target of Palantir because of what's happening in the rest of the sector. And boy, the rest of the sector is under pressure once again. And it seems to be because of Anthropics, a latest legal unveil, but so much more. Yeah, good morning. Thank you for having me. So Anthropik's latest tool is really just sort of the latest in a series of AI tools that have come out and really spooked investors about what all of this is going to mean for legacy software companies.

8:51Are they going to see their growth eroded? Are they going to see pricing pressure, pressure on margins? The outlook has become extremely clouded and by most accounts, extremely negative. People are viewing this as one person called a SaaS apocalypse. So software as a service companies that historically had pretty durable growth and pretty consistent trends. Now their outlook is a lot more muddled and people are just dumping pretty much everything across the board. We are seeing major names down pretty significantly at multi-year lows. SaaS apocalypse. I find this interesting because in August when I was in London, there was a very severe sell-off in European software names on the very simple anxiety that AI tools like Anthropic can do exactly the same thing that software you pay for can do.

9:39August was a long time ago, and some of those names recovered. In your piece, there are people that see this as an opportunity, right? This sell-off. Yeah, a lot of valuations have gotten down to levels that historically have been quite attractive. And there is certainly a lot of optimism, especially for leaders in the industry, most notably Microsoft. Now, Microsoft, as you know, last week struggled quite a bit following its result, its Azure growth, and its cloud computing business. That was a little bit disappointing. That stock fell 10%. It hasn't had an update since. However, that stock is getting to levels that are below its longer-term valuation multiple.

10:14It's getting pretty cheap. It wouldn't be surprising if you see some people look in and try to buy the dip on stuff like that. I've had people talk about Snowflake as a company that looks like it can navigate this era pretty well. But just in general, there is so much confusion about what growth is going to look like, what margins are going to look like, that people aren't really taking the risk, especially since the hardware part of the AI trade, chips, memory, storage components, all those parts of the market continue to look pretty strong and are delivering the kind of growth that people really want to see in this backdrop.

10:45Bloomberg's Ryan, Vestelica, thank you very much. Now coming up, Elon Musk confirms he's combining SpaceX and XAI. He's got those details next. This is Bloomberg Tech.

11:06It's official. Elon Musk is combining SpaceX and XAI. The deal, which was announced in a statement on SpaceX's website signed by Musk, values the combined entity at$1.25 trillion. That's Bloomberg reporting. Let's bring in Bloomberg's Lauren Grush, who broke this story with the team. Actually, I think it's probably worth going through the chronology of yesterday afternoon. There are two memos, right, that we know about, one from Elon Musk and one from SpaceX's CFO, Brett Johnson, that explained as much as we know about the mechanics of it. Take it from there and then we'll get to the big picture.

11:43Right. So the original memo came from Elon himself, which I actually believe is posted on the SpaceX website now, talking about the reason for the merger. He mentioned creating the most ambitious vertically integrated company that would be designed around AI and using space for AI purposes. Obviously, Elon's talked very openly in recent months about building out these massive data centers in space in order to do complex computing for artificial intelligence. And so that was just reiterated in that memo. And then a follow-up email that talked about the new valuation for the company. We're looking at $1.25 trillion for SpaceX.

12:26That's because SpaceX was revalued at$1 trillion with XAI at$250 billion. And then a new share price being set as well. So it was just a massive day for both SpaceX and XAI and this new combined company that we will be covering moving forward. Lorna, investors pumped about this Because XAI spends gargantuan amounts of money, about a billion a month. Is that a good news story longer term as they try to IPO the business? I think there's definitely some skepticism and a lot of questions that we still need answered, right? You know, XAI comes with a lot of debt. Where does that debt go? How is that going to get paid off?

13:08I think also there's some questions about what this means for the long term vision for SpaceX. You know, ever since the company was founded, it was founded with the purpose of starting a settlement on Mars that humans could live and work at. It's, you know, this sounds, you know, building out data centers for AI sounds like a bit of a detour from that. I'm sure, you know, there are ways in which Elon will say that they all work together. But I think, you know, maybe some investors and shareholders might think this isn't exactly what they signed up for when it came to the SpaceX vision overall.

13:46Caroline raises a very good point on the IPO. My understanding is that that IPO is still on track. They need the capital for the GPUs that goes into these instances. Very quickly, SpaceX is subject to ITAR. What do we know about the structure of this new beast? Right. So as of now, these companies, it doesn't look like a lot is changing functionally or operationally. They will remain separate. As you mentioned, SpaceX is under these regulations that control the transportation and information flow related to defense systems, which SpaceX is subject to because they build rockets and many of that technology that is used for their vehicles are used for weapons and defense related materials.

14:28and a lot of, you know, that just limits a lot of the things that they can do when it comes to communication, software they use, et cetera. And so XAI isn't under those regulations. I don't think they want XAI to be under those regulations. And so for now, the two entities will be functioning separately, but I'm sure they will look for ways to integrate moving forward and maybe some, you know, fun branding opportunities I'm sure we can expect in the future. Bloomberg's Lauren Grush. Great reporting throughout. Thank you very much indeed. Now coming up, Disney names a successor to its CEO. We'll hear from the company's chairman about why they chose the parks chief just tomorrow.

15:07That's next. This is Bloomberg Tech.

15:12Check in on PayPal shares tumbling today. And also HP2. This has got a change at the top. We say goodbye to the chief executive, Alex Chris of PayPal. And in comes the HB CEO, Enrique Lores, both pressured and indeed PayPal numbers. They report fourth quarter and profitability that missed expectations, Ed. OK, Disney is named Josh DiMaro, head of the company's experiences division, which includes its famous parks as its next CEO. The 28 year veteran of the company will succeed Bob Iger starting in March. Earlier, I spoke with Disney chairman James Gorman about the choice. Josh is just a standout executive we looked all over the world as you could imagine we wanted to do this right we wanted to make sure that whoever got the job beat all comers and he beat all comers so we're thrilled Mr Gorman what mandatory goals performance targets did you set Mr DeMauro over the term of his contract well we haven't set goals in terms of his contract he hasn't started he'll be taking over as CEO at the annual meeting which is March 18, Bob will be working with him through 2026, guiding and mentoring and helping further develop him.

16:30Obviously, he laid out a vision for the board in the various discussions we had, which we had numerous ones. We really got to know Josh and all the other top executives, Dana Walden, Alan Bergman, Jimmy Pataro, just a tremendous group of four executives we had to consider in this process. And, you know, over time, we'll work with him as he settles into the job to lay out what the right strategic moves will be and how we're going to measure ourselves against those. So I'm highly confident in Josh and the team working with him. Mr. Gorman, there was reporting that Mr. Iger confided in those close to him that he wanted to leave Disney before the end of his contracted term.

17:11To what extent did that push the board to to move up its succession timeline? Yeah, I think, firstly, let's just talk about Bob. I mean, he's had effectively two careers at Disney. The first was an amazing 15-year run where he did deals that, you know, nobody else on the planet could have done, frankly. He worked with Steve Jobs, with George Lucas, with Rupert Murdoch to buy a bunch of studios, which we now oversee seven studios, which Alan Bergman has been overseeing, by the way, produced under Alan's leadership and working with Dana and has produced over $6 billion movies in the last two years.

17:51But Bob did a phenomenal job. When the company got in trouble, and it was before I joined the board, they invited Bob to come back. And really, there were two mandates for him. One was to get us through the very difficult post-COVID period and the changes taking place in the linear space with what was going on and streaming and now what is going on in AI. He did that. He really got the company fit for purpose. The second was to make sure if we were to go internal, that the lead executives, and we had four of them to consider, would be ready for prime time if and when we went in that direction.

18:23We ultimately did. Disney chairman, James Gorman, great interview, Ed. What's so interesting is that he talked very optimistically and positively about all the candidates that they went deep into. And I think about Dana Walden in particular, who's been elevated. She's now president. She's now a chief creative officer across the entire brand. And president, when I asked him how much that move was designed simply to keep her at Disney, he basically said, if you're not trying to keep top talent, there's something wrong with you. But I asked also, is it just those four internal candidates that are in the race?

18:54Because the reporting made it seem like that. Said no, 100 people were competing against Josh DiMario for that role. And in the end, he was the one named to be CEO. And he spoke very optimistically about where the company can go. and certainly from where its valuation perspective is. Let's just talk more broadly about Hollywood right now because there's plenty of other news. In a Senate subcommittee, it's set to question Netflix co-CEO Ted Sarandos about the media giant's plan to buy Warner Brothers Discovery Studio and its streaming business, of course. It's offering a glimpse of legal scrutiny to come for, let's bring in Jennifer Huddleston, Senior Fellow in Technology Policy at the Cato Institute.

19:28Jennifer, Ted Sarandos, what can he expect today? I think it's 2.30 p.m. local time when he is going to be in Washington. I think it'll be really interesting to watch this hearing because there are a couple of different topics that could come out. The first is this merger and how it will play out in light of overall questions around mergers and acquisitions more generally. We certainly have seen increased scrutiny, particularly in the tech sector, and a concerning shift at times away from that focus on consumers. But also because this will inevitably bring up other topics potentially related to tech policy.

20:02Will we see questions around content moderation or speech or any other number of the topics that have come up around tech companies and their decisions also come up in light of this particular hearing? We're actually having headlines across the terminal that Paramount's Ellison has declined the hearing invite on this Warner Brothers Discovery hearing itself. As we get more, we'll bring it to you. I want to go back to Disney. We just spoke with the chair of the board. I didn't get a chance to ask him, but earlier in the week, Disney's CFO said that a combined Netflix and Warner Brothers would be awfully big.

20:37Do the other players in the field have a stake here in how proceedings in these hearings run, their voices from the outside? One of the real questions in examining this potential transaction is going to be that question of market definition. Who exactly does a combined Netflix and Warner Brothers compete with? Is it the wide array of streaming services, which we see many pop up all the time? Disney has its own, as you just referenced. But there are also very specialized streaming services. Is it the broader entertainment complex that could also include things like short-form videos on YouTube and TikTok and any number of things?

21:14Is it the going to the movie theaters and the kind of production side of things? So this is something that's certainly going to come up in the debate over this potential transaction, not only here in the U.S., but also internationally where it could face scrutiny as well under a different standard, one that might be less focused on consumers and more focused on competitors, really raising questions of would the consumers lose out if a transaction is blocked because it would harm consumers or would harm competitors, I mean. Not because the consumers are harmed, but because it might make competition more difficult.

21:49Jennifer, just go to that competition abroad in particular. Where do you think the definitions get more murky? Where indeed does Netflix and enlarged Netflix have to fight harder? Is it all about the likes of TikTok or YouTube, as you say? Or I'm sure in China, they're a completely different field of candidates. Well, I think when it comes to the actual transaction, where we're more likely to see scrutiny are places like Europe and South Korea. We've seen other acquisitions by American tech companies be scrutinized over there. I'm thinking about things like the Microsoft Activision transaction.

22:21We certainly saw the scrutiny from abroad focused on the potential impact, not on consumers, but on competitors. And when I say the impact on competitors, I don't mean any kind of anti-competitive behavior. I mean that this would make competitors potentially have to raise their level of competition, something that we should want in the market, because raising the level of competition, raising that standard benefits consumers. And so that's really what we should ideally be focusing on. Jennifer, very quickly, based on past precedent and the frameworks you've outlined, does Netflix's Warner Brothers Discovery go through?

22:56This is going to be interesting to watch because in some ways this is going to be the first time the new merger guidelines, the revised merger guidelines, have really come up, particularly in the tech sector in the U.S. So it will certainly be something to watch in terms of not only how do we see this play out with these revised merger guidelines here in the U.S., as well as what challenges do we see from abroad? And are we able to maintain that focus on the consumers and on the way that this transaction could potentially benefit them? Jennifer Hodgson, Senior Fellow at the Cato Institute. Thank you very much.

23:30So coming up, we discuss the market divergence in tech as traders sour on software. Software. Anna Rathburn of Grenadilla Advisory joins us halfway through the show. And what a show it is. This is Bloomberg Tech.

23:50Welcome back to Bloomberg Tech and checking on these markets that are under pressure more broadly. The Nasdaq 100 now accelerating some of the losses up by 1.3 percent. Big chip stocks are in the red. So, too, are the software names. And really, we're selling not just stocks. We're selling the dollar. We're selling bonds. We're back to the state of play we had for the whole of the year. Move on and have a look at the individual movers that I want to shine a light on because there's interesting things happening in the world of Palantir. It was at one point up 11 % pre-market. We're now up 4 % because it smashes past expectations.