11AM Hour: Microsoft Copilot EVP, Guardant Health CEO & Costco Jumps on Earnings 9/25/26

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0:27Helmy Eltoukhy: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts.

1:03Jacob Andreou: Good Friday morning and welcome to Squawk on the Street. I'm Leslie Picker with Carl Quintanilla, live from Post 9 to the New York Stock Exchange. Sarah Eisen has the morning off. Today, Citi's head of AI research, Heath Perry, is with us. Why? He says the recent bond market volatility will create friction but not derail the tech trade.

1:20Helmy Eltoukhy: Microsoft delivering a A co-pilot Reboot saying the new super app might redefine the AI era, similar to how Office redefined work in the PC era. We'll discuss the change with the Microsoft executive, whose CEO Satya Nadella tasked with revamping that AI assistant.

1:36Jacob Andreou: An AI-powered precision oncology company Guarded Health, drawing fresh investor attention following a landmark FDA approval for its liquid biopsy test. The company's CEO joins us to discuss how it could reshape breast cancer detection and care and what's behind the stock's breakout move in the past year.

1:55Helmy Eltoukhy: Astro markets trying to hang on for gains for the week. IT helping out a little bit here up almost a full percent. Industrials too. Energy and oil are a little bit lower, but we're watching the 10-year really not divorcing itself too far from the highs of last night around 5-2-2. Let's start with that move lower in oil this morning. Our Pippa Stevens has more. Pippa, good morning.

2:16Jacob Andreou: Oil is in the red, as Iran said it would reopen the Strait of Hormuz and resume nuclear talks with the U.S. within seven days if Washington accepts its conditions. Iran's foreign minister told reporters on the sidelines of the U.N. General Assembly that the conditions the country has asked the U.S. to meet are nothing new and the same as what was in the prior MOU. That's according to state media. Now, oil is well off the lows of the day, suggesting some skepticism that this will hold. As one oil analyst told me, everything in Washington right now seems like posturing for the midterms. And once they're behind us, maybe policies will shift to a more long-term focus and long-term solutions.

2:52Jacob Andreou: But in the meantime, J.P. Morgan estimating that oil flow through the Middle East stands at about 70 percent of last year's numbers, though there is still some supply risk being priced in, seen in the spread between Brent's front and second month contracts. Now more than six dollars here. Usually that the difference is less than a dollar. And that does point to a premium for oil being delivered right now. Meantime, diesel futures now about 10 percent below their recent high, but not translating to much movement for prices just yet. The national average holding at 650. That's just three cents shy of the all time high from earlier this week.

3:27Jacob Andreou: Guys.

3:28Helmy Eltoukhy: Yeah, Pippa, some of the refiners a little bit lower today. There was this Reuters headline about the energy secretary reaching out to some refiners trying to gauge interest in some kind of voluntary export restriction. Wonder how that would work.

3:41Jacob Andreou: Yeah, so this would be like a voluntary quota and then it would have the refiners curb their exports a little bit. But, you know, the consensus here and clearly what that's pointing to is that while a diesel export ban could bring prices down in the immediate term, Longer term, it will actually raise prices for consumers, not to mention damage the U.S.'s role as kind of the supplier of global energy markets. And J.P. Morgan put out an analysis that got a lot of traction here that said that for 30 days it would lower domestic prices as refiners, you know, maxed out storage. But then also you have to look at the fact that if the Jones Act waiver isn't extended, all of the refining surplus is on the Gulf Coast because it is meant to be exported.

4:22Jacob Andreou: So that's not like it will then help the east and the west coasts. And right now, the Jones Act waiver is extended through November. And so if that were not extended, then this wouldn't actually help any of the price dynamics on the east and west coast. But clearly, there is a lot of focus on this ahead of the midterms. And so, you know, there seems to be some, you know, politicians saying that we're trying to do something. But the consensus being that this would only be a temporary move and bring some temporary, you know, less pressure for consumers. but longer term be more damaging. So that seems to be the thinking behind the latest shift towards perhaps not an outright ban, but more of some quota framework.

4:59Jacob Andreou: All right, Pippa, thank you. A lot of complexity there. Thank you for making it digestible for all of us. Let's turn now to tech. We heard moments ago from Akamai CEO Tom Layton weighing in on the company's nearly$12 billion new partnership with Anthropic, the potential for$9 billion more, and the broader debate around AI regulations. Take a listen.

5:20Helmy Eltoukhy: What we need to do as an industry is to develop the guardrails and the security to keep the agents in line so they don't do things they're not supposed to do, and also to defend the critical infrastructure. Now, we already there's already a lot of cyber attacks out there. You know, that's been happening since the dawn of the Internet. Now the attackers have more powerful tools. So it's even more important that you have state of the art cyber security defenses.

5:50Jacob Andreou: Joining us now with his outlook, City Research Head of Tech and Communications, Heath Terry. Heath, why don't we start there, just about how to really institute real guardrails and what these companies should be doing. Because you talk to certain multinational companies that spend a lot of money on tokens for frontier models, and they say, look, these companies need to take some responsibility here. We're spending all this money, and then we've spent all this money on cybersecurity. And, you know, to what end do we continue doing this? And, you know, I'm just curious how you see the solution ultimately playing out here.

6:23Helmy Eltoukhy: Well, look, I think those companies see themselves as the solution. Like, they are building these cybersecurity tools. They want to be able to offer you agents. We're obviously going to see some of this next week at OpenAI's Developer Day. Anthropic has been here for a while with Mythos and the Glasswing project that they've had out there. And so you can kind of make the argument that they're creating these risks, but they're also trying to help solve these risks. And there's economic value in doing that. But it is a recognition of the reality that AI does raise the risk level for these corporations that are using this.

6:55Helmy Eltoukhy: The guardrails are there. And a lot of the kind of intentional panic building around this is to get people to focus on the need to build those guardrails and make sure that they not only exist, but that people are actually using them. Because it's too easy, I think, for a lot of corporations to kind of sit back and say, well, you know, we're protected because we have the firewalls in place. or we've got the right endpoint security without taking into account of how much illusion you've actually seen and what that threat landscape looks like.

7:21Jacob Andreou: Yeah, and the question of liability remains an open one. Of course, that's unsettled law at this point in time. And it sounds like a cynic might say they're looking for something similar to Section 230, which basically said anything that's said on the Internet, the companies who provide those platforms aren't necessarily liable. What are you handicapping in terms of something likely like Section 230 being used for AI? Or do you think that we will see regulations that are much more strict and provide more liability for the model companies?

7:54Helmy Eltoukhy: They're looking for two things, and they are playing this masterfully. The biggest thing that they're looking for around this whole pacing conversation is a recognition of the reality that we have been pacing since April. when Mythos came out and was restricted to 50 companies in June when they tried to release Fable and the government shut them down for doing that. At the beginning of August when Sam Altman went to DC with Astra and said, can we please release this? And he instead came back and had to delay it. And then once he did release it, said, here's Astra, amazing model. But by the way, we also have a more amazing version of it that we're using to solve millennium math problems that we're not going to let you have access to.

8:30Helmy Eltoukhy: So we've been doing sort of this unofficial shadow ban kind of form of pacing since the beginning of April, what they're looking for is an even playing field where it's applied not just to them, but to the Chinese companies, to the other companies that are trying to chase them. They're also really looking for a recognition that the Chinese companies aren't going to play along with this. And so if they're not going to play along with it, you can't make us do it either. And that is their way of telling the regulators, back off unless you want us to lose this competition. Because all of those executive order drafts that were like floating around in August of, you know, 30 to 60 day cooling off periods and FINRA like regulation boards around this, which would be terrifying to all of us.

9:14Helmy Eltoukhy: That is something that they do not want to see in place. And this is their way of sort of fighting back around that. Something like liability protection, that would be the holy grail. There's almost no way that's going through, not in this political climate. So then does, I mean, as Alex Karpier suggested a few days ago, does that lead you to a nationalization conversation? I don't think there's anything, I don't think there's any way that's realistic. Clearly, these are privately owned companies with investors who are very happy with the gains that they've made in these companies. They're not about to turn some of that over to the government without, you know, when they have any choice to it.

9:49Helmy Eltoukhy: I also don't think it's necessary. I don't think it really accomplishes anything.

9:52Jacob Andreou: Yeah.

9:52Helmy Eltoukhy: I've been dying to ask you if Muse is a game changer for any subscription-based business. It's a game changer for subscription-based businesses, for any sort of aggregator. If you're an internet company or even a financial services company or a brand that has sort of built your business around bringing together buyers and sellers or bringing together people around a specific product, this is a new aggregation layer. It is a, as some people have called it, sort of a new front door to the Internet and a new potential owner of the end customer. And so if you have been on the other side of that, this puts that at risk.

10:32Helmy Eltoukhy: What would be an answer, a retort by insurers and financial services companies and legacy telecom? Their own AI machine to combat Muse? Well, I think you'll see some of that. I also think it's just going to be more standardized processes, right? The fact that these companies have sort of built up businesses around uneven pricing strategies that take advantage of customers that are lazy about canceling subscriptions or lazy about recognizing when they've been on the wrong side of five years' worth of price increases, this is going to level the playing field for those kind of customers.

11:07Jacob Andreou: Yeah, it certainly seems consumer-friendly in many ways, at least at the moment. I wanted to get your thoughts on some of the news we've seen out of data centers recently. We've been covering the story with Oracle and Blue Owl. We've been covering the story of several potential IPOs of data centers or data center adjacent companies that have had to delay or postpone over the backlash. Do you feel like the market is just being discerning here? Or do you think that there is kind of this rethink, revaluation in everything that's going on with the CapEx buildout?

11:37Helmy Eltoukhy: Yeah, I think there's a bit of a reset that has to happen because the market is being discerning. And because really consumers and the people who are on the other side of this issue at a local level are being more discerning, there's a way to build data centers the right way. Google is building a data center in Huntsville, Alabama, on the site of a coal-powered old coal plant. It's got connectivity into the grid. It's using nuclear and solar to power it. They were completely open with the city and the town as they were building it. Nobody's protesting that data center. You go 90 miles down the road to Bessemer, Alabama, and you've got a data center builder that's bulldozing 800 acres of farmland, that's trying to use gas-powered on-site generation, that's probably trying to use an open water system there, and has the entire town leadership under NDA.

12:29Helmy Eltoukhy: That's the stuff that people are upset about. And so this is going to force more of the data center operators to do it the right way. And when it does, it's going to make it more expensive. It's going to take a little bit longer, but you're not going to have the same sort of issues around regulation that you do. And we just need a few months to kind of get there.

12:46Jacob Andreou: Yeah. Seems a little difficult to build a data center without power.

12:49Helmy Eltoukhy: Yes.

12:49Jacob Andreou: So it'll be an interesting one to watch. And others like it as well. Heath, thank you so much.

12:54Helmy Eltoukhy: Thanks for having me.

12:55Jacob Andreou: Appreciate it.

12:56Helmy Eltoukhy: When we come back, Microsoft's EVP of Copilot will join us exclusively as the company releases an update to the AI agent today.

13:03Jacob Andreou: Plus, Costco beating earnings and revenue estimates for the latest quarter, reporting a record year for its gas business. More on that quarter coming up or back in a moment. Legacy 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.

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14:25Helmy Eltoukhy: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.

14:56Jacob Andreou: Welcome back. Microsoft releasing an update to co-pilot today as the AI agent race heats up. Kate Rooney has those details. Kate, never a dull moment. Never, Leslie. Well, happy Friday. Good to see you. So Microsoft is revamping its flagship AI product for workers as it really tries to compete with Anthropics Cloud. And we are seeing the rise of very popular consumer AI agents this week from Meta in particular. This new version of Copilot does bring together coding, knowledge work and AI agents into one app. So that is a shift, guys. Until now, Microsoft has kept that Office Copilot product separate from GitHub Copilot, which is its coding assistant.

15:35Jacob Andreou: The app includes co-work for those more complex tasks, code for coding, as the name suggests, and then autopilot. So that lets workers do some tasks and build custom agents to handle things on the back end for you. And the idea here is to make co-pilot a lot more competitive with Anthropics Cloud and OpenAI's co-work, which have also been sort of bundling these capabilities into a single experience. Those two right now have been dominating white-collar work and enterprise agents. Microsoft is still relying on those outside AI models, which is also invested in. Users are going to be able to toggle between OpenAI, Anthropic, and then Microsoft's own models for some of these tasks.

16:14Jacob Andreou: It does underscore this balancing act for Microsoft. The company is building a lot more of its own AI technology, but has also invested in those AI giants as well that I mentioned, also competing with them. And it is changing how Microsoft charges for some of these tools. It's moving away from just a flat subscription toward usage-based pricing. Right now it's got about 450 million commercial office, 365 seats, but fewer than 7 % of people are actually paying for that AI addition. So the big question going forward is whether Microsoft can harness this massive installed base of office customers and then turn Copilot into a must-have AI product.

16:50Jacob Andreou: The strategy does matter for the stock. It's up about, let's see, year to date, about 6 % year to date. It is trailing the NASDAQ, though, which last I checked was up about 15%, guys.

17:00Helmy Eltoukhy: Yeah, of course, was underwater for much of the year, but has made up some ground and then some. Okay, appreciate that very much, Kay Rooney. For more on these newly announced enhancements to CoPilot, let's bring in Jacob Andrea, Microsoft's EVP for CoPilot, in a CNBC exclusive interview. It's great to have you. Thanks for coming in. Thank you for having me. So how do you describe it to someone, maybe who's already a CoPilot user, someone who's maybe not? Yeah, well, I think it's really important for us to anchor on the fact that every era of technology has basically had a new kind of defining interface.

17:28Helmy Eltoukhy: And so for the PC era, Office became that interface for work for so many, so many people. And with Copilot, that's really going to become this interface to AI, especially when you're bringing it into the workplace. And so the way I would think about what we did today is we took all of the amazing things that people have been drawn to, whether it was chat or co-work that have been out for a little while now, and we added a complimentary offering in the form of code and then our probably most exciting thing, autonomous agents with Autopilot. And this kind of rounded offering means that you have amazing tools when you go to work or amazing tools when you go home as a professional in your personal life.

17:59Helmy Eltoukhy: Right. Give us some examples of how you might use it. Yeah, so we've actually been using this version of the product for a little while internally. And it's really transformed the way that I work. My work suite has honestly kind of migrated down to being really about co-pilot and Teams. And these are the two places that I basically live now. With the new Home tab, I'm basically flipping into co-work. I'm doing analysis, pulling in a bunch of disparate data sources. With code, I'm creating dashboards and widgets for my team to use. The best example that we have internally, our head of user research, Wendy, actually created a dynamic kind of UXR portal.

18:31Helmy Eltoukhy: And she's totally non-technical. And now every single member of our team has the very latest user research in this thing that dynamically refreshes as her and her team does it. That was created in the code tab. And Autopilot has really become, honestly, my new interface to my inbox. I don't spend time scrolling through Outlook anymore. I open up Teams. I message my Autopilot directly. I ask what's top of mind, what I missed, and I actually don't even jump back into Outlook to read the full message. I go back and forth with it to understand, catch up on the whole thread, all the emails that came in, and this has been a totally new way that I work.

19:01Helmy Eltoukhy: So this kind of new work OS is really centered around the new co-pilot and also Teams.

19:05Jacob Andreou: How should we think about this in the context of Muse as a competitive source and also just the cybersecurity implications of an agent going through your emails and letting you know what you missed?

19:18Helmy Eltoukhy: Yeah, totally. So the way to think about this is in the very beginning of the year, we actually built and released a product called Copilot Tasks. This was a pure consumer offering, and it taught us a lot. It taught us that right off the bat, people like to use some of the superficial things, like maybe scraping their followers list we've heard a lot of people talking about, or maybe ordering a little more food delivery very easily and quickly. But to get into real meaty work, whether it's personal productivity at home or whether it's anything in the enterprise, you need two things. You need the productivity suite underneath it, the engine that drives Office with Word, Excel, and PowerPoint, And then second, you need enterprise controls.

19:50Helmy Eltoukhy: And that goes to your second question of what does it mean to actually bring these things into the workplace? You need compliance. You need governance. So every autopilot has its own identity, its own permissions, its own full audit. It exists in the exact same places where you already manage this for employees. So inside of your admin center for M365, you now don't just see people. You also see agents. And this means FinOps, SecurityOps, as well as actually ITOps all exist in kind of this one singular destination. People are using it to manage access, but also ROI.

20:20Jacob Andreou: What about its ability to send emails on your behalf? And, you know, the concern would always be, oh, it's going to go rogue and email someone really important, something kind of scary. Yeah. Because I've granted it those permissions to do so.

20:33Helmy Eltoukhy: So Autopilot actually has its own email address. And so you control both what it's able to draft and what it's able to send. It'll always ask you for permission before it sends an email. And so the way that we think about it is anything that is a one-way action, whether it's something like deleting an email, whether it's sending an email to another person, or making a purchase if you're in the consumer product, these things are things that require human intervention and require you to actually have explicit approval to move forward with. And that's how Autopilot works today. How does it affect your ability to charge?

21:01Helmy Eltoukhy: What's pricing like? Yeah, so the core offering is kind of the co-pilot seat. And this is something that is largely paid for by IT. It's the everyday AI that you should just give to every single employee in your company. It's an amazing chat experience. It's rooted in your company context with WorkIQ, so it actually understands everything about your business. And then for your most ambitious work or your hardest tasks, that's when you want to take people to usage-based billing, to consumption. So they complement each other really, really nicely. Once you get to usage-based billing and consumption, it means you can kind of unlock this universe of everything from co-work to code to these long-running autopilots.

21:33Helmy Eltoukhy: And this is where we see people supercharge their work. We've been super surprised by the places that we found ROI and adoption, especially with these new form factors.

21:40Jacob Andreou: Do you see Meta's muse as a competitive threat?

21:43Helmy Eltoukhy: I think on the consumer side, there will certainly be many people that will show up and kind of deliver some version of autonomous long running agent. I think the key ingredient we learned from way back in tasks at the beginning of the year is to really serve someone's whole life. You actually may have to start with their work life. One of the best examples that I've seen people try to demo is booking a vacation. Unfortunately, you need to know your work calendar to book a vacation. I know that's kind of crazy, crazy concept. And so what's really interesting is I think that earning the right to exist in the enterprise is actually going to be the key ingredient to unlocking the door to winning both enterprise and consumer.

22:17Helmy Eltoukhy: That's interesting. Would that be? I mean, I'm trying to give past examples of adoption where you got familiar with the product through work and then migrated it to your house. I think that because of the permissions landscape of what it means to bring something from home into the office in this space where it has access to so much data, there's so much sensitivity. I do think you have to start enterprise first, but we've established this pattern. We have this already with Edge. It's the most popular commercial browser, but at the same time, people use their consumer life all the time. Outlook's another fantastic example.

22:46Helmy Eltoukhy: You don't even profile switch in Outlook. Your personal inbox and your work inbox are side by side. It lets you see those calendars at the same time to book that vacation. And so we're really going to lean on that precedent and build something amazing for both enterprise and consumer users. Do you think going forward, the biggest areas of friction for adoption are about price or about privacy or security or something else? The thing that we think about the most right now is how we can diffuse amazing intelligence into the hands of all these people. The thing that keeps me up at night is with this latest generation of models, we clearly have incredible intelligence.

23:17Helmy Eltoukhy: But it hasn't transformed the broad-based economy. It hasn't transformed every company. Our job at Microsoft is to use the fact that we deeply understand our customers and we have these trusted relationships. we know what it means to have the right data retention policies, the right compliance, the right security, and leverage all that knowledge to build the right thing for those enterprises. And that is what's going to accelerate adoption. Jacob, really interesting. A huge day for you. Stocks obviously responding. Stay close. Come back. Good to have you. Jacob Andreo. Thanks for having me.

23:45Jacob Andreou: All right. We have some breaking news on Anthropic. Kate Rooney has the story. Hey, Kate. Hey, Leslie. So this is a temporary blow, at least for Anthropic, in its ongoing battle with the Pentagon over its designation as a supply chain risk. A U.S. appeals court is right now upholding this Pentagon designation of Anthropic as a supply chain risk. So it's a federal appeals court declining to temporarily block this Pentagon, essentially blacklisting of the AI giant for national security reasons. They, again, call it a supply chain risk. It goes back to this fight earlier this year between Anthropic and the DoD.

24:21Jacob Andreou: But the court said that Anthropic had not met the bar to freeze the designation, and they're letting the legal process play out. So essentially, Anthropoc had asked for a pause, asked for this to be frozen, and the court is saying, not yet. We're going to let it play out. But guys, I would also know that this is not a final ruling on the Pentagon's action. So it's expected to continue, but not frozen. And as part of this, the DOD and other parts of the government are trying to unwind Anthropoc's clawed from things like military use, other parts of the government. It's been ongoing from what we've heard, and it is the latest in this.

24:58Jacob Andreou: I would also mention it did actually win a separate legal challenge out here in California, so it's sort of a split decision on this, but Anthropic is still going to need to fight this at a time when it is, of course, has filed to go public. We are expecting that S-1 could list in November, but this legal challenge, not quite clear yet, guys.

25:17Helmy Eltoukhy: Yeah, maybe another line for the risk factor statement. I'm just trying to think of all the outrage from the Valley in the initial designation and the worry that the government could basically pose an existential risk to your business. Would this renew that?

25:32Jacob Andreou: It really, at the time, Carl, you're right, where a lot of enterprise customers said, wait a minute, if this is a supply chain risk, how are we going to get around this? It feels like, from what I've heard from CEOs that still actively use Claude, it is not the biggest risk. I mean, there are other things that have happened since, including things like data retention that has changed the way that some folks at least temporarily thought about using Claude and Anthropic. Those seem to be the bigger issues that we hear about. Price is the bigger issue. It seems like this is still a narrow government issue versus spilling into the private sector.

26:03Jacob Andreou: That's at least what we're hearing. But it is a headache for Anthropic at a time when it's trying to plow ahead with its IPO. And, you know, it's not that the government is the biggest client here, but the political headline risk is still something that this company has needed to fight back against. Yeah, and the relationship with the government as CEO Dario Amadei being a notable absent tech CEO at last night's dinner, last night's state dinner. Kate Rooney, thank you very much. Still ahead, Costco beating estimates on the top and bottom lines for the latest quarter as consumers remain resilient.

26:35Jacob Andreou: We'll break down those numbers in a moment.

26:36Helmy Eltoukhy: The CEO of Garden Health will join us. The company just receiving FDA approval for a blood test for breast cancer treatment guidance. Squawk on the streets back in just a minute.

27:14Jacob Andreou: It's got 505.

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27:51Helmy Eltoukhy: Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts. Welcome back. Costco heading higher after the company beat earnings and revenue estimates for the latest quarter. Our Brandon Gomez joins us with more. We had a bit of a discussion about the comps, but also paid membership rates or trends, maybe softening a bit.

28:29Helmy Eltoukhy: And that's the key metric that investors are looking at. But first, it's worth noting that in that beat, the company saw a 15 cent gained EPS from tariff refunds in the quarter, totaling$184 million. Now that's slightly more than one third of what Costco expects to receive. The company using most of that money, though, to reinvest in price and member value, to your point, Carl, which is key in the current environment. Analysts really pointing to broad-based underlying strength with core comps up 6.7 percent, excluding gas and foreign exchange digital sales are up nearly 20 percent. Costco is also expanding its digital reach with DoorDash and Uber Eats while planning 28 net new clubs next year.

29:05Helmy Eltoukhy: But what's really driving shares higher, it really comes down to those 84 million paying members. Membership fee income for the quarter grew 7.3 % to 1.85 billion. Now, it's slightly below estimates, but renewal rates did tick higher in the U.S. and Canada compared with the last quarter. So renewals, good. But it's that growth investors are watching so closely. Stock is historically traded at a premium, so a good quarter isn't always enough. The market wants to see membership acceleration, particularly as the benefit from the last fee increase starts to roll off. Slowing membership growth rates or shaky renewals are a canary in the coal mine right now for the market.

29:41Helmy Eltoukhy: Goldman Sachs doesn't see that happening, though, reiterating a buy this morning, saying the company is well positioned to benefit from younger members and additional third party delivery options. Look, the stock relative to peers when it looks compared to Walmart, it's outperforming year to date. So we'll see sort of how the membership ends up playing out, especially given the macro environment we're seeing.

29:59Jacob Andreou: Any thoughts on the impact of news on either just subscription rates? There's been some speculation that maybe it could flag to consumers, hey, do you still want this subscription and make it easier for them to cancel? And then also potential online shopping for Costco, maybe as a beneficiary relative to other places where people could be shopping online?

30:18Helmy Eltoukhy: I'll latch on to the end of that question, which is the online membership. because the question was it tends to skew to a younger consumer. And perhaps the renewal rates were not going to be as high amongst that consumer. It was meant to draw them in. But are they going to renew? Perhaps are these investments with partnerships like DoorDash, with Instacart, which they already have, that might end up not being the case. The churn might not be as high as perhaps analysts were previously expecting. Yeah, there's been some work done on subscription renewals in, say, media and streaming, where people are beginning to cancel one or two here or there.

30:49Helmy Eltoukhy: We'll see if that applies to commerce, too. Brandon, thanks. Brandon Gomez.

30:54Jacob Andreou: All right, it's time now for a CNBC News update. Pippa Stevens has that for us. Pippa. Hey, Leslie, the U.S. Army Reserve is reportedly looking at Cuba and examining whether it can provide southern command with police, medical personnel and other support units within the next few months. That's according to CBS News, which reports that the document requesting aid is for continued military planning aimed at the communist island. CBS reports there's no indication in the document that any units have received deployment orders. Pope Leo arrived in France today for the first papal visit in almost two decades and warned that the, quote, paradise of machines risks undermining humanity as he continues to question what it means to be human in the age of AI.

31:37Jacob Andreou: More than a million people are expected to come out to see the pope during his four-day visit. And Hurricane Nolo is breaking, bearing down on Hawaii with forecasters warning of catastrophic and life-threatening flooding. The storm is threatening to dump as much as three feet of rain on the Big Island. It's currently a Category 1 storm, but forecasters expect it to strengthen to at least a Category 3 over the weekend. Carl, back to you.

32:02Helmy Eltoukhy: Yeah, man, a lot of rain there and a lot of rain here in the Northeast. Thanks for the Stevens. We want to update you on a story we brought you a month ago on this program. We were joined by Jason Williams, who found, if you remember, that rare NBA debut patch autograph card for Dalek's Maverick star Cooper Flagg in a box, which he had purchased for just$515. Early this morning, that card did sell through a Fanatics auction for more than$8 million. It marks the third most expensive NBA card sale in history and the most expensive basketball card featuring a single player ever. We had talked to him.

32:40Helmy Eltoukhy: What were your plans? I think he was still in shock about his good fortune. I love this story. Yes, it is amazing.

32:46Jacob Andreou: It's such a good, feel-good story, turning$515 into a surprise$8 million. Doesn't get better than that.

32:53Helmy Eltoukhy: Congratulations to Jason.

32:54Jacob Andreou: Yeah, exactly. Coming up, it's been over 100 days into Fed Chairman Warsh's tenure. Is this regime change taking place? We'll discuss in just a moment.

33:03Helmy Eltoukhy: Plus, Tesla opening a new factory in Nevada to scale its semi-production. and it comes at a time when diesel prices are at record highs. Details on that story coming up.

33:12Jacob Andreou: Welcome back. It's been over 100 days into Fed Chairman Warsh's tenure. How is his regime change taking shape? Steve Leisman joins us now with more. Hey, Steve.

33:21Helmy Eltoukhy: Hey, Leslie. Yeah, in his first 127 days, Fed Chairman Kevin Warsh has moved surprisingly fast on some easy and very visible items in his regime change agenda. But some big steps do face some obstacles. Some are beyond his control. Let's look at what we call moving at war speed here. He shortened the press conference, shortened the statement, declined to provide his guidance and provide his dot. He's rejected this neutral language used by previous chairman, and he's offering a financial conditions framework for figuring out where rates may be going. He's detailed a series of market metrics that he's watching to determine the right level of the funds rate.

33:55Helmy Eltoukhy: They include credit spreads, private sector lending conditions, commodity prices, and currency exchange rates, among many others. He's made clear He believes that those credit conditions right now mean money is easy. That creates a potential need for the Fed to lean against it if it has an inflation problem. And he has said that the Fed does have an inflation problem. That suggests Walsh's framework could be in alignment with at least the initial probabilities in the Fed funds futures market calling for 25 to 50 basis points more in rate hikes over the next several months. And, of course, that assumes he doesn't get an inflation report that gives him the confidence that he says he needs that the Fed is making progress towards that 2 percent target.

34:31Helmy Eltoukhy: What's gone slower in the chairman's pursuit of regime change, his quest to reduce the balance sheet. With the 10-year topping 5 percent and the Fed with an immediate inflation problem, it's a dicey time to pursue the goal of reducing the$6.7 trillion balance sheet. He's unlikely to give up on it, though. Balance sheet changes will likely have to wait until next year. He gets the task force reports, and he has to also get support from his committee to make those changes. In the meantime, he's affirmed the funds rate will be his primary tool for loosening or tightening policy, guys.

35:01Jacob Andreou: Yeah, Steve, you had a really great piece on CNBC.com about this. How would you kind of characterize the regime change and the market's command of what they're expecting from his tenure?

35:14Helmy Eltoukhy: I think it's a learning process on both sides, Leslie. It's a really interesting question because I'm trying to monitor this. And I'm also sort of part of it in the sense that I get to ask him a question at the press conference, trying to figure out which questions he will answer and then trying to figure out what his new framework is. I think from the other side, you know, he didn't walk in as a prior chairman. He was on the Fed before. I think he's learning how to speak to markets. He started off not saying very much and came back later and said more in the next press conference, gave us a little more in the Jackson Hole speech.

35:45Helmy Eltoukhy: So I think something is taking shape here that we can follow. It just is a big difference from, say, Fed Chair Jay Powell. You'd ask him, are you modestly restrictive? And he would say yes or no. Are you accommodative? and he would say yes or no. Other chairmen have talked in that kind of language. He dismissed that question outright. Well, what's replacing it? Some kind of financial conditions framework, which, Leslie, as you know, has one particular potential problem, which is that financial conditions in part reflect what they think the Fed's going to do. And so how much of a signal to take that?

36:18Helmy Eltoukhy: It becomes a little circular potentially. Yeah, I love I love that you pulled the quote from Claudia Somm. What's odd is that wars frame. The decision is removing a dose of accommodation and then distance himself from the concept that defines accommodation. Yeah, it was a good column by Claudia pointing out how when I asked the question of the chairman at the press conference, this idea of are you at neutral? Where can you describe it? I thought he had opened the door for that discussion by saying dose of accommodation. Well, he hadn't. He actually closed the door on that. Doesn't want to use that language.

36:49Helmy Eltoukhy: Now, to be fair, Fed Chair Jay Powell also talked about this idea of a neutral rate, very sort of circumspect because you can't know it. You only know it by its works. But he was he was OK describing the rate in those contexts. So as Claudia points out, we just don't really know where the Fed chair thinks we are on the spectrum of loose or accommodative or neutral. But we have to watch these financial conditions, it would appear for now. Yeah. Great piece. Everyone should take a look at it, especially as we wade through even more. With my colleague Matt Peterson, by the way, if I might. Yes, yes.

37:23Helmy Eltoukhy: Steve and Matt, the good team. Thanks, Steve. Thanks, Mark. Still to come this morning, the CEO of Garden Health will join us. The company just got FDA approval for a blood test for breast cancer treatment guidance. Plus, do not miss a new special CNBC Innovation Lab hosted by our own John Fort. He'll take a look at how AI is shaping the labor market, especially for younger workers who are entering this AI-driven world. That airs tomorrow at 4 p.m. Eastern time. We're back in a minute.

37:50Jacob Andreou: Welcome back to Squawk on the Street. Take a look at shares of biotech company Garden Health, up more than 70%, nearly 75 % this year, following a number of FDA approvals for the company's Garden 360 CDX treatment. The latest coming earlier this month, approving the blood-based biopsy test for breast cancer treatment guidance, alongside AstraZeneca's own breast cancer drug. Our next guest calling the development, quote, a landmark shift. Joining us here at Post 9 is Garden Health co-CEO Helmi Altuki. Thank you very much for being here. So can you just explain to us how this works and what exactly it is detecting here?

38:27Jacob Andreou: Yeah, this is a landmark change in terms of how cancer is managed. When you think about most cancer patients, they essentially are put on a treatment, and then you sort of wait and wait and wait until the cancer has grown and is visible on a scan. But at that point, it's sometimes too late. With this approval, what we can do is take a blood test, our blood tests, which can detect cancer in the blood, monitor that patient every three months. And as soon as you see the initial signs of molecular resistance, you see that sort of tumor evolving and trying to evade that therapy, you can change treatment.

38:58Jacob Andreou: And what this led to in this study and for this drug approval was a 56 % reduction in risk of death and progression for breast cancer patients. So this isn't something that people would use instead of, say, a mammogram or a sonogram or an MRI. This is once you already have cancer detected in your body, it tracks to make sure that it is, you know, diminishing to a smaller amount. Yeah, exactly. This is for metastatic patients, breast cancer patients. But it's more than that because the sense that this is changing cancer from this sort of one step behind flying blind to this idea of being one step ahead with these blood tests.

39:37Jacob Andreou: And so it's really changing this idea from one-and-done testing to using our blood testing platform as a sort of cancer management platform. And this is going to spread not just to apply to breast cancer, but to almost every cancer type. This is really the future of cancer care, the future paradigm of how physicians will manage their patients.

39:56Helmy Eltoukhy: So on what timeline do you think it would migrate to other types of cancer? And what is the breakthrough that made this possible?

40:02Jacob Andreou: The breakthrough was really the blood test that we have that we developed about 10 years ago, which allows us to essentially see the genetic makeup of cancer, rather than from a biopsy, but from a tube of blood. Historically, before our blood test, you'd have to do surgery, you'd have to go poke around, poke in metastases to find what the genetic driver of disease is, and then change the therapy. Because we can do that with blood, this has been a huge sort of step forward in the field. This is called the field of liquid biopsy, which we pioneered, as I said, 12 years ago.

40:32Helmy Eltoukhy: Liquid biopsy. And so are there notions of which cancers would be next in line to get these kinds of diagnostics?

40:39Jacob Andreou: Almost every cancer goes through this mechanism. Lung cancer is where there are the most what are called targeted therapies. There was huge news in pancreatic cancer a few months ago in terms of the therapy that was there. all of those drugs eventually fail because the cancer essentially evolves, creates these mutations, and essentially it's called treatment pressure. And so the fact that, you know, essentially we can monitor those mutations in blood means that almost every cancer will be amenable to this approach. Do you see a future in which it would be used as more of a diagnostic tool in lieu of the other mammogram, sonogram, MRIs that are available?

41:21Jacob Andreou: Yeah, so we have three parts of our business. So this part is in the one million late-stage cancer patients in the U.S. We have another part that's for the 18 million cancer survivors. We have blood tests that can give them peace of mind in terms of early recurrence. And then probably the most exciting part of our business is two years ago, we got FDA approval for the first blood test for early cancer detection. Since we launched that two years ago, that has been the fastest growing test in diagnostics history outside of COVID testing. And what's the accuracy of that? That test detects 83 percent of everything a colonoscopy detects.

41:56Jacob Andreou: So it's in line with other non-invasive screening approaches. And if you think about what that unmet need we're addressing right now is, it's the fact that there are 50 million Americans who are unscreened right now for colorectal cancer. 55 ,000 Americans will die this year. So this blood test is going to really make a big, big difference in terms of cancer screening.

42:17Helmy Eltoukhy: Looking at the stock over 10 years versus the S &P, it's been a bit of a roller coaster. Sure, yeah. But are there, do you have notions of being part of a larger company in diagnostics, or do you want to go this alone? What's the model on this?

42:31Jacob Andreou: Yeah, that's a great question. We are really firing in all cylinders. If you think about our businesses, we have these three S-curves that are really on fire. We have the business for late-stage cancer patients. That's a$10 billion total addressable market. We have the cancer survivor business, 18 million people, about a$20 billion addressable market. And then early cancer detection, which is about a$50 billion addressable market. And so things are going extremely, extremely, extremely well right now. Yeah. I can't imagine anyone who doesn't want an early detection of cancer. Helmi, thank you.

43:03Jacob Andreou: Thank you. And we want to point viewers to a story from our CNBC Cures team. Last year, funding cuts at the National Institute for Health delayed the start of hundreds of clinical trials, including a promising treatment for a rare childhood brain cancer. This week, CNBC Cures talked with one family impacted by the fallout and shared the story of a little boy who was fighting for his life. For more on that story, check out cnbc.com slash cures. There you can find all of our rare disease coverage and sign up for the CNBC Cures newsletter.

43:34Helmy Eltoukhy: Still to come this morning with diesel prices at record highs, Tesla opening a new factory to scale production of its semis. We'll bring you details after a short break. Welcome back. Tesla just opening its first high-volume factory for semis in Nevada. Our Phil LeBeau joins us with more on that and how this is moving the stock. Morning, Phil. You know, Carl, this happened last night in Sparks, Nevada. That's where they have been building and working on the Tesla Semi since they first unveiled it in 2017. And you might be saying to yourself, well, how much volume will there be for an electric semi?

44:08Helmy Eltoukhy: About 250 ,000 to 300 ,000 Class 8 semis are sold in this country every year. The annual capacity for Tesla Semi plant will be 50 ,000 trucks. Doesn't mean they're going to deliver 50 ,000 trucks right off the bat. That's simply the capacity. They have racked up about 3 ,000 new orders between yesterday and over the last couple of weeks. Max range on the Tesla Semi, 500 miles. Will this move the needle with what investors care the most about, shares of Tesla? Probably not. It is an important vehicle if they can scale volume. But in terms of overall vehicle deliveries, look, they're going to deliver about 1.7, 1.8 million vehicles this year, depending on how things shake out through the rest of this year.

44:48Helmy Eltoukhy: By the way, we get Q3 deliveries from Tesla next week, towards the end of next week. As for Elon Musk, he was not at this event in Sparks, Nevada, because he was at the state dinner in Washington. So as a result, he issued a or let a recorded message show to the people who were in attendance there. As you take a look at shares of Tesla, keep in mind that they also will have the unveil of the new Tesla Roadster. That is also scheduled for next week. Bottom line is this, guys. The Roadster, the Semi, they are niche vehicles. Vehicles, important vehicles in certain regards, especially for Tesla enthusiasts and for Tesla as it tries to show that it has a complete set of vehicles.

45:29Helmy Eltoukhy: But they're not going to move the needle in terms of deliveries or in terms of the bottom line. Although we've talked in recent weeks, Phil, about the backdrop of diesel prices and whether or not that's going to act as any tailwind for commercial EVs. Yeah, and I think there's an important part of this business that, look, they can certainly appeal to shipping companies, freight companies, commercial companies. PepsiCo is one of their original companies. They can appeal to those companies and say, look, you want to get away from the problems with diesel fuel? This is the answer right here. And it's a compelling message right now.

46:03Helmy Eltoukhy: The question becomes how many companies want to make that commitment long term? Or do they look at the diesel fuel prices right now and say, yeah, it's not good? But is it going to be like this in three years? Just a couple seconds left, Phil. There is a report out of the information about their Optimus production, that it's actually grown quite a bit, but not easy to scale. It's not easy to scale. And remember, Tesla has never, or Elon Musk, I should say, has never said, look, right off the bat, we're going to be building a million of these. Yes, he has talked about that type of volume down the road.

46:37Helmy Eltoukhy: Initial production, remember, is going to be very, very limited. So if there is a production snag, I'm not sure how much that really matters initially, near term. Phil, appreciate it. Phil LeBeau all over Tesla today. Tons of news in all kinds of directions. We got through most of this week, almost done, although next jobs number a week from today.

46:57Jacob Andreou: Yeah, already for the month of September. A lot of compute headlines this morning with Akamai, Anthropic. We continue to watch that space, of course, as well as yields.

47:06Helmy Eltoukhy: Yeah. Thanks, Leslie, as always. Our thanks to you. Have a great weekend. Frank Collins in for the judge.

47:11Jacob Andreou: All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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47:47Helmy Eltoukhy: This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast, or find Schwab Market Update wherever you get your podcasts.