Exxon’s Profits, Anthropic’s Hacking Revelation, & FIFA’s Debate 7/31/26

0:00Trading at Schwab is now powered by Ameritrade. Unlocking the power of Thinkorswim, the award-winning trading platforms loaded with features that let you dive deeper into the market. Visualize your trades in a new light on Thinkorswim Desktop with robust charting and analysis tools, all while you uncover new opportunities with up-to-the-minute market news and insights. Thinkorswim is available on desktop, web, and mobile to meet you where you are. It's built by the trading obsessed to help you trade brilliantly. Learn more at schwab.com slash trading. What made you confident that you could do something that hadn't been done before?

0:34I have no fear of failure. Trailblazing women changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got to think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. Bring in show music, please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Rising crude prices lead to record profit for the U.S. oil industry. ExxonMobil CEO Darren Woods tells us about the price pressures hitting the industry as the conflict with Iran continues and snarls the critical strait of Hormuz.

1:23That resource in the region has to get to market. The strait has to open up. It is the main artery of supply for the world that powers economic growth everywhere. And so eventually those barrels are going to have to flow. And the only question is, how long will it take to get to some resolution here? The new AI models are so smart, they're the next generation of hackers. FAR AI's Adam Gleave on raising them right. So suddenly we need to be turning this more into a science or engineering practice with rigorous safety standards and testing. rather than the current, more organic approach. And is it too late?

2:02Can we just unplug these bastards at some point? Plus, a tale of two mega cap earnings reports, New York versus Koushi and the wild week at World Cup parent FIFA. A FIFA advisor on White House's World Cup panel resigns to protest Infantino's private equity plan. Infantino's the head of FIFA. Yeah, he spent a couple weeks with the president. It is Friday, July 31st, 2026. Squawk Pod begins right now. Stand Becky by in three, two, one, cue it please. Good morning, everyone. Welcome to Squawk Box right here on CNBC. We are live from the NASDAQ market site in Times Square. There's someone standing right behind me.

2:46He's distracting me. There is. Hi. I'm Becky Quick along with Joe Kernan. Andrew is out today. It's a Friday and so far it looks like things are looking pretty good, at least if you're a bull. some pretty massive gains for the major averages yesterday. Microsoft shares spiked 16 percent. That was their strongest session since the peak of the financial crisis all the way back in 2008. The biggest gains they'd seen in one day in 18 years. That stock trading all the way up at$451.10. You did see meta platforms off by about 8 percent, but Microsoft added just shy of$450 billion to its market cap. That was the most by any stock in a single day.

3:27On the other side of the ledger, Meta shares down by 8 percent. It was Meta's 11th consecutive decline. That's its longest losing streak ever. But we did see quite a lot of activity yesterday and quite a lot of movement in what was happening with those major averages. In fact, at this point, Joe, after a pretty volatile week, we are looking at all three of the major averages higher for the week at this at this moment. NASDAQ 100 is down, but only by about eight one hundredths of a percent. Microsoft was early in. But then the gains kept adding. But it was early in sort of consolidating some of its gains.

4:03Remember how, what that company was worth at the top? It was 550. It was all the way up at$550 a share. And that wasn't that long ago. It was like June, mid-June. So it dropped all the way almost to$350. So it was one of those stocks that we said, wow, the gloom was off the rose for the MAG-7. And if you bought it and you believe in the story, you're getting reward. But it's only back to$450. So$350,$550 right now. You look at the chart, it's kind of right in, it's regained 50 % of the sell-off from a huge move higher in the last year. And it just wouldn't surprise me to see similar action in a lot of these.

4:51And it's funny, they, you know, it'll be Amazon's day, but not Meta's day. It'll be, you know, NVIDIA's day, but not Micron's day. Although there did seem to be a change in the narrative overnight, like over the last week, let's say, where if you are a hyperscaler and you're spending more money, you will be rewarded for that as long as you can show that you're monetizing it. And that's been the case for the hyperscalers. We heard that yesterday. Right. If you look at we'll talk about Amazon in just a moment, Amazon and Microsoft sharply higher. If Google had reported its results a week, you know, this week instead of last week, Alphabet shares, you might have seen a different story there.

5:28And in fact, Alphabet shares have been up about 5 % since last week when they reported earnings, too. If you can monetize it, the market at this moment is saying, OK, you can spend it. We all need a primer on free cash flow again, because the bottom line number can be amazing. But if you are spending, you know, tens of billions of dollars on infrastructure and the build out. And so that after all is said and done, if you like break even or only make a little bit of. in terms of free cash flow. Like Meta, that was the case. They had$20 billion in free cash flow that fell to like$784 million in free cash flow over the course of that.

6:07And you want, how long does that continue? And then where's the payoff? Right. Again, if you can monetize it, if you can show that you're making it back in your private services. Or that you got other things in the company firing on a different cylinder, which is feeding the, you know, which is sort of funding it. Meta did pretty well with the advertising. And that was not enough for the street, although you see this morning it's indicated up by about 1.7 percent. But again, that was after a decline of about 8 percent yesterday. Amazon shares surging following better than expected earnings and revenue.

6:36Amazon Web Services sales jumped 37 percent. The street was looking for 31 percent. The company also detailing how it plans to spend even more on AI. We now believe we will spend approximately 220 billion dollars in cash CapEx in 2026. The higher cost of memory pushing this number up from our prior estimate of about$200 billion. But even at that amount, we will still not have enough capacity to meet all the demand we have in 2026. And I believe this dynamic will also be true in 2027, too. So they're not doing more. It's just costing more to do what they're planning to do because of memory. Amazon's CapEx in the just finished quarter reached$54 billion, up from$32 billion a year ago.

7:21The spending causing the company's free cash flow to flip into the red, which we were talking about, stands at negative$7.6 billion in approximately the last 12 months. And yet there, investors are OK with that. Yeah. Stock up 13 percent, even though free cash flow dipped. I guess, again, it comes back to, are you monetizing it? Who doesn't defer to Amazon at this point? after watching anyone who deferred to what they were doing through the history of those shares. And just remember all the clowns that were calling tops on Amazon. Some of them that are still around. And I don't know. It's because all the way through from Jeff Bezos and then Andy Jassy, they've been very clear with telegraphing to their investors what they're going to do.

8:07There are times that we're going to spend very heavily. You know, Jeff Bezos said that in his very earliest letters to shareholders. and they've been proven right at the times that they've chosen to dig in. New York Governor Kathy Hochul and Attorney General Atisha James are suing Kalshi, alleging its prediction market operates as an illegal, unlicensed gambling platform in the state. The lawsuit seeks to halt Kalshi's New York operations and recover fines, illegal profits and restitution for users. In a statement released by a Kalshi spokesperson, Kalshi says, It's sad to see this type of political theater from the leadership in our own state.

8:47States can't just shut down a federally licensed exchange. This would also just hurt New Yorkers who would be driven offshore. We love New York. We love New Yorkers. And New Yorkers love our product. We've reached out to the governor and to the attorney general for comment on this. And by the way, disclosure for you, CNBC and CalSheet have a commercial relationship that includes customer acquisition and a minority investment. But this is an issue that is a lot of states are trying to figure out what they can do to work around federal guidelines on this and federal regulation. FIFA attempting some damage control after a proposal to sell stakes in or a stake in the World Cup to outside investors.

9:31And that sparked a global soccer backlash in a statement. FIFA said in their words, we respect the feedback and concern aired in public. And we reaffirm. I don't know whether they're reaffirming it. That depends on whether they already affirmed it one other time. They're probably just affirming our commitment to an open and democratic consultation. It added nobody is selling football. Earlier yesterday, European soccer governing body UEFA said that it would boycott the World Cup if FIFA went through with its outside investment idea. It includes plans for FIFA to sell a 20 percent stake in a new entity called FIFA Forward Enterprise, which would take over all commercial and event operations.

10:20FIFA member nations would get part of the profits. The proposed investor group is led by Joshua Kushner, Thrive Capital. Kushner, obviously the brother of President Trump's son-in-law. And he's married to Karlie Kloss or something. Karlie. Karlie Kloss. I think I said Karlie Kloss. Oh, OK. I didn't know what you said. But look, there's big questions about this. No doubt the other teams would get some money. Right now they get$8 million a year, I think. They're talking about getting the other teams 20, then 22, and then$24 million over time. But I think it's also not right to say that they're not selling soccer.

10:59What are they selling if not soccer? And I think all of these other teams are saying, wait a second, you're selling us, and you've never asked us about any of this. And it's very unclear who's going to get what profits, where things come down with that. And I understand why they're saying no. And UEFA, by the way, has shut down things in the past. A couple of years ago, they wanted to move the World Cup. FIFA wanted to move the World Cup to every two years instead of every four years because they made$12 billion this last go around. I kind of wish they would, I guess. But it sounds a little greedy at some point, too.

11:30I'm not. This is great. I don't like the greed word. I like the maximize your potential. Maximize your potential, but the teams are saying, wait, how do we get to say, how do we have our say in this? That's why they're going back to this. I was just going to say, you know, this guy spends a couple days with Trump. Next thing you know, he's got a whole new idea of how to, as far as being a businessman. Oh, wait a second. There's just a headline that crossed on AP. A FIFA advisor on White House's World Cup panel resigns to protest Infantino's private equity plan. Infantino's the head of FIFA. Yeah.

12:10Who spent a week with, or a couple weeks with the president. And suddenly it has some really valuable ideas for FIFA. I don't know. No sport is pure. No, but this reminded me an awful lot of the college athletes who said, forget it. We're not going to allow the NCAA to continue to sell us without us having a very explicit role in what we get paid on these things. And that sounds like the same thing that they're saying here. I think everyone. We get to decide. That's why the FIFA statement says we're going to go back to democratic consensus, right? They rely on democratic consensus. Look, let the good times roll.

12:49Things are happening. It's worth a lot. I don't know. You don't own me. Yeah, but the pure, you know. If you love the game and the sport so much, maybe you shouldn't get paid at all. Just you do it just so you can. No, this is what and what UEFA said earlier this week was we can't allow this to happen without knowing very clearly who's getting paid. Right. Basically, it's a price. It's a settlement. It's who's getting what. Cheese will be next. Coming up on Squawk Pod, ExxonMobil reported a quarterly profit over double what it was for the same quarter last year, thanks to rising oil prices. CEO Darren Woods will explain how the Iran war continues to put pressure on the energy business.

13:33We had so much disruption. It was particularly difficult, particularly for our refining business. We are the largest refiner in the world outside of China. and with the high, high margins and all the changes that we're making across our slate with the crude disruption, the ability to predict what prices we're going to do on that business was difficult. Trading at Schwab is now powered by Ameritrade, unlocking the power of Thinkorswim, the award-winning trading platforms loaded with features that let you dive deeper into the market. Visualize your trades in a new light on Thinkorswim Desktop with robust charting and analysis tools, All while you uncover new opportunities with up-to-the-minute market news and insights.

14:15Binkerswim is available on desktop, web, and mobile to meet you where you are. It's built by the trading obsessed to help you trade brilliantly. Learn more at schwab.com slash trading. What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just got to think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players.

14:52New episodes every Tuesday, wherever you get your podcasts.

14:59You're listening to Squawk Pod from CNBC. Today with Joe Kernan and Becky Quick. Welcome back, everybody. ExxonMobil reporting its second quarter results. earlier this morning. That stock right now off by about eight-tenths of 1%. Joining us this morning is Darren Woods. He's the company's chairman and CEO. And Darren, thanks for being with us this morning. Good to see you, Becky. Thanks for having me. So there's a lot of numbers to look at. I know you're hitting new records in terms of production, some other things to focus on. But the earnings per share was about eight cents below what the street was expecting.

15:31I know you have qualified this and said that this is a really strong quarter. Walk us through what happened with the earnings for share on what you're seeing in other places. Well, you're right, Becky. We had a slight miss on earnings and a significant beat on cash flow from operations. And every quarter, we try to work ourselves an estimate for how we think the market prices and the volatility out there is going to impact our operations. The street does the same thing. In good times, that's a challenge. In times like the second quarter, we had so much disruption. It was particularly difficult, particularly for our refining business.

16:06We are the largest refiner in the world outside of China. And with the high, high margins and all the changes that we're making across our slate with the crude disruption, the ability to predict what prices we're going to do on that business was difficult. That's where the mist came from. Frankly, it doesn't represent anything in the operation or the underlying business, which was an extremely strong quarter. The free cash flow. Let's start with that and then We'll talk some more about the refining business. $17.2 billion. That was above estimates, I think, of about$16 billion the street had been looking for.

16:39That is more than the past three quarters combined. What are you going to do with all that cash? Well, you know, we have a long-term philosophy of capital allocation. It's incredibly important that we maintain the investment profiles, the projects that we plan to build. We maintain a rateability in terms of continuing to invest in that. We've got to make sure we have a strong balance sheet because we know we're going to go through these cycles. And as you point out, it wasn't so long ago where we were drawing on that balance sheet and building debt. And so as we start to see a fly up in the market, we rebuild that balance sheet to make sure that we're prepared to go forward.

17:16Then obviously we continue to share the success with our shareholders. In terms of buybacks, in terms of dividend hikes, what should shareholders expect? We have raised our dividend for 43 consecutive years. That is a commitment that we feel very strongly about. So we'll continue to reward through a consistent and growing dividend. And then we are buying back shares today, really, from my perspective, to buy back the shares that we issued as part of the Pioneer acquisition, which has been an incredibly successful acquisition for us. Yeah, Darren, refining, that has been incredibly important. We were just talking a little bit earlier with Dan Yergin about how refined product is really getting pinched right now because of what's happening in the Middle East and what's happening with Russia.

18:00Some of the damage to their refineries in the fight with Ukraine. Where are you in terms of how much you're producing? Where does it stand in terms of right now? I think 96 percent is what the industry is producing in American refineries right now. That's without any shutdowns or maintenance or anything else that's going on. What can you tell us about that picture right now? Yes, you're right. As I said, we are outside of China, the largest refiner in the world. In fact, we're number two when you include the large Chinese companies. So it's a business we've been in for a long time. It's the business that, frankly, I grew up in.

18:37And typically, that business has historically been at very low margins. And so you try to run full. What we're at right now with, you know, people have been very focused on crude and crude prices. The reality is, you mentioned the strait has taken significant refining capacity off the market. It's unavailable. Russia's lost significant capacity with Ukrainian bombings. And the Chinese have stopped exporting product, which is also a large amount of product not going into the marketplace. So it is extremely tight. And as you said, everyone around the world is running all out. We ran at very high utilization within our U.S.

19:13Gulf Coast circuit. We had record distillate production. The point I'd make, though, is, you know, you don't solve these problems in the short term. You've got to be focused on this for the long term. So if you look at what our company's been doing for the last 10 years, we've invested over$110 billion in U.S. production. $12 billion of that has been in our refining business. In 2023, we started up the largest expansion in the U.S. that the U.S. has seen since 2012. And so we have for a long time been focused on the critical responsibility we have to grow this business and continue to meet the growing needs for the products that we make all around the world, which plays such an incredible, critical role in economic growth and, frankly, people's lifestyles.

19:56And we're seeing that play out today, just how important the work that we do is. And so we've been aggressive in our investment and growing production, and we're going to continue to do that going forward. Is there much that you can do in terms of refining, though? Are you basically all out at capacity at this point? Yeah, I think anybody who has access to the crude is trying to run at high utilizations. We've seen that. We've been at very high utilizations in the U.S. And if you look around the world, we've had the record high yields in distillate and jet, which have been very short with respect to the demand and the supply that's out there.

20:32And so I think everybody's trying to do that. But as you point out, the utilization that we've seen can't be sustained for the long term. So I think this refining challenge is going to be with the world for a while. Even after the strait opens up, we'll see more products start to flow through the strait, which is going to be critically important. But we've still got the Russia capacity that's been lost. And we'll have to see what the Chinese do with respect to exporting. Darren, obviously, you and your team must be watching the Middle East very closely right now on a day-by-day or maybe even hour-by-hour basis.

21:03What's your assessment of where things stand and what that in turn means for the global supply of not just refined product, but of crude oil as well? Well, as you say, you know, it's kind of an evolving narrative every day. We haven't we've gotten out of the business a long time ago trying to predict what's going to happen. Instead, make sure that the business is resilient to whatever comes our way. And I think we've demonstrated this quarter that irrespective of where things move, the company is ready to respond for that. And we've got a business that will be successful in the high markets and in the low markets.

21:40And so let's focus on that. What I would say, though, in the long term, that resource in the region has to get to market. The strait has to open up. It is the main artery of supply for the world that powers economic growth everywhere. And so eventually those barrels are going to have to flow. And the only question is how long will it take to get to some resolution here so that the strait opens up and that production can come back on in the Middle East. But I think, you know, medium to long term, the world needs that resource. And I think governments will find a way to make sure that resource is available to the world.

22:17Do you have ongoing conversations with the administration, with the U.S. administration, as we're watching oil prices climb and prices at the pump climb? Well, because of the large footprint we have all around the world and the breadth of our operations, we try to make sure that not just the U.S. administration, but frankly, administrations all around the world and Europe as well, understand our perspective of what we see and how things are playing out so that they've got the best information to make policy decisions. So we very much stick in our lane with respect to here's what we see, here's how we think it could potentially play out, and make sure that policymakers have our best thinking when they're putting together their decisions and the approach that they want to take moving forward.

23:02Darren, I know when we've spoken with you recently, you've been a little frustrated with some of the European lawmakers in particular, just about what they're doing to make it tougher to operate and do business there. Are they more receptive now that other lines of some of their energy have been cut down? Unfortunately, no. I think, you know, I stay in pretty regular contact there. And, Frank, in fact, what you see happening is additional regulations coming out. They've got a methane regulation that comes out in January of 2027 that, frankly, nobody in industry can meet. And so products are going to stop being exported into or they're going to have the imports available to them because they've got a law that's coming into effect that, frankly, nobody can meet.

23:46And a penalty, that's 20 percent of your revenue. And so I think they're doubling down on what is some very bad policy. And we've been trying to explain, particularly in a time like this, where the world is short product and the EU isn't particularly short in products, that you should have policies that open up trade and give you access to as much as possible rather than continuing to try to constrict it. Today, we haven't seen a very good response there. But I tell you, they're heading down a path that doesn't have any real positive outcomes. And you still aren't getting any. I mean, what will ExxonMobil do as a result?

24:27Well, we our policy around the world is we don't knowingly break laws. And so to the extent we can't comply with a regulation for importing oil and gas, we won't import oil and gas. It's pretty simple and straightforward. I think the EU has been looking at we'll waive the penalty. And our position has been, frankly, we don't choose which laws we follow based on the size of the penalty. We try to follow all the laws. And so they've passed a law. They expect us to meet it by January 2027. It can't be met. And therefore, we won't be able to import product or crude or natural gas in order to run our facilities there.

25:05That's a significant issue. And it's one that the entire industry is facing. Anybody who's importing product has got a problem. I hope I didn't miss anything on this. Anything settled on Venezuela? I know. Is that still in the works? Where does that stand? Because I think you're going to do something down there, aren't you? Are you planning it? Well, we were kind of good morning, Joe, by the way. We are heading down the same path that I talked about in January, which is, as I mentioned, in January, there's a lot of structural reform that has to happen with respect to investment guarantees, fiscal policy, legal frameworks, and what have you.