Big Tech Earnings Put the Rally to the Test; Warsh’s Latest Fed Decision 10/28/26

0:00This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big.

0:37Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. The bell's bringing an end to the trading day at the NYSE Haymaker Acquisition, ringing the closing bell, and next door doing the honors here at the NASDAQ. Welcome to Closing Bell Overtime. We're live from Studio B at the NASDAQ Market Site. I'm Melissa Lee, along with Mike Santoli.

1:12Stocks close to the flat line as the Fed kept rates unchanged as expected. The Dow at more than 100 points. S &P 500 up a quarter of a percent. NASDAQ 100 with the biggest gain. And the 10-year yield falling during Fed Chairman Walsh's news conference, but rebounding to just around 5.02 percent here. The bigger move was in shares of Oracle, jumping 11 percent as it says it will put a cap on how much money it will raise. We've got a huge hour of earnings coming up. Microsoft and Alphabet reporting. Kate Rooney and Mackenzie Sigalo standing by to bring us those numbers. There are also a lot of other reports we'll be waiting for, including FedEx, Ford, Chipotle and Snowflake.

1:49And we'll get reaction to the Fed decision from Treasury Secretary Scott Besant in just a few minutes. But we start off with the first take on the close. And obviously, we're waiting these mega cap earnings. But that big news out of Oracle had a huge impact on a lot of the sort of the picks and shovels aspect of the A.I. trade. When you take a look at the memory stocks, for instance, even the power suppliers like a Bloom Energy on the back of the Oracle news really went higher. It was really like the flip of the switch. And it was really day three of the market being able to exhale about the prior anxieties about financing the kind of unending demand for capital and what that was going to cost.

2:23And it really did overshadow whatever impact the Fed might have had with an as expected decision and maybe cementing the view that there's likely to be a Fed rate hike in December. But that's far enough away that we obviously have business today, which is can the semis and the related sectors continue to bounce off of what seemed like a decent short term low after they got kind of washed out? The rest of the market doing not much of anything at all. No, not at all. Not at all. And we're seeing Microsoft shares react to the earnings. We're going through the numbers right now, but the stock is higher by about 2.9 percent.

2:54And you have to wonder here, you see the initial reaction. Is it going to be like a meta where the initial reaction was a good one? And then you get some more detail about CapEx numbers, et cetera, and their ramp. And then markets start to rethink. And I think what we learned from Oracle maybe today and Meta last week is investors don't necessarily want to see that CapEx keep going higher. They want to see a roadmap to an off ramp. Yes, that is true. And Kate has the details for us right now. Kate. Hey, Mike. So it looks like a beat, at least on the top and bottom line. And that all-important cloud growth number for Microsoft will start on that EPS number.

3:25This is the adjusted number,$4.89. Street was expecting$4.73 there. So a sizable beat. You've also got a beat on revenue here,$92.28 billion compared to the roughly$90 billion that analysts had estimated. And then cloud growth. This is the Azure number, 48%. Street was looking for 45%. So easily beating there. We're still digging through for the rest of these numbers, guys. But you can see stock reacting up more than 4 % now after hours. Back over to you. All right, Kate, thanks. Kate Rooney. We'll await some more details here. The market's going into these big tech earnings with a big bout of momentum as the tech trade tries to study.

4:03But will that all change in the next hour as we start to digest Microsoft and we get those numbers from Alphabet? Do out any second now. Let's bring in Paul Hickey from Bespoke Investment Group. Paul, welcome. Busy day. Very busy day, to say the least. So what do you make of Oracle? And now, I mean, at first blush, Microsoft looks pretty good in terms of can the AI trade find a footing here? Yeah, I mean, I think it's both good news, like you said. Oracle's showing that they're only going to have to go into the capital markets for another$20 billion, which is encouraging. The Microsoft numbers will like to see what comes out of there.

4:35Microsoft is, though, coming off of what was its best earnings reaction since at least 2001 last quarter. So expectations were a lot lower last quarter than they are this quarter. So we'll have to see how that pans out. But overall, and then to Mike's point where it looked like a tradable low on the semis and the memory stocks last week, those are the keys to the market right now. This has been an AI bull market. And for those, AI is going to have to lead in those two sectors need to lead. They finished last week right at support and they're rallying. So as long as they can stay in that range, I think it's very positive for the overall trade.

5:11We want to get to the 7 percent decline in Alphabet shares after hours. Earnings are out. Mackenzie Zagalos has the numbers. Mack. Hey, Mel, yeah, those shares down almost 8 % now. Q3 EPS coming in at$2.12, but because of likely significant investment gains tied to those investments in SpaceX and Anthropic, at this point, we're not going to compare EPS to estimates. On revenue, it's a miss, $127.58 billion versus the$128.2 billion that was expected. Now, cloud revenue, this was a segment that we were looking at going into the print, really, whether they're getting a payoff for all that CapEx spend.

5:43It's coming in at$30.71 billion. That's up 103 % year over year. It is a beat against the street, which was anticipating$28.7 billion. So this is right in line with what we were seeing with estimates that we'd see something in the range of 92, potentially up to 120%. That's 103 % gain. The other number I have for you here is Q3 CapEx. This is actually light of what the street was expecting. So 51.36 billion dollars of CapEx spending in the in the quarter. But at this point, shares actually pairing those losses down around six and a half percent. Guys. All right, Mac, thank you. Yeah, I mean, it seems as if if the high end of the cloud growth forecast was up to 120 percent, seems like the buy side usually anchors toward a little bit more aggressive there.

6:29That might be one of the reasons. Plus a top line mess, which is not not actually common. It's also been kind of a weak and somewhat cheaper stock over the last few months, Paul, Google. So we have this dynamic where it seems like not so much zero sum, but it's not as if everybody can seem like they're winning at all times. Yeah, there's definitely bifurcation. You look at the mega cap tech stocks, if you look at their performance year to date, it's all over the map. So that's a good thing. They're not trading as a monolith. With respect to Alphabet, let's see what the numbers look like rather than the headline.

7:01Seagate was down 8 % yesterday, finished up 3 % today. So you just want to see how the numbers play out there. And the cloud, the most important number, there was strong growth, maybe not 120%. Yeah, no doubt strong. We do have a little more color on Microsoft. Kate Rooney, back with that. Hey, Mike, this is an important line item here, CapEx. So this is the quarterly CapEx. Street was expecting about$50 billion. The number we're getting from Microsoft is about$5 billion light, which is a good thing. They're spending less than expected. It's about$45 billion for the quarter. And that was a key moment we're looking for.

7:34Also, Azure revenue. So we talked about the growth rate, which is also stronger than expected, 48%. We have the full number, which was a beat as well,$33 billion roughly. They also beat on agents and infrastructure revenue. And then, guys, I was also just looking at their cash on the balance sheet. It grew year over year, so it looks like they're still in positive territory compared to some of their big tech peers compared to Alphabet, for example. Amazon has been heading in that direction. That's one thing that investors really have been looking for, that they're able to have the balance sheet discipline.

8:04It looks like from first read, that is still the case. They've got about $20 billion in cash and cash equivalents on the balance sheet, guys. All right, Kate, thanks. Kate Rooney with some more details about Microsoft. Based on what we know so far, Paul, I mean, CapEx being a little bit less than what people had expected for that, that's a good sign, too. Yeah, and the free cash flow and the cash. I mean, Microsoft, So it rallied last quarter on those numbers. It's showing better numbers than Alphabet this quarter as well. So you see that differentiation there. You know, the market wants companies to, you know, produce cash flow and see a return on their investments.

8:38So that's just the way it's going. You know, that's 10, you know, prone to switch over time. But that's what the market's looking for. We'll see if the hardware names actually have some give back on that, this idea that we're slowing the spend. But right now, market's happy with it. Paul, stick around. We'll get back to you in just a little bit. Now let's get to D.C. for the first administration reaction to the Fed's decision. Our Brian Sullivan is joined exclusively by Treasury Secretary Scott Bessent. Brian, take it away. Mike, thank you very much. Do appreciate that. There's a lot going on with Microsoft and Google earnings.

9:11So Treasury Secretary Scott Bessent, really appreciate you making some time for us here on CBC. Thank you, sir. Good to be with you. It's good to be here at the U.S. Treasury. Actually, I want to get to Microsoft and Google indirectly in one moment. But first, your reaction. Federal Reserve, no change on rates, changing the meeting schedule for next year and in 2028. But give us your first read and take on Kevin Warsh and the Federal Reserve. Look, I think Chair Warsh is off to a great start. And as I often say, I have great confidence in him. But more importantly, the president has great confidence in him to find the right balance between the Fed's dual mandate of full employment and the inflation mandate.

9:50And I think he continues to fulfill that. There is a school of thought that the Federal Reserve doesn't have a lot of control over the inflation as we see it now. That when you look at energy prices, war, Russia, Iran, when you look at input costs, a lot of it caused by energy prices, the inflation that we're seeing that the Fed is, quote, fighting is not really something the Fed has the power to fight. What do you think about that? Well, I've said that often. And as I said, when I led the search for the Fed chair, that President Trump obviously had the final decision was I would like a chair with an open mind, just as Alan Greenspan had in the 90s.

10:32And I think we are getting an energy supply shock here. And you might remember in 2008 in the summer, I think one of the great the fails or policy errors in central banking history was when the ECB hiked into a similar energy price shock. And then we obviously saw what happened in September of 2008, the GFC. So I think they should have an open mind in terms of the transitory nature of the supply shock. So would you view then any future interest rate hikes as a policy mistake? That's not necessarily so, because, again, the Fed, I believe, raised their terminology today in the statement. They seem to insinuate that they believe that the economy is accelerating.

11:26I think we're going to get I haven't seen it yet, but I think we're going to get a strong GDP number for the third quarter. Atlanta Fed is well over three percent. Yeah, that number will come out tomorrow. You know, going back to your hedge fund days, there is also there are people who I've talked to. We talked about it actually on on our Federal Reserve show today on the air, which is that if the Fed were to, let's just say, cut rates by one percent. I mean, they're not going to, but we're going to sort of theorize here. If they cut rates by 100 basis points, that bond yields would go up. In other words, the bond market might be running to show more than the Federal Reserve.

12:08What do you think about that? Well, I think we can look back to the Fed's very large rate cut before the election in 2024. we saw a 50 basis point rate cut and 10-year yields have never been lower since then. So the 10-year yield never looked back. So look, the curve, there are a lot of things that influence the curve. It could be the term premium. It can be exogenous factors. So I always had great respect for the bond market. And as Chair Warsh said in the July decision, that the bond market has done a lot of tightening for us. Are you frustrated by, is the president frustrated by 5 % real 10-year yields?

13:01Well, it's nominal yields. Nominal yields, apologies. So I think that we both believe that we will get to the other side of this Iran conflict. and the oil market's going to be better supplied on the other side. And how much of that do you think is playing into where bond yields are and the economy may go, the price of oil, which is also related to things that are largely out of our control or maybe out of our direct control? Well, I do think what the Fed is very attentive to is they have been above target for a long time. And I think in some of the board members' minds that the time has gone on too long and it may show a lack of will.

13:51I don't think it has to. But importantly, I think that we've seen a very high correlation between oil prices and the 10-year, the 30-year, the longer end of the market and between crack spreads. Yeah. And as long as oil then remains elevated from where it was, I would anticipate then that you, sir, the Secretary of the Treasury would anticipate yields to sort of remain where they are. Thus far. And look, as I said, I have great confidence in Chair Wors to steer the Fed between the right combination of growth and inflation, because what you don't want to do is cause enough of a growth slowdown that energy consumption would drop.

14:42This might be a better question for the Secretary of War, but I will ask you because part of the economic blockade of Iran has come from your office. And it appears to be working. They're exporting effectively zero barrels of oil. Their currency has collapsed. Yeah, probably for the first time since Iran started producing oil, they have no barrels of oil on the water. Zero. Zero. Some in storage, I think. Well, they have some stored behind the blockade. Yep. And their currency has collapsed. But then there are others who might think, well, they can go on longer than we think. Do you have a timeline on how long it might take to bring Iran to that negotiating table based on their economy right now?

15:27Well, I don't have a timeline. But what I can tell you is last Wednesday was the eight-week anniversary of Operation Economic Outcast. And it has been very successful. This is the toughest operation ever to isolate a single economy in the history of the world. And we can see both in the data that you said the currency has collapsed. It's collapsed so much that you can be arrested for printing the level of the currency. So, you know, it may be through three million reals. We have internal estimates that show that the economy from March to March, when the blockade started or the conflict started, March to March, the economy may contract by as much as 25 percent.

16:19To put that in perspective, for the three years after the Iron Curtain came down, the Russian economy contracted 22. So in one year, it would do what happened in 22 years. And we are seeing, as you know, there are three pillars to the Iranian regime. There are the politicians, the elected officials, the IRGC, and the supreme leader and the religious column. And in the summer, the elected officials started worrying out loud about the economy. Now, publicly and privately, the IRGC is very concerned. They're talking about a collapse. And part of my worry is that many of the IRGC members are kind of like rats in a sewer pipe.

17:10They are afraid for their lives. So they're going to fight. No, they're bunkered down. OK, but I worry that it makes them dangerous as well. Well, it makes them unattentive to what's happening. And then the Ayatollah is isolated. But the rubber is meeting the road. They're not able to pay their troops. Importantly, they're not able to get dollars. So they're not able to replenish. What we are also seeing, too, their proxies, whether it's the Houthis, Hamas or Hezbollah, their funding is being cut off. And that's kind of the tip of the spear when that money starts going down. So quickly, Microsoft, Google earnings out, big top story.

17:52Obviously, these are huge, great American companies. Stocks are doing well. Are you worried, though, about the lower end of the credit spectrum? Some of the junk bonds, some of the AI-related debt has started. I mean, we're looking at double-digit yields for some of this debt. How much is this on your radar, sir? We monitor all of this. I don't think it's problematic at all because we're seeing that the neoclouds are a small component of the overall ecosystem. And we're still seeing the financing getting done. We're still seeing the deals get done. And we're also seeing companies like Meta decide to finance with equity.

18:36Yeah, they are. And two more questions if we have time. And I appreciate the time again that you have today. Number one, I want to talk very quickly. Last time we spoke, we were in Paris, France, Europe. France looks a lot different now than it did basically a year and a half ago. Are you worried about France or European debts and deficits leading to some larger global economic problem? Well, first thing I will say. I hate to say black swan, but you know what I mean. I will say I know the French finance minister very well, and President Macron has a great economic team. They've got a tough hand.

19:15And at the G20 in Asheville, North Carolina in August, we pushed all the G20 members toward growth. We said that the biggest risk to financial stability is a lack of growth. And I think that's what we're now seeing in Europe because the U.S., we have this temporary price spike. We have, as you said, 5 percent 10 years, but our nominal growth is much higher, much higher. And I think at a point, the nominal growth, the components of the nominal growth will switch. We'll have a greater real growth component, lower inflation component, but that will keep powers on. And so I worry in general, it's just the lack of growth.

20:02And we've been kind of saying that to our allies for months. Yeah, their debts yielding the same as ours. They have almost no growth and their currency continues to go down. I've got to ask, we are in D.C., so I will ask this question because you were out campaigning recently. How important is the midterm election for this administration's economic agenda and plan? Well, I think a lot of it is baked in. So what we're seeing, working families tax cut, a.k.a. the one big beautiful bill, very powerful bill on one side, great incentives for business, full deduction and expensing for equipment, for factories, for ag structures.

20:52On the other side, the president's four signature tax policies, no tax in tip, no tax in overtime, no tax in Social Security deductibility of American made. All those, the interest. So consumer surveys can be a little gloomy, but the consumer behavior is quite strong. Corporate behavior is actually quite strong. And I think with tax policy, trade policy, energy policy and regulatory policy, we've got a very good mix. Are you happy with tariffs where they are? I know we have to go. We've got a lot of earnings, but tariffs, any plan to change the tariff structure? USTR, Jameson Greer is doing a fantastic job.

21:33I think he still has a 301 study outstanding. But in general, aside from Mexico and Canada, which is a USTR renegotiation, the trade deals are pretty locked in. Treasury Secretary Scott Bessent, Mr. Secretary, really appreciate you sitting down with CNBC on a very busy day. Thank you, sir. Good to see you. Melissa, I appreciate it. Thank you. I'll send it back to you and Mike. Thank you, Brian Sullivan. And, of course, our thanks to Secretary Scott Bessent. Let's get back to Mackenzie Zagala. She's got more on Alphabet's quarter. Mackenzie. So, Mel, Alphabet share is down more than 8 % now. I want to clarify on that gap EPS number.

22:09Part of what's dragging it down is an$8.7 billion investment loss. And that's something that we haven't seen in a while because of the significant investment gains from Alphabet's stake in SpaceX and Anthropic. On Q3 search and other revenue, that's a miss. $63.35 billion versus the$64.96 billion the street wanted to see. This is a key read both on the ad market writ large, but also on the part of Google's business, it's the most profitable. This is really how they're able to make up the difference in terms of spending on CapEx. So it lost momentum last quarter. It was a miss last quarter and this quarter.

22:44And that's why cloud coming in at 103 % year over year growth is so key. In terms of Q3 YouTube revenue, it's a miss,$11.21 billion versus the$11.44 billion it was expected. We also have a read on free cash flow. Remember, that flipped negative for the first time in Alphabet's history as a public company last quarter. It came in at negative$9.1 billion versus the loss of$2.7 billion that the street was looking for. And then that other bets revenue, that is where Waymo lives. It's self-driving unit. That's a miss, four straight quarterly miss there, a$372 million versus a$382.4 million that was expected.

23:23Waymo raised$16 billion in equity earlier this year and then just had a debt raise of$5 billion as it looks to scale internationally and across the country. And those shares still hovering around 8 % lower. Guys? Mac, thank you. Let's dig in more on this big move lower in Google shares. As Mac mentioned, stock's shedding over$300 billion in market cap if it were to open at these levels. Joining us now is Evercore head of Internet Research Mark Mahaney. He has now performed a$450 price target on Alphabet. Mark, it's good to see you. It seems like perhaps the search revenue shortfall is maybe the thing that stands out.

24:01It grew 12 percent year over year versus like 14 percent plus forecast. Yeah, advertising kind of for Google across the board decelerated. Now it's the second quarter in a row that it's decelerated. Search, YouTube, ads as a whole decelerated. Even on a two-year stack basis, it's decelerating. That's a little bit – it's a little surprising. You had the opposite from Meta where the two-year stack actually accelerated. So there may be a little bit of a share shift going on here. There's something that Google was going to need to address in their earnings call. Cloud business came in. I mean, there were big bogeys out there, 100 % plus revenue growth for cloud.

24:38And they met those. And there was no sacrifice in the margins. Operating margins at cloud stayed at 36%. So that's the good news. But the advertising business kind of decelerated across the board. That's the overwhelming bad news. We know that what we're now going to be listening for is whether we're going to get meta-like comments about the need to raise capital. I don't think they're going to need, I don't think Google needs to raise capital from here. But if they were definitive about that, I think that would, you know, give investors some comfort. Is there concern, Mark, that because Search is going to, let's say, even Gemini, as opposed to another, you know, search provider or another agent, that because of that, that's what's causing Search to be down across the board for Alphabet?

25:17You know, Melissa, I think that fear is going to rise. I'm not sure it's warranted. But, But when you get a surprising deceleration in the growth rates, revenue shortfall, then yeah, I hope we don't go back to where we were two years ago when ChatGPT was going to undermine search. But it's possible that we'll get that fear in the market again, that agentic commerce, agentic search is going to now be the challenge that Google needs to overcome. By the way, Melissa, I'd love to hear them talk about their own muse. I think this is a rich opportunity for Google to jump into this consumer AI market with a freemium model like Muse has.

25:56They should do it. I don't think we're going to hear that on earnings call, but somebody is going to ask them about it. And if they don't, I will. You mentioned that, you know, you don't really expect Google to say that they have, you know, ever higher capital needs right now. But they obviously dip to negative free cash, so maybe not unexpected. expected. But how do you think the market is going to view that? In other words, we just saw today Oracle rips on the idea they're not going to raise as much capital. Meta has come under pressure since it said it did need more. It seems like the market's winnowing along these lines.

26:28I think you're right, Mike. It is. But Google raised$160 billion over the last 12 months. I mean, good for them. They fought ahead of their capital needs. I think Meta can you can you can and the market is correctly dinging them for being a little late to realize how much capital they needed to raise. I think Amazon has raised over$100 billion, too. So just looking at free cash flow forecast, yeah, I know they're going to be next year. This is a huge investment cycle. They've been telling you this for a while. They've been telling us that CapEx is going to rise significantly next year. Maybe we'll get a quantification of that on the earnings call.

27:03That would be very helpful. But I think they've got enough capital to get through this investment cycle, the biggest one they've ever faced. I think they've raised enough in order to get through it without having to go back to the markets. You just said we don't really know what the peak part of the investment cycle is. I mean, it's going to be a huge investment cycle and you think they have enough money and their core search business, their core search ad revenues are going down. And yet you still think that there's no need to raise money. I mean, how are you so sure of this when we don't really have that sort of roadmap that Oracle's presenting?

27:33I mean, maybe they'll give it on this conference call, but we don't have that roadmap as to what they consider peak in this investment cycle and what their off ramp is in terms of spending? No, Melissa, make a good point. I can't be sure. I can come up with a range of scenarios. It's just, you know, this is a company that's going into this with close to 200 billion in cash. And yes, this company is going to be losing this year, I don't know, something on the order of 20 billion in free cash flow. I mean, that's huge for most companies. This is the company that generates 200 billion a year, roughly in operating cash flow.

28:07So, you know, you just get a few tweaks here or there. And as long as the margins stay high and a Google Cloud business, you know, my guess is that they didn't spend all of this time in the last 12 months doing a bunch of different raises, equity and debt, you know, and didn't plan ahead for how much CapEx they thought they would need. But, you know, surprises can happen. So I can't be 100 % sure. Hopefully we'll get some clarity on the earnings call. The easy opportunity for the company to win some favors back from investors by putting a line in the sand and said that we've raised all the capital we need to get through this cycle.

28:38Yeah, at a time when, you know, it's starting to look cheap again, of course, as it does once in a while here when it gets out of favor. Mark, thank you very much. Thanks, Michael. Coming up, more reaction to this hour's big earnings reports. We'll get much more in Microsoft. That's up about 5 % after hours. And we want to show you the closing bell at Sebo in Chicago, ending the regular trading day for options. You're watching Closing Bell Overtime live from the NASDAQ Market Site.

29:08Legacy Credit Scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market. That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on Vantage Score 4.0.

29:46With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com.

30:23At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning. A promise. A milestone. A memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared. Make the holiday last forever. Shop Jared Jewelers.

31:06We've got a news alert on Instacart. Mackenzie Cigalos has that. Mac. Hey, Mel. Sources are telling us that tomorrow morning we could see DoorDash close its deal to buy Instacart. Now, reportedly, this is a deal worth$17 billion. This is the first time we are putting some timing around whether this deal could close. Told by a source last week that Instacart approached Uber about a possible acquisition. Uber ended up walking away from this deal. They had just spent shy of$15 billion on Delivery Hero to expand their international footprint. Now, the next question here is whether antitrust comes into the picture.

31:40You've got Bernstein modeling what a combined Dash and Instacart might mean. They're looking at 88 % market share in terms of those third-party delivery services here in the U.S., so there's a question of whether this goes through, certainly an advantageous time under this current administration. On news of this deal potentially happening, Instacart is up some 15.5 % in the last week. Meantime, you've got DoorDash down 7 % week to date. Mel? Mac, thanks. Mackenzie Cigalos. ServiceNow shares dropping in the after-hours session down by about 16.5 % on earnings. John Fort's got all the numbers. John?

32:14Yeah, Melissa, taking it on the chin, let me tell you why, and also give you some comment from CEO Bill McDermott, who I spoke to about the quarter. Now, the top and bottom lines for ServiceNow are just about in line with expectations. Revenues, slight beat at$4.11 billion versus$4.10 expected. EPS, slightly less at$1 non-gap versus$1.02. But this is a quarter where there's more to learn beneath those headline numbers, particularly in the deal pipeline and the AI momentum. When I did speak with CEO Bill McDermott, he said that he's raising the year-end AI annual contract value, the ACV target, to$1.7 billion from$1.5.

32:55It started the year at$1 billion. At the same time, the Armist acquisition aftermath is part of what weighed on EPS. He told me as a result of the M &A, we're talking about EPS at$1 versus consensus at$1.02, which is basically due to the lower interest income because of the cash that we deployed to acquire Armist. So I would call that de minimis. And he said, we've expanded our operating margins by 150 basis points on our free cash flow margin, as you know, is like 36 percent. Now, on top of that, I'll point out the pipeline. While Q4 current remaining performance obligations is guided to 18.5 percent, which is beneath the 20 level that some will note RPO is guided to 22.5.

33:37McDermott telling me that's from longer contracts, that the other metrics in this report support AI momentum in the business, guys. So, John, I'm sorry. I'm going to ask you an obtuse question. Why is the stock down that much? What specific number? because he seems to sort of be saying that nothing is a big deal here. I think, one, ServiceNow gets held to a very high standard because they have tended to beat, and this quarter is a bit more in line on the surface. And then, overall, application software companies, and that's what ServiceNow is seen as, though Bill McDermott would push back on that, have a very hard road to hoe in this environment.

34:18Anything that's seen as a miss, as you know, is tending to get sold. So I think that combination of the high bar for ServiceNow because of its growth and where it's multiple has historically been and that attitude right now toward enterprise software names. All right, John, thank you. John Ford, don't miss an exclusive interview, by the way, with ServiceNow CEO. That's coming up 6 p.m. on Mad Money. And just in terms of that stock move out in ServiceNow after hours, takes you back about two months, around 125. This stock went from a low of about 81 in the spring to 160, and it's given back, you know, over$50 to$40 to that.

34:56Chipotle earnings are out. Brandon Gomez has those numbers. Brandon. Hey there, Mike. Yeah, stock was down over 22 % year-to-date coming into this print. Shares up now almost 3 % there. Adjusted EPS missing by$0.02, coming in at$0.27 below the$0.29 that was expected. Revenue was in line, meeting the$3.29 billion that was expected as well. Now, Q3 same-store sales did beat up 2.1%. That's compared to the 1.5%. So clearly, any cyclospore-related pullback in summer traffic clearly recovering later in the quarter. Restaurant margins, however, slightly below expectations by half of 1%, coming in at 23.3%.

35:31The company reiterating fiscal year comp sales growth in the low single digits. You have CEO Scott Bortright saying in the release, Three consecutive quarters of positive comparable transaction growth demonstrates that our recipe for growth strategy is working. Again, taking a look at shares of 3 percent, probably on that same store sales number. All right, Brendan, thank you. Well, don't miss Jim Cramer's exclusive interview with Chipotle's CEO coming up on Mad Money at 6 p.m. Eastern time. Coming up much more on the big earnings reports out this hour, including Microsoft. That stock is higher by just about 4 percent right now.

36:03Closing bill overtime. Be right back.

36:37We'll be right back. required. Restrictions apply.

37:07all states. Terms apply. See Fanatic app for details. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, Have it all without spending it all. Happy holidays from House of Burl, Burlington.

37:44Welcome back to Closing Bell Overtime, live from the Nasdaq market site. Stocks closing slightly higher after the Fed decision to leave interest rates unchanged. Oracle also a big market mover. That stock jumping on news that it's limiting the additional funding it will raise and says it expects to be cash flow positive by 2028. AI infrastructure names, including the beleaguered core weave, also moving higher on that news. Shares of KLA higher after hours earnings and revenue, both topping estimates. Guidance for the next quarter at the midpoint of the range is also ahead of current analyst estimates.

38:18Shares up almost 3 percent. And shares of Fortinet getting crushed, beating by five cents a share on earnings and narrow beat on revenue. Fourth quarter guidance also seen ahead of current estimates. The one negative in this report, gross margins did miss the target. Shares down 22 percent. Ford earnings are out. Phil LeBeau has those numbers. Phil. Hey, Mike, take a look at shares of shares of Ford. It posted better than expected earnings for the third quarter, earning 49 cents a share. The street was expecting 40 cents a share. Revenue just shy of analyst expectations at 46.08 billion. Some of the key metrics from the third quarter for Ford, the adjusted profit of 2.7 billion, top to analyst expectations.

38:59Look at free cash flow, almost$2 billion more than what analysts were expecting,$4.7 billion there. Then the three divisions, internal combustion engine, model revenue, a little shy of expectations, coming in at$27.1 billion. Commercial vehicles, which has been a strength for Ford, coming in at$17.8 billion, just a little bit below analyst expectations. And then the EV division, which once again lost money with revenue coming in at$1.2 billion. In terms of guidance, Ford for the rest of 26 is raising the lower end of its profit guidance, now expects to make between$10.5 and$11 billion for the year.

39:40Previously, it was at $10 billion to$11 billion. It is targeting a profit in 27, similar to what we're seeing in 26. Not an official guidance, no numbers there, but that's what the company is saying. And this one may get a fair amount of attention. Similar to what General Motors was talking about when it said it's seeing higher commodity costs, Ford is seeing the same thing. It is raising its commodity cost headwinds to$2.5 billion year over year compared to previously expecting a$2 billion headwind. Guys, during a conference call with the company CFO, the question from a lot of reporters was, where's the increase coming from?

40:17Steel, aluminum, aluminum is starting to improve a little bit. copper, even chips as they move into the next year. So that is a headwind that Ford is facing. Conference call starts with CEO Jim Farley in about 20 minutes. We'll be on it. Back to you guys. Yeah, half a billion is a big difference. Phil, thank you. Phil LeBeau. Let's get another check on shares of Microsoft. The stock is higher by almost 4 % after beating on the top and the bottom lines moments ago. The company reported 19 % revenue growth. Azure cloud revenue jumping 48 % to$33.2 billion. Joining us now is Jeffrey's senior software analyst, Brent Thill.

40:52Brent, great to have you with us. You know, Microsoft has been loved on the street. It's performed well since its last earnings. And the estimates for Azure as well as Microsoft 365 have gone higher into earnings, and yet it's still beat. So at this point, what do you want to hear from management? Yeah, I mean, it was a zen quarter. We're all just kind of hanging out right now looking at these numbers. Azure accelerated, M365 accelerated, CapEx a little lower, RPO up massively. So I think it's more about the forward guide. And ultimately, we're starting to see companies like Oracle and Microsoft say, you know, maybe we don't need to spend quite as much.

41:33So I think everyone's bracing for are we going to see a CapEx moderation? You know, we've had the throttle at 11 on CapEx, and maybe we pull it back to 7 or 8. And I think that would bring many of these AI investments back into some of these hyperscalers that are actually going to monetize these investments. So I'd say overall, you know, you look at the margin. This is one of the highest quarterly operating margins ever at this company in the face of AI. And this goes back to the biggest room at Microsoft is the room for improvement, as Microsoft CFO says. So they keep improving in the face of all these investments, which is pretty is a pretty incredible feat.

42:18So we're still positive. We think stocks going higher. And ultimately, it's just the sustainability of the demand. But I think, again, we're really, really early in enterprise A.I. deployments. And that is both really well for Microsoft over the next year. Brent, you mentioned Oracle. Obviously, we've been talking about how that company's announcement that it would only have to raise another$20 billion in the next couple of years really did put a charge into the stock and some related ones. What do you how do you kind of place that into context with what Oracle is committed to deliver and how much it still has to to build?

42:58How does that compare with what you thought they were going to need to raise? yeah so if we just step back uh at the analyst day they basically just gave a forecast that matched what they've been giving historically no one believed the forecast and that was to get the twenty dollars earnings power we said if even if they got the ten dollars earnings power half of what they're guiding and you put a 20 multiple this is a 200 stock so we still think uh the stock has upside. Oracle is very different. They don't have a big CapEx trajectory. They plug into other data centers. They don't actually have to build these DCs out on their own.

43:35And so they take their software and their equipment to plug in. So their CapEx needs are just a lot lighter than many of the other companies that we cover. And so I think investors still are learning the differentials between, you know, what is Microsoft, Google, what's Oracle doing? They all have different characteristics. And I think everyone just threw Oracle in, hey, you know, they got a couple of big data centers and one of them's off track and it's the company's going to fail and they're going to have to spend more money. I mean, they just told you they're only going to have to raise 20 billion more and that's it.

44:08And then CapEx starts to slow and they kind of go after improving the margin again after they put these investments in. So I don't think the trajectory has changed dramatically other than the comment that they'll get to free cash flow break even. It will start to build free cash flow in the back of 28 and then in 29 get to 30 billion where they were looking for more flattish cash flow. So I think it just tells you that they feel that they can make money in this. This has been the concern across the trade. If you look at Microsoft's margin, if you look at what Oracle just told you, I think what the biggest companies who are building the biggest AI infrastructure are telling us is they can do it with with maybe not as much money as we thought and at a very high margin.

44:53But just a quick question, Brent. I mean, how do you think about when companies are saying we're going to spend less on CapEx or we're going to cap CapEx in terms of the number of data centers they're projecting to be online? Do you think about it like that the capacity that could be brought online could also be pulled back or that they have a handle on how to get to that projected capacity within those spending limits? I think they can make it inside their limits. And I think that ultimately there's this worry that there's such big targets out there that none of these companies are going to be able to deliver.

45:27I think what Oracle is saying is, according to their plan, they can deliver what they need to. According to maybe the streets plan and what semi and hardware and energy analysts want, maybe we're not going to deliver. But according to their plan, they're holding to that. Again, the forecast they gave today matches. The only thing they changed was on the cash flow and the funding needs. So I think this just goes back to I think they're kind of just staying inside themselves. They're not going too far out on the boundary in terms of pushing the boundary. But they're saying underneath our current plan, this is what we think we can deliver.

46:04And again, I've said if they can get to$20 of earnings power, again, you don't have to put a pretty big multiple on the stock. You put a 10 multiple on the stock, it's$200. Right. Brent, we'll take advantage of the fact that you also keep track of Alphabet. Does this 9 % drop on the shortfall in search make sense to you? Everything went right at Microsoft and everything went wrong. The score on Google, I mean, you look at every metric. Search, you know, was 12%. It went 19, 17, 12. That is a slide that no one wanted to see. We wanted to see closer to mid-teens. They don't guide, obviously. So all of us are, you know, basically making an educated guess on the number.

46:44But that trajectory of the search slide is not in the ballpark of where investors wanted. If you look at the cloud business was the only business that beat at one hundred and three percent growth. The street wanted one hundred. So it didn't beat by much. And it missed some of the high end targets. Everything else missed. YouTube missed. Search missed. You know, all these metrics are margin missed. So, you know, again, when Google, Google doesn't guide. You know, they don't give us a lot of color. And I've said this, that I think the software companies do a better job of holding everyone's hand and saying, here's the framework of how you should set your numbers.

47:21And this is the problem with Google. You just don't really you're going to get more dramatic moves, you know, off these prints. But the number, again, just face value. It's a great company. Again, it's cheap. But at almost every metric we track, they missed other than their cloud business. Microsoft beat on every single metric. Right. Yeah. Brent, really appreciate it. Thanks a lot for running on quick to break it all down. We've gotten a flurry of earnings reports so far this hour. Let's bring back bespoke Paul Hickey. A lot to a lot to chase here. So obviously, we were talking before these stocks are not moving as one.

48:01And clearly, the market is trying to discern who's in better position, who's got the core business that's actually you don't have to worry about. And then ultimately, are we getting to a point where the treadmill is slowing on the build out of A.I. and CapEx? Yeah, I mean, as far as the build out, I think we're not at the peak yet of that. But when you go back to Google, I think the problem is there the search is going to just be an overhang. And last quarterly report, they didn't quite address those needs, those questions. And if they don't address them on this call, it's just going to be more weakness.

48:34The stock's the worst one day reaction to earnings for the company has been a 9.7 percent decline. So this could be its worst earnings reaction as a public company. So that's a negative. You know, borrowing a word from a comment from Warsh, you know, moving to the left side of the decimal here. You look at the market overall. The Fed came in and they didn't, they were able to hold. And when the Fed's either hiking or cutting rates, when they're doing it aggressively in either direction, that's when the market gets really uncomfortable. When they can do it gradually in either direction, that's a great situation for the market.

49:09It means they're tightening policy, but they're not in an exceptional urge to do that. When you look at forward returns following those start, stop, start, stops, returns have been much better than average over even the next three months. Just taking a look at ServiceNow's quarter, I mean, the stock is down 15 percent. You've got Salesforce down 5 percent in the aftermarket session. Microsoft's shares are off of their session highs on what Brent Hill called a Zen quarter. I don't know if the software side of Microsoft is sort of playing into that decline. I'm wondering, Paul, what you think of the software stocks in general in light of what the AI climate is bringing us.

49:44So I think the software stocks were getting this lift in this market. There's no trend you can really catch yourself onto. You know, it's a few days or a couple of weeks. You see one sector of the market doing well and then they just get socked. You know, Microsoft off its highs, ServiceNow down a lot. On the other side, the AI infrastructure companies, Google's putting the kibosh on that as far as its reaction. So it's just it's really hard to get a sense of what's going on and draw a consistent trend. But it's an ever changing moment in the market. We constantly see shifts and that's what you have to just deal with.

50:18And so you either got to take a step back and just not let the day to day moves bother you or try and trade it like the guys on Fast Money will be telling it. For sure. Fast Money at five. You know, maybe some of this explains and I've been talking about it for months how, you know, we've had this is the second straight quarter. we're going to be like 30 % aggregate S &P 500 earnings growth. And the stock market is not really going up step by step for that. In fact, it's been flattish over that period. And maybe the possibility that a$4 trillion company can go down 9 % on a light print is one of the reasons why there's just not a great level of comfort.

50:53Yeah, so I mean, I think we've rallied into that 30%. You know, the market's always forward looking. And so we're seeing this consolidation. And it's remarkable how well the market has held up in terms of, like, you see Alphabet down 10 percent. But other, you know, I don't know where the futures are right now, but the market can get past that with that. It's not the end of the world where it used to be with these bigger companies. If they were down 10 percent, the next morning futures were down across the board. That's true. Paul, good to see you. Thank you. Thanks for having me. Paul Hickey.

51:21A busy hour, to say the least of earnings behind us. Another big day tomorrow. We'll get you set up for that. Plus, what to expect from a key inflation report. Closing bell overtime live from the NASDAQ markets. I'd be right back.

51:35Let's get you set up with tomorrow's trade today. Another huge slate of earnings. Before the bell, we'll get results from Caterpillar, Merck, Eli Lilly, MasterCard and D.R. Horton. And then after the bell, Amazon, Intel, Sandisk, Coinbase and Starbucks, just some of the names set to report. Plus, we've got some key economic data tomorrow. Economists expecting the PCE index to rise 3.7 percent year on year, with the core PCE increasing by 3.1 percent from a year ago. Also on tap, the first reading of third quarter GDP and weekly jobless claims. And, of course, add to this mix how tonight's earnings fare tomorrow.

52:08Yeah, perhaps more important than any. And just for benchmarking purposes in terms of impact on the index, Microsoft and Alphabet are basically equivalent market values, like$3.9 trillion. And so, you know, you could say one's down a lot more than the other one is up, and that's going to have a net negative impact plus that service. Now, I also did notice the chip stock selling off on some of this idea that maybe slower spend over the next couple of years after a huge rebound in semis the last couple of days. That does it for overtime today. Fast Money starts right after this.

52:44At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box. That smile they can't hide. Knowing you chose exactly right. Because the right gift can bring a lifetime of meaning, a promise, a milestone, a memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.