Anthropic, Google Discuss Multibillion-Dollar Cloud Deal | Bloomberg Tech
Summary
Investment Theme: Anthropic and Google are in discussions for a significant cloud computing deal, potentially valued in the high tens of billions of dollars, highlighting the growing demand for specialized AI infrastructure.
Market Insights: The potential deal between Anthropic and Google has impacted market movements, with Alphabet shares rising and Amazon shares falling, reflecting investor sentiment on cloud service competition.
Company Discussion: Texas Instruments reported a lackluster forecast, indicating a slow recovery in the semiconductor market, while Netflix faced a significant stock drop due to a tax dispute with Brazil, despite strong sales growth.
Opportunities and Risks: The cloud computing market is witnessing intense competition, particularly in AI workloads, with companies like Google and Amazon vying for dominance, raising questions about infrastructure capabilities and partnerships.
Key Takeaways: The ongoing developments in AI and cloud computing underscore the importance of strategic partnerships and infrastructure investments, as companies like Anthropic seek to expand their capabilities and market reach.
Economic Outlook: The semiconductor industry is experiencing a slow recovery, with companies like Texas Instruments indicating uncertainty in macroeconomic conditions affecting growth and investment in technology sectors.
Technological Advancements: Google's potential breakthrough in quantum computing and its implications for future applications highlight the rapid pace of innovation in the tech industry, with significant investment opportunities on the horizon.
Transcript
Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lelo in San Francisco. This is Bloomberg Tech. Coming up, Anthropic and Google discussing a deal for cloud computing services valued in the high tens of billions of dollars. Plus, we break down earnings. Netflix and Texas Instruments in focus while we await Tesla's results after the closing bell. And hot on the heels of AT&T's own earnings. We discuss with the company's CEO, John Stany. Let's get to our top story. Overnight, Bloomberg breaking the story that Anthropic is in talks with Alphabet, specifically Google for cloud computing capacity, high tens of billions of dollars. TPUs are in the mix. When we broke the story, Alphabet shares jumped in after market. Amazon fell. This is where we're trading right now in Wednesday's session. I broke that story with Bloomberg's Rachel Mets. Let's get out to her. Actually, Rachel, like the details are quite simple to understand. early talks and they're around capacity. But let's recap what we know. >> Yeah. So, as you said, uh the two companies have been discussing a plan uh for Enthropic to use Google's tensor processing units, TPUs. These are chips that uh are are can be used for a lot of things, but they also can be used for AI workloads. And anthropic, I think it's important to remember, is already a customer of Google's for its cloud service. And also um Google is an investor in Anthropic and Anthropic is a similar deal with Amazon too. So that's that's why you sort of see these these mixed reactions. There has been a lot of reaction to our reporting. Later in the program, we're going to speak to Bloomberg Intelligence about their take on it. Anthropic have been busy of late, right? We've reported that Dario Amade did this kind of tour of the Middle East seeking both money and compute capacity. The compute capacity bit is where people are trying to understand this. Like is it that just Anthropic really needs as much capacity as it can get or is this a story about how actually Google is kind of becoming the better partner for anthropic beyond an Amazon? >> I think there's a couple things that could be happening here. One is that yes, building the kind of AI uh models that Enthropic is building is extremely compute intensive and you can't just use like any cloud capacity you could find anywhere and you can't just use any chips. You have to use certain chips that are going to work well for the kinds of large language models they're building and the kinds of models that they are serving to people. So it it seems like a vote of confidence potentially for Google and for its chips. I mean, hardly any companies beyond Nvidia, AMD, um maybe one or two others have chips that people are willing to be using for these kinds of AI workloads. Um it also could make people a little nervous about what it says about Amazon and its ability to provide the services that a company like Anthropic needs. >> Bloomberg's Rachel Mets, thank you very much. Let's get to the earnings story starting with Texas Instruments. The stock fell the most in 3 months after it gave a lackluster forecast for the current quarter. Bloomberg's chips reporter Ian King is with us. Um actually a probably more simple story uh than than we expected. We got a lens into the health of analog devices. Texas Instruments is analog chips. You covered the the earnings blowby-blow. What do we need to know about this? >> So the first off the numbers not too bad. 14% growth for most companies would be fine, projecting something in the region of 11% for this current quarter. But what they said was more important. What they said was things are coming back. Everything's okay, but just not at the pace that we had been expecting. There's still some uncertainty out there. This is macro related. Companies aren't investing in their factories perhaps as quickly as we had hoped. And really, they were sort of painting this picture of a kind of an anemic kind of return to growth for the whole industry. When I was um reviewing your story, the the CEO said that overall the semiconductor market recovery is continuing that that seems a little bit in congruous with the the market's reaction to what's going on. The stock's down 5%. But also kind of, you know, what's specific to them? Well, what they're projecting is basically seasonal, right? What would happen normally if everything is equal in the fourth quarter. The problem is with that is that if we're in this recovery period, if we're in this bounce back from this inventory correction that we've suffered, things should be growing quicker than that. People should be rushing to stock up. People should be rushing to build new things and they're not. Bloomberg's Ian King, thank you very much. We actually just had some breaking news at the top of the show and it is moved shares of Google. You can see there on the screen. The company ran an algorithm on its Willow quantum computing chip that can be repeated on similar platforms and outperform classical supercomputers. A breakthrough it said clears a path for useful applications of quantum technology within 5 years. This was detailed in a paper published Wednesday in the science journal Nature. And you can see there on the screen the right hand side of the chart when those headlines hit Alphabet shares who had given up the gain they'd seen from our reporting on Anthropic suddenly jumped in the session to a gain of around 2%. We will continue to track that story and Alphabet shares throughout the show. Okay, back to earnings. Another steep share drop. Netflix disappointed investors with its results. The streaming giant blamed a tax dispute with Brazil for a cut to its third quarter earnings. Let's get more with Bloomberg's media editor, Felix Gillette. This tax issue, like yesterday, I went on television all day long saying maybe there'll be a foreign currency benefit to Netflix's earnings. We'll learn about advertising, but actually this tax issue is the main story. Just explain it. >> Uh, this is a longgoing dispute that Netflix has warned about in filings before. They didn't factor it into the forecast. They ended up having to pay several hundred million dollars more to Brazil. They're saying it's a one-time deal. it's not going to be material impact moving forward. They're trying to steer the attention back to the growth, you know, 17.5% growth in sales for the quarter and uh, you know, profit growth also up. >> You know, we were talking, Felix, about the idea that Netflix wants to be judged by its sort of traditional financial metrics. Those were quite good generally speaking, right? >> Yeah. Yeah. I mean, they were fine at this point. You know, I think investors were looking for more than fine. They were looking for an complete blowout quarter in part because, you know, they had such a strong slate of programming in the third quarter. You know, Wednesday, new episodes, Squid Game, new episodes, K-pop Demon Hunters. So, at this point, yeah, the programming looked good. The growth and sales looked good, but investors wanted more. >> Bloomberg's Felix Gillette, really appreciate your time. Thank you very much. Aayoko Yoshoka is a portfolio consulting director at the wealth enhancement group which holds some of the major magnificent seven names Texas Instruments and I think we can also talk a little bit about Netflix. That's where I'd quite like to start. Earning season in technology can bring all kinds of beautiful stories. Did you have a tax dispute with Brazil on your bingo card for what Netflix would tell us about the world of streaming? >> I did not have uh Brazil tax issues on my bingo card. Uh but I I think the Netflix earnings were actually pretty decent. Um you know, we forget that Netflix has actually come a long way from a free cash flow growth perspective. They were only generating about $1.6 billion about 2 and a half years ago and now they're generating close to $8 billion uh in free cash flow and that's uh slated to go to 11 billion. So we'd like to focus on that metric versus the Brazilian tax issue. >> Okay team, let's leave the shares up. were showing shares on the screen. The stock's down almost 10% on track for its biggest drop since April 2022. What was the big picture story about the health of streamers and streaming here and where Netflix sits in that landscape? >> Sure. I think from a consumer standpoint, you know, Netflix is one of those go-to uh programs that consumers are going to continue to go to. I I think that you know for for Netflix the content you mentioned has been very solid and even if the macro environment is a little shaky out there I think Netflix will continue to see subscriber growth and that's what we'd like to see over time let's get back to our top story today overnight Rachel Davey and I broke the story that Google is in early talks with Anthropic for a cloud computing deal capacity in the high tens of billions of dollars when We broke that story. Alphabet shares really jumped in after market. They've given up some of that gain in the in the market open this morning and Amazon fell. Uh Wealth Enhancement has some exposure particularly to Alphabet. What is your reaction to that reporting and what does it signal to you for those companies involved? >> You know, I think in general the sort of clue to me is just that the infrastructure buildout is still uh in its early phases, right? Uh, you know, we've heard so many announcements over the last several months and yet here we are with another one and just when you thought you weren't going to get another announcement related to AI infrastructure buildouts, you here we are with uh Google and Anthropic. Um, I think that the race is clearly on and we'll have to see who's really going to win. Um, but the buildout is sort of still in its early phases. The cloud computing market as we've always understood it and talked about it is AWS number one player, Google Cloud number three player. In the specifics of this story, both of those companies as it relates to AI workloads have some questions to answer here, right? So Amazon is also a significant investor in Anthropic. Our reporting says that Anthropic wants to use TPUs. What are you learning about the competitive nature of Alphabet's cloud offering or Google's cloud offering versus Amazon's in the AI domain? >> Sure. So, I I think we have to really dig into this in terms of, you know, what are the TPUs offering in terms of optimizing workflows that GPUs aren't and and how is this better suited for, you know, Google's sort of overall workflow? um and how they're going to be using AI through uh Gmail and Google Maps and a lot of their applications that they have in house and then how does that fit related to Amazon and how you know some of the algorithms are working uh for Amazon's you know uh suggestions for retail uh as well as advertising. I think there's still a lot to dig into here uh in terms of how this is all going to work out. Texas Instruments is worth lingering on. I think you know sometimes it's seen as almost like a crystal ball of what all kinds of end markets around the world will do coming up next because of because of how uh many analog chips go into all kinds of things. What was your read on the print there? >> Sure. So I think in general the you know as Ian said the this the overall quarter in earnings were actually pretty decent 14% growth but I think the read through into industrial markets into automotive uh into some of the consumer electronics that are more basic really shows that we're not in a macro environment that is growing gang busters. So outside of all of the AI investments that we're seeing in the economy, we're not seeing that sort of economic growth take off as much as I think people had hoped for. We're in it. This is it. Technology earning season, my Super Bowl. I don't know if it's your Super Bowl. what what was it that we were expecting to hear and what do you need to hear from the technology sector specifically the mag 7 I suppose to keep uh the direction of travel that we have seen in equity markets. >> Sure. So next week will be the the big week for all this including a Fed meeting to to cap it all off too. Um so I I think for for us we're always going to be looking at commentary around capex spend. I mean this is what really set it off years ago. Uh, and we're going to continue to see whether or not that spend continues from the hyperscalers or whether or not they need to, you know, take a little bit of a pause, but I think we're going to continue to see that spend. I mean, we're seeing announcements left and right. Uh, and so we'd like to kind of dig into that during earning season. >> Do you expect that tariffs specifically or any other Trump administration policy will play out on the calls or in the statements >> in the tech side? maybe a little bit, but I don't think it's going to be as prominent as some of the consumer names uh have talked about with with tariffs and and goods. Um I think it's going to be less of an issue. Uh you know, I think we've we've seen all of this talk about exporting uh that has had a little bit more of an impact and the sort of tit fortat with China that's probably going to be a little bit more of an impact. Um, but overall I really do think that investors are going to be focused on general capback spend ROI around AI and you know how that's playing out. >> Yoshoka of the Wealth Enhancement Group really appreciate you rolling with the news of the day and a big tech earning season. Coming up, AT&T CEO John Stany joins us to talk about the company's earnings and it was a big one. Investors still making up their minds. That's next. This is Bloomberg Tech. Welcome to our Bloomberg TV and radio audiences worldwide. We bring in AT&T CEO John Stany. The company reporting results this morning that showed higher than expected subscriber growth, though some analysts noting customer churn and average revenue per you per user showing signs of strain. Hey John, it's great to have you back with us. you know the story. >> Thanks for having me in. >> You're welcome. It's like a simple story. You know, the the the data from the quarter is very clear. There was an element of promotion um and and and marketing and deals that drove it. But how would you summarize it? >> Look, we had really strong growth as you indicated and we're really comfortable with our growth as as I think you're probably aware. We've been focusing on customers that want to buy both wireless and broadband from us. And when we can do that, even if it's promotional, that's a good customer to pick up because they have great lifetime values and over time they'll churn less and they'll address that very issue that you alluded to, which is the increasing churn in the industry. And we kind of anticipate as we acquire these customers, we're going to see a little bit of our pressure, partly because we obviously give them a better price for their loyalty. And over time, we move them up on the continuum of services. we sell. So, excuse me. By and large, we feel really good about it. >> John, I don't I don't know if you have some water there with you. Let me give you a second just to take a quick drink if you need it. Of course, in the quarter, and we've discussed this with a number of the carriers, it was iPhone 17. You know, I was there at Certino Apple Park on the day of its release. Can you give us a realterm sense, even if it's from the promotion perspective, of how big a factor the iPhone 17 was for you? >> Well, I think it's it's not a huge factor, but clearly there was a little bit of suppressed activity after the last iPhone cycle a year ago. Maybe some folks anticipated it was going to be a little bit larger. Customers were seeing if it was really framebreaking and change and concluded possibly that it wasn't and delayed waiting for the next cycle. And I think, you know, you can only suppress that activity for so long. And now the new device comes out, people see what it is. So there there has been an increase over last year and maybe some other previous years. It's not a record-breaking cycle, but it's strong and we're seeing that as a result, but I don't think it's anything dramatically out of pattern given the the suppression we've seen in the market. And we were very effective at working through it. 400,000 over 400,000 postpaid phone net ads shows we can compete in that space and do well with it. >> If you're joining us on Bloomberg television and radio, we're speaking to AT&T CEO John Stany. Final on the iPhone 17. Will it be more of a factor in the 3-month period that ends in December? Uh the holidays, >> well, the holiday season moving through the fourth quarter is always a peak season for everybody in the industry. I expect that's going to continue to be the case this year. Um I don't see anything what we've had over the first couple of weeks of the introduction to suggest we're going to see a step function change from current rate and pace. So all of our forward guidance that we've given expects that it's going to be competitive that we're going to compete and continue to earn our fair share of service revenues on those converge customers I talked about. And um I expect that uh it'll be as rambunctious in the industry as it has been and we'll do just fine. >> John, if I turn on my television and watch a show that has ads or I scroll on any given social media timeline, I keep seeing AT&T it talking about itself as a home internet provider. I know that's been a priority. Have you any evidence that that push has been a success and that you have positioned AT&T in that domain? Well, I'm I'm glad you're seeing those. It means we must be getting our right market and targets out there. And I think this quarter was an excellent example of it. We had our best broadband gain on our strategic products and services, fixed wireless and fiber, than we've had in 8 years. And so over 550,000 ads on those strategic products and a net gain of over 230,000 of broadband total. It's the best we've done in 8 years. I think that's a good strong indication that it's working, especially when you consider the industry has been rife with examples of our competitors adjusting their offers, trying to do different things to stem the momentum we've had. So, I feel really good about where we're going on that front and to the effect we can add that with wireless subscribers, which we're showing that we can do over 50% of the time when somebody buys our fixed wireless product. and we're over 41% penetrated on our fiber base. That's a winning combination economically and what kind of differentiates us from everybody else in the industry. Okay. Shares are down a touch more than 1% which in the the grand scheme of today is is modest is a decline. The back and forth you had with the analysts was yes churn is up um and ARPUs are down but you you you seem not to be concerned about that. Why why is that not the metrics by which we should should look to progress? Yeah, part of it I think Ed as well is we've got a little bit of churn going on in the industry from CEO change outs and there's a little uncertainty around what the competitive posture is going to be and then you look at the data points you just referenced and we're the first to report and people are asking you know what what's going to happen when we hear from everybody else and my answer to your question is we're going to talk about the fact that we're focused on putting customers together with wireless and broadband and part of that dynamic is go penetrate segments that we've not been successful at penetrating or as successful. So when we go to value segments that we're maybe a little undershared in, you're going to naturally have a little bit less arpoo or average revenue per user when you pick that customer up. And when you combine wireless and broadband together, you may be giving initially a little bit better deal to do that. But that's designed into the plan. We want to grow in aggregate service revenues which we've demonstrated that we can do that. We indicated we're going to see some strengthening of that as we move through the year from where we were this quarter. And I'm okay with a little bit lower arpoo if we actually execute on this consolidated customer strategy and are more successful at penetrating some of these segments that we haven't been as active in. >> John Stany, AT&T CEO. It's great to have you back here on Bloomberg Tech. Thank you very much. Okay, coming up, ARM could be on the way to providing full chips as customers demand faster paths to market. We have more on that next. This is Bloomberg Tech. ARM is exploring an expansion into producing full complete chips as AI customers seek faster routes to market. CFO Jason Child discussed the plans with Bloomberg Tech's Tom McKenzie in London. We're actually exploring building full chips. Uh and the reason why is we are actually having customers in this AI cycle basically asking us can you help us be able to get products to market faster? Uh which means instead of us just taking the IP from you, can you actually just really help us design the chip? So it's something we're exploring. Coming up, Netflix drops as a tax dispute with Brazil cuts into its earnings which on the whole were pretty good. But that is quite a drop on track in fact for its biggest drop in a couple of years. We will have more on that story with a key analyst and some of the sound from the earnings call coming up next. What a day. What a show. Stay with us. This is Bloomberg Tech. Welcome back to Bloomberg Tech. One of our top earning stories is Netflix. The stock down significantly, 10%, putting it on track for its biggest drop since April of 2022. The story isn't the one we were expecting necessarily. A tax dispute with Brazil hit the company in the quarter. But Netflix, the streamer, has been saying for quite a long time, judge us by traditional financial metrics, please, Wall Street. Look beyond the content. Look beyond the subscriber count, which they don't disclose in the same way anymore. There's still a lot to talk about when it comes to Netflix. So, let's get to Alicia Reese Wedbush, senior VP of equity research. Um, and let's start with what is the headline, the Brazil tax dispute. Um, idiosyncratic to the quarter. Um, and and Netflix itself, let alone the sort of broader streaming landscape. What did you make of that? >> Well, they took the tax um, from 2022 to present. And so, if you look at it on a holistic basis, uh, it was over 300 basis points uh, impact to operating margin in the quarter. So that's why there was such a huge miss, but if you look forward, if you extrapolate that, it's only going to be about 20 basis points hit annually um going forward. So there's a pretty big difference um having had to take that over that long period of time. Um the legislation in Brazil um you know, just it was it was unclear and made them you know think and many other companies, not just Netflix, think that they didn't need to pay that up until recently. So they had to kind of back um back pay that or at least set aside the money for that. um you know again idiosyncratic as you say um there are a lot of other interesting highlights and um maybe some disappointments on the on the revenue line given the K-pop demon hunters phenom. >> Okay. So so dig into some of those disappointments. You know is that you disappointed wi with in the sense you had higher expectations? >> Um slightly higher expectations. I the thing is that Netflix is um trading at such a high or it was trading at such a high multiple Netflix has to continually knock it out of the park and revenue was in line um roughly and uh the fourth quarter guidance didn't impress you know extravagantly as Netflix typically does and that's one of the big reasons I think the stock's trading down. That being said, I think there's still plenty that you could pick out of the earnings call and the shareholder letter. They're very exciting for the future, >> you know, like I I've been super fixated on programming. I've been watching Black Rabbit, which is interesting piece of television. Despite the kind of spend and commitment to the slate, the free cash flow figures were really interesting. Like what do you make of the balance between like committing to content but also those traditional financial metrics? >> Yeah. Yeah. The free cash flow is so impressive. um they pulled back on the content spend just a little bit. Um I think they didn't need to spend quite as much and they don't need to in the fourth quarter just given the slate that they already have and how sticky it already is. Um I I think the most important thing though is to really dig into the advertising opportunity right now in the third quarter. I think the thing that um made the UKAN region not quite as um exciting as it typically would be is that Netflix while they're getting a lot of advertisers and they're getting all the bookings and their CPMs have probably leveled off from all the data we've gathered, what it looks like is that their ad delivery rates are just so incredibly low that they're not booking all of it. You have a lot of people on the ad tier. You just need to give them a little bit more ads um to really get that revenue to ramp up. in the fourth quarter, you have more live events and they can issue ads across all tiers and so they'll start to pick up on that um in the fourth quarter and certainly through 2026. >> You know, I'm the generation, the last generation where you had to have ads when you watch shows on television. So, you know, trying to process that. Look, um Bloomberg and others reported that Netflix is one of the companies circling for a part of Warner Brothers Discovery. Ted Sarandos addressed this idea of M&A on the call. Listen to what he said. >> We've been very clear in the past that we have no interest in owning legacy media networks. So there is no change there. Uh but in general, we believe that we can be and we will be choosy. Um we we have a great business. We're predominantly focused on growing organically, investing aggressively and responsibly into the growth and returning excess cash flow to shareholders through our sh to our share of repurchase. your interpretation of what Ted Sarandos was saying. >> Look, 10 years ago, HBO was the the top content that everyone wanted and Netflix was did not shy away. Reed Hastings did not shy away from saying that that was what they were shooting for. Netflix was shooting to be like HBO Max or HBO at the time. Um, they've since surpassed them. Um, they're leagues ahead. Now, that being said, you know, Warner Brothers still has some really excellent content, and if Netflix has an opportunity to kick the tires and see if they can get a piece of that and not the legacy media piece, um, sure, of course they're going to look at it, and if they can get it for a good price, of course they will. However, they're they're not the only ones looking at it, and they're certainly the only one who's looking at it just um, peace meal and trying to take the the best bits and and not the rest of it. So, I don't think they're going to be as competitive as the other um biders in, you know, looking at this. Ultimately, you know, what Ted also said that was really important is that they don't need to um use M&A to reach their targets. They don't need to um do that to reach all of their, you know, their growth goals. And so, you know, it would be a nice it's a nice to have, not a must have for Netflix. Alicia Ree Webbush. Thank you very much. Okay, let's stick with the earnings story. Tesla will report its results after the closing bell. Let's get the preview. Bloomberg's Craig Trudeell, our global autosar joins us. The quarter gone was recordbreaking. A number that I don't think many of us saw coming in terms of delivering EVs to customers. But as you know, it came with the asterisk that it was against the expiry of a federal tax credit in the United States. Is that the story tonight with Tesla or is there something much bigger here that we're bracing for? Yeah, I I I think uh there may be some possibility that we get some surprise about, you know, maybe some of the the costs that it took to achieve those results and and uh because I think, you know, we we heard uh Tesla itself executives on on the call uh a quarter ago kind of saying contradictory things, right, of of uh you know, we've we've got uh a fair amount of demand and and yet uh we do have some incentives on offer on top of of the $7,500 tax credit and you know sort of go out and buy your Tesla now before before it's too late. Uh you know the the big question though I think and the big point of emphasis for everybody is going to be do we hear Elon you know say again uh you know what yes we we may be in for a few rough quarters uh because of these credits going away and just how tough the sledding is going to be particularly in the US market. Uh and and also I think you know outside of the US we are just seeing uh Chinese manufacturers just really give Tesla a run for its money and how how concerning is that? >> Really quick Craig is tonight's earnings call a precursor for the compensation package vote on November 6th. It it does feel like a topic that uh will be difficult to completely ignore even if uh if if with any other CEO they would shy away from uh addressing the issue of of their own uh you know payday and uh yet I I would expect it absolutely to come up. There's so much anticipation for this next month. We're going to be running the blog on the Bloomberg terminal I think online as well. Either way you know where to find us. Bloomberg's critell. Thank you very much. Meta is set to seal an almost $30 billion financing package for its data center site in rural Louisiana, marking the final step for the largest private capital deal on record. Blue hour Capital and Meta will split ownership of the data center site with the tech giant retaining just 20% of it. That's according to sources. Blue O co-CEO Mark Libert sat down with Bloomberg's Danny Burgerer to discuss the challenges of getting this deal done. It was difficult to I'd say innovate together with Meta. That is to say it's new. It's groundbreaking as as you observe. It's a scale no one has dealt with. But Meta is an incredibly innovative company. Right. So this is this is a beautiful marriage of a deeply innovative company meets you know the the this sort of need for innovative capital solutions which certainly we think of as our calling card in Blue Owl. And so together we're able to craft something really bespoke at a scale that nobody has seen before. And that is exciting. And you know they they have a great team there. You know the CFO Susan Lee and the team to Todd Hessie and Michael Hart. I mean they're they're really good at what they do. Uh and working together we're able to do something that really worked for them and creates a great investment for us. There's a lot of excitement around AI and I think a lot of players would also look at Meta as a counterparty and also be excited by that. How competitive was this deal? >> So I do think at the end of the day partnerships will define this industry for the foreseeable future. And you know that's because it isn't just about capital. I mean yes capital is a necessary and important component and in quantum that people are not used to. But it isn't just capital. It's capital married with knowledge. capital married with skills to be able to craft a solution. It's not just a generic building. You have to picture the magnitude of what we're all talking about, right? This is a 2 gawatt complex. So, just to frame that, you know, that's that's more than a big city in America consumes in power in one site. You know, this is the largest data center complex being built, you know, as far as we know, in the world today. But remember, it's bigger than the one we announced three weeks ago, the Border Plex project. That's $22 billion, which is bigger than the one we had before that, which is Abalene, Texas, which is 15 billion through phases 1 and two. All of those are Blue Owl Solutions. All of them are different because in the case of say Abene, you have Crusoe who's a fantastic developer partner. So there we're partnered to a developer in putting together that massive and successful project for Oracle in Borderlex. We're building it internally. We have our own uh business called stack thousand people captive that does the development very complex projects. So stack is developing blue owl as a capital partner the borderlex project. Here meta is going to build and going to operate the data centers themselves. So it's three different flavors all of them require a different customized solution. All of which require really deep knowledge on the one hand and really deep access to capital and we have uniquely brought those two together. And so I think people know if they come to us we can deliver all the capital one-stop shop with the knowledge you need to do it right. >> So as the deals get bigger and bigger again this one $27 billion. How do you make sure just given the sheer size of it that Blue Owl as a whole isn't overly dependent and exposed to be it just this individual deal or these AI deal deals you're making? >> Yeah. Well, so people that um you know if you're a blue owl like our business is built on risk management, diversification. In fact, our whole business is about downside protection. So actually comes natural for us to be thinking about you know where are all the different pockets of risk and how do we manage them? Now very importantly in this space different from most others you got to remember we're dealing with companies that are the biggest companies in the world with the best credit ratings in the world. So there is a different question when it comes to concentration you know that is to say having a lot of exposure to Microsoft a lot of exposure to Meta a lot of exposure to Amazon those are pretty darn good exposures blue coe along with Bloomberg's Danny Burger in other Meta news the tech giant is cutting roughly 600 positions from its AI unit to move more quickly in the AI race the cuts won't affect Meta's newly formed lab unit. Though the company says it will continue to hire for AI efforts and some of those hires in the hundreds of millions of dollars when it comes to comp. Okay, coming up, Apple faces a few wrinkles in it plans for a giant foldable iPad. Got more on the Bloomberg exclusive next. This is Bloomberg Tech. Samsung and Google have launched a new mixed reality headset. It's a precursor to smart glasses that the companies say are coming pretty soon. Bloomber's consumer tech reporter Sam Kelly joins us now. Tell me about this project. It's a first step, right? But you've been able to get an insight into Samsung and Google's mixed reality capabilities. >> That's right. Yeah. So, Samsung's been working on this for quite a while. It'll directly compete with Apple's Vision Pro headset. Um, you know, it works very similarly. You put it on, there are two different um main areas, ways to sort of engage with the device. One is sort of a pass through experience where you kind of see your home screen apps in front of you using gestures to point and touch your um pin uh fingers together almost like pinching to open up apps and experience uh things that way. You can also have a more immersive experience such as, you know, watching Netflix or watching an NBA game where you feel like you're immersed. They're also, you know, because Google is involved too, um, you can experience Google Maps in a certain way where you're on street view and kind of go into different restaurants. And of course, the big thing here is AI. AI hasn't really had a major place on headsets before. And now you can communicate with Gemini, ask it questions. If you're watching a movie, you could circle an actor's face and say, "Who who is this actor? where do I know him from? So, that adds um a new layer to headsets in general. >> Let's turn our attentions to Apple. Bloomberg has some reporting around Apple's plans for a foldable iPad. Quickly, it's hit some snags. What do we know? >> Yes. So, Apple's been working on this for a while. Was projected to come out in 2028. Now, um Bloomberg is hearing that'll be pushed back to 2029 or even beyond. Uh so the concept is just an iPad that will um it opens up it folds uh kind of look more like a MacBook when folded. Uh but some challenges around the engineering related to the display um also related to the weight um you know to keep these things light is a a big challenge. Now Apple's trying to make it lighter. It also comes at a time when Apple's trying to uh you know drum up sales around iPad and also just bring new innovation into its product lines in general. We're seeing it experiment. The iPhone Air just came out recently, too. So, new form factors, but we might have to wait a little bit longer. >> Bloomberg, Sam Kelly, thank you very much. Let's get some more news in talking tech. First up, China's demanding some US chip firms submit sensitive data about their sales as part of a probe of American suppliers. Companies have been asked to provide further details, including costs, profits, customer names, and transaction details. Plus, SpaceX CEO Elon Musk took aim at NASA's interim administrator, Shawn Duffy. Musk took to X to insult Duffy, criticizing his proposal of folding NASA into the Department of Transportation and potentially staying on as the administrator instead of fintech billionaire Jared Isaacman. And Only Fan CEO Kylie Blair says the platform has paid out more than $25 billion to its content creators since it was founded. She spoke with Bloomberg's Caroline Hyde at the Bloomberg Tech Conference in London. >> We've paid out 25 billion to creators since 2016. So there's not very many tech companies that can talk about creating wealth for others um rather than just profiteering essentially. Um, and so for us as a company, that makes us very proud when we talk to our content creators and we understand the difference that it's made to their lives, the way that they can continue to challenge themselves or build their fan base or try something new, be a bit disruptive, be a bit, you know, reinvent themselves in some way. Um, and so for us as a business, providing a platform and enabling creators to have the tools to do that and to connect with their global fan base is is really the thing that makes us very proud. Coming up, more on Google and anthropos anthropics talks that could be worth tens of billions. This is Bloomberg Tech. Open AAI unveiled its first AI powered web browser, trying to take on Google in that new front. The browser called Chat GPT Atlas is designed to be a more personalized web experience and also field tasks such as booking flights or editing documents on a user's behalf. Back to our top story, sources saying anthropic and Google in discussions for a potential deal that would have Google providing cloud computing services to Anthropic high tens of billions of dollars. Mandep Sing of Bloomberg Intelligence wrote, "Google's expanded anthropic deal may speed TPU commercialization and cloud growth, echoing Oracle's multi-year open AI partnership that's driving its infrastructure revenue toward 106 billion by 2030." Let's get to BI's Anaragana who's joining us from Chicago. What is your take here in your thesis on what what this reporting about Anthropic and Google represents? >> See, there are two aspects of it. Anthropic has been working closely with Amazon Web Services. It also has investment from Google. So it is logical that they will be using some cloud capacity from Google as well. But the big question is whether this you know talks a little bit about AWS's infrastructure or this is just a matter of you looking for capacity at this point because everybody is constrained. Um Microsoft recently signed some new deals with a couple of neoclouds which gives us some insight that there may be more of an issue of they are not being able to build uh infrastructure as the demand is coming in and that's no different than what's happening with you know open AI also. So this could be just a capacity issue. Um longer term we anticipate all large language model to work with almost every hypers scale cloud provider that's out there uh because of the size of um you know the expectations once this gets to the enterprise level. >> So that let's linger on that last point. We we'd reported just last week that anthropic executives are doing this tour of the Middle East to secure money but also just like more capacity as a case study. Like a lot of people react to our reporting with with a a lack of understanding of how anthropic can need that much capacity like is it justified? >> Yeah, I mean if you look at the economic projections or the growth projections for both these vendors whether it's OpenAI or Anthropic I mean we are just in a very early innings of enterprise applications being built using some of these models. So we have this is a multi-year trend. The big question obviously is whether the GPUs that they are getting from AWS are they good enough or not that we'll find out over time. I I can't make that prediction today whether you know going to Google only for tech reasons but if you look at what even Microsoft is doing you know they have allowed open AI to go out and sign deals with Oracle with um you know other neoclouds core being one of them. So, you know, everybody is going and trying to find capacity right now and and that's the state we're in at this point. >> One source did tell me that the talks are about TPUs, but we'll keep reporting and we'll get the analysis from Blooming Intelligence and Anaragana. Thank you very much indeed. That does it for this edition of Bloomberg Tech. A lot of breaking news, a lot of it originating from Bloomberg's newsroom, but we are like right in the thick of earning season. So, recap on the podcast. You know where to find it on the Bloomberg terminal as well as online on Apple, Spotify, and iHeart. I appreciate all of you that tune in live every single day, but I know so many of you listen to this show in the form of a podcast, whether it's here in Silicon Valley or beyond. Have a great week. This is Bloomberg Tech.
Anthropic, Google Discuss Multibillion-Dollar Cloud Deal | Bloomberg Tech
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Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lelo in San Francisco. This is Bloomberg Tech. Coming up, Anthropic and Google discussing a deal for cloud computing services valued in the high tens of billions of dollars. Plus, we break down earnings. Netflix and Texas Instruments in focus while we await Tesla's results after the closing bell. And hot on the heels of AT&T's own earnings. We discuss with the company's CEO, John Stany. Let's get to our top story. Overnight, Bloomberg breaking the story that Anthropic is in talks with Alphabet, specifically Google for cloud computing capacity, high tens of billions of dollars. TPUs are in the mix. When we broke the story, Alphabet shares jumped in after market. Amazon fell. This is where we're trading right now in Wednesday's session. I broke that story with Bloomberg's Rachel Mets. Let's get out to her. Actually, Rachel, like the details are quite simple to understand. early talks and they're around capacity. But let's recap what we know. >> Yeah. So, as you said, uh the two companies have been discussing a plan uh for Enthropic to use Google's tensor processing units, TPUs. These are chips that uh are are can be used for a lot of things, but they also can be used for AI workloads. And anthropic, I think it's important to remember, is already a customer of Google's for its cloud service. And also um Google is an investor in Anthropic and Anthropic is a similar deal with Amazon too. So that's that's why you sort of see these these mixed reactions. There has been a lot of reaction to our reporting. Later in the program, we're going to speak to Bloomberg Intelligence about their take on it. Anthropic have been busy of late, right? We've reported that Dario Amade did this kind of tour of the Middle East seeking both money and compute capacity. The compute capacity bit is where people are trying to understand this. Like is it that just Anthropic really needs as much capacity as it can get or is this a story about how actually Google is kind of becoming the better partner for anthropic beyond an Amazon? >> I think there's a couple things that could be happening here. One is that yes, building the kind of AI uh models that Enthropic is building is extremely compute intensive and you can't just use like any cloud capacity you could find anywhere and you can't just use any chips. You have to use certain chips that are going to work well for the kinds of large language models they're building and the kinds of models that they are serving to people. So it it seems like a vote of confidence potentially for Google and for its chips. I mean, hardly any companies beyond Nvidia, AMD, um maybe one or two others have chips that people are willing to be using for these kinds of AI workloads. Um it also could make people a little nervous about what it says about Amazon and its ability to provide the services that a company like Anthropic needs. >> Bloomberg's Rachel Mets, thank you very much. Let's get to the earnings story starting with Texas Instruments. The stock fell the most in 3 months after it gave a lackluster forecast for the current quarter. Bloomberg's chips reporter Ian King is with us. Um actually a probably more simple story uh than than we expected. We got a lens into the health of analog devices. Texas Instruments is analog chips. You covered the the earnings blowby-blow. What do we need to know about this? >> So the first off the numbers not too bad. 14% growth for most companies would be fine, projecting something in the region of 11% for this current quarter. But what they said was more important. What they said was things are coming back. Everything's okay, but just not at the pace that we had been expecting. There's still some uncertainty out there. This is macro related. Companies aren't investing in their factories perhaps as quickly as we had hoped. And really, they were sort of painting this picture of a kind of an anemic kind of return to growth for the whole industry. When I was um reviewing your story, the the CEO said that overall the semiconductor market recovery is continuing that that seems a little bit in congruous with the the market's reaction to what's going on. The stock's down 5%. But also kind of, you know, what's specific to them? Well, what they're projecting is basically seasonal, right? What would happen normally if everything is equal in the fourth quarter. The problem is with that is that if we're in this recovery period, if we're in this bounce back from this inventory correction that we've suffered, things should be growing quicker than that. People should be rushing to stock up. People should be rushing to build new things and they're not. Bloomberg's Ian King, thank you very much. We actually just had some breaking news at the top of the show and it is moved shares of Google. You can see there on the screen. The company ran an algorithm on its Willow quantum computing chip that can be repeated on similar platforms and outperform classical supercomputers. A breakthrough it said clears a path for useful applications of quantum technology within 5 years. This was detailed in a paper published Wednesday in the science journal Nature. And you can see there on the screen the right hand side of the chart when those headlines hit Alphabet shares who had given up the gain they'd seen from our reporting on Anthropic suddenly jumped in the session to a gain of around 2%. We will continue to track that story and Alphabet shares throughout the show. Okay, back to earnings. Another steep share drop. Netflix disappointed investors with its results. The streaming giant blamed a tax dispute with Brazil for a cut to its third quarter earnings. Let's get more with Bloomberg's media editor, Felix Gillette. This tax issue, like yesterday, I went on television all day long saying maybe there'll be a foreign currency benefit to Netflix's earnings. We'll learn about advertising, but actually this tax issue is the main story. Just explain it. >> Uh, this is a longgoing dispute that Netflix has warned about in filings before. They didn't factor it into the forecast. They ended up having to pay several hundred million dollars more to Brazil. They're saying it's a one-time deal. it's not going to be material impact moving forward. They're trying to steer the attention back to the growth, you know, 17.5% growth in sales for the quarter and uh, you know, profit growth also up. >> You know, we were talking, Felix, about the idea that Netflix wants to be judged by its sort of traditional financial metrics. Those were quite good generally speaking, right? >> Yeah. Yeah. I mean, they were fine at this point. You know, I think investors were looking for more than fine. They were looking for an complete blowout quarter in part because, you know, they had such a strong slate of programming in the third quarter. You know, Wednesday, new episodes, Squid Game, new episodes, K-pop Demon Hunters. So, at this point, yeah, the programming looked good. The growth and sales looked good, but investors wanted more. >> Bloomberg's Felix Gillette, really appreciate your time. Thank you very much. Aayoko Yoshoka is a portfolio consulting director at the wealth enhancement group which holds some of the major magnificent seven names Texas Instruments and I think we can also talk a little bit about Netflix. That's where I'd quite like to start. Earning season in technology can bring all kinds of beautiful stories. Did you have a tax dispute with Brazil on your bingo card for what Netflix would tell us about the world of streaming? >> I did not have uh Brazil tax issues on my bingo card. Uh but I I think the Netflix earnings were actually pretty decent. Um you know, we forget that Netflix has actually come a long way from a free cash flow growth perspective. They were only generating about $1.6 billion about 2 and a half years ago and now they're generating close to $8 billion uh in free cash flow and that's uh slated to go to 11 billion. So we'd like to focus on that metric versus the Brazilian tax issue. >> Okay team, let's leave the shares up. were showing shares on the screen. The stock's down almost 10% on track for its biggest drop since April 2022. What was the big picture story about the health of streamers and streaming here and where Netflix sits in that landscape? >> Sure. I think from a consumer standpoint, you know, Netflix is one of those go-to uh programs that consumers are going to continue to go to. I I think that you know for for Netflix the content you mentioned has been very solid and even if the macro environment is a little shaky out there I think Netflix will continue to see subscriber growth and that's what we'd like to see over time let's get back to our top story today overnight Rachel Davey and I broke the story that Google is in early talks with Anthropic for a cloud computing deal capacity in the high tens of billions of dollars when We broke that story. Alphabet shares really jumped in after market. They've given up some of that gain in the in the market open this morning and Amazon fell. Uh Wealth Enhancement has some exposure particularly to Alphabet. What is your reaction to that reporting and what does it signal to you for those companies involved? >> You know, I think in general the sort of clue to me is just that the infrastructure buildout is still uh in its early phases, right? Uh, you know, we've heard so many announcements over the last several months and yet here we are with another one and just when you thought you weren't going to get another announcement related to AI infrastructure buildouts, you here we are with uh Google and Anthropic. Um, I think that the race is clearly on and we'll have to see who's really going to win. Um, but the buildout is sort of still in its early phases. The cloud computing market as we've always understood it and talked about it is AWS number one player, Google Cloud number three player. In the specifics of this story, both of those companies as it relates to AI workloads have some questions to answer here, right? So Amazon is also a significant investor in Anthropic. Our reporting says that Anthropic wants to use TPUs. What are you learning about the competitive nature of Alphabet's cloud offering or Google's cloud offering versus Amazon's in the AI domain? >> Sure. So, I I think we have to really dig into this in terms of, you know, what are the TPUs offering in terms of optimizing workflows that GPUs aren't and and how is this better suited for, you know, Google's sort of overall workflow? um and how they're going to be using AI through uh Gmail and Google Maps and a lot of their applications that they have in house and then how does that fit related to Amazon and how you know some of the algorithms are working uh for Amazon's you know uh suggestions for retail uh as well as advertising. I think there's still a lot to dig into here uh in terms of how this is all going to work out. Texas Instruments is worth lingering on. I think you know sometimes it's seen as almost like a crystal ball of what all kinds of end markets around the world will do coming up next because of because of how uh many analog chips go into all kinds of things. What was your read on the print there? >> Sure. So I think in general the you know as Ian said the this the overall quarter in earnings were actually pretty decent 14% growth but I think the read through into industrial markets into automotive uh into some of the consumer electronics that are more basic really shows that we're not in a macro environment that is growing gang busters. So outside of all of the AI investments that we're seeing in the economy, we're not seeing that sort of economic growth take off as much as I think people had hoped for. We're in it. This is it. Technology earning season, my Super Bowl. I don't know if it's your Super Bowl. what what was it that we were expecting to hear and what do you need to hear from the technology sector specifically the mag 7 I suppose to keep uh the direction of travel that we have seen in equity markets. >> Sure. So next week will be the the big week for all this including a Fed meeting to to cap it all off too. Um so I I think for for us we're always going to be looking at commentary around capex spend. I mean this is what really set it off years ago. Uh, and we're going to continue to see whether or not that spend continues from the hyperscalers or whether or not they need to, you know, take a little bit of a pause, but I think we're going to continue to see that spend. I mean, we're seeing announcements left and right. Uh, and so we'd like to kind of dig into that during earning season. >> Do you expect that tariffs specifically or any other Trump administration policy will play out on the calls or in the statements >> in the tech side? maybe a little bit, but I don't think it's going to be as prominent as some of the consumer names uh have talked about with with tariffs and and goods. Um I think it's going to be less of an issue. Uh you know, I think we've we've seen all of this talk about exporting uh that has had a little bit more of an impact and the sort of tit fortat with China that's probably going to be a little bit more of an impact. Um, but overall I really do think that investors are going to be focused on general capback spend ROI around AI and you know how that's playing out. >> Yoshoka of the Wealth Enhancement Group really appreciate you rolling with the news of the day and a big tech earning season. Coming up, AT&T CEO John Stany joins us to talk about the company's earnings and it was a big one. Investors still making up their minds. That's next. This is Bloomberg Tech. Welcome to our Bloomberg TV and radio audiences worldwide. We bring in AT&T CEO John Stany. The company reporting results this morning that showed higher than expected subscriber growth, though some analysts noting customer churn and average revenue per you per user showing signs of strain. Hey John, it's great to have you back with us. you know the story. >> Thanks for having me in. >> You're welcome. It's like a simple story. You know, the the the data from the quarter is very clear. There was an element of promotion um and and and marketing and deals that drove it. But how would you summarize it? >> Look, we had really strong growth as you indicated and we're really comfortable with our growth as as I think you're probably aware. We've been focusing on customers that want to buy both wireless and broadband from us. And when we can do that, even if it's promotional, that's a good customer to pick up because they have great lifetime values and over time they'll churn less and they'll address that very issue that you alluded to, which is the increasing churn in the industry. And we kind of anticipate as we acquire these customers, we're going to see a little bit of our pressure, partly because we obviously give them a better price for their loyalty. And over time, we move them up on the continuum of services. we sell. So, excuse me. By and large, we feel really good about it. >> John, I don't I don't know if you have some water there with you. Let me give you a second just to take a quick drink if you need it. Of course, in the quarter, and we've discussed this with a number of the carriers, it was iPhone 17. You know, I was there at Certino Apple Park on the day of its release. Can you give us a realterm sense, even if it's from the promotion perspective, of how big a factor the iPhone 17 was for you? >> Well, I think it's it's not a huge factor, but clearly there was a little bit of suppressed activity after the last iPhone cycle a year ago. Maybe some folks anticipated it was going to be a little bit larger. Customers were seeing if it was really framebreaking and change and concluded possibly that it wasn't and delayed waiting for the next cycle. And I think, you know, you can only suppress that activity for so long. And now the new device comes out, people see what it is. So there there has been an increase over last year and maybe some other previous years. It's not a record-breaking cycle, but it's strong and we're seeing that as a result, but I don't think it's anything dramatically out of pattern given the the suppression we've seen in the market. And we were very effective at working through it. 400,000 over 400,000 postpaid phone net ads shows we can compete in that space and do well with it. >> If you're joining us on Bloomberg television and radio, we're speaking to AT&T CEO John Stany. Final on the iPhone 17. Will it be more of a factor in the 3-month period that ends in December? Uh the holidays, >> well, the holiday season moving through the fourth quarter is always a peak season for everybody in the industry. I expect that's going to continue to be the case this year. Um I don't see anything what we've had over the first couple of weeks of the introduction to suggest we're going to see a step function change from current rate and pace. So all of our forward guidance that we've given expects that it's going to be competitive that we're going to compete and continue to earn our fair share of service revenues on those converge customers I talked about. And um I expect that uh it'll be as rambunctious in the industry as it has been and we'll do just fine. >> John, if I turn on my television and watch a show that has ads or I scroll on any given social media timeline, I keep seeing AT&T it talking about itself as a home internet provider. I know that's been a priority. Have you any evidence that that push has been a success and that you have positioned AT&T in that domain? Well, I'm I'm glad you're seeing those. It means we must be getting our right market and targets out there. And I think this quarter was an excellent example of it. We had our best broadband gain on our strategic products and services, fixed wireless and fiber, than we've had in 8 years. And so over 550,000 ads on those strategic products and a net gain of over 230,000 of broadband total. It's the best we've done in 8 years. I think that's a good strong indication that it's working, especially when you consider the industry has been rife with examples of our competitors adjusting their offers, trying to do different things to stem the momentum we've had. So, I feel really good about where we're going on that front and to the effect we can add that with wireless subscribers, which we're showing that we can do over 50% of the time when somebody buys our fixed wireless product. and we're over 41% penetrated on our fiber base. That's a winning combination economically and what kind of differentiates us from everybody else in the industry. Okay. Shares are down a touch more than 1% which in the the grand scheme of today is is modest is a decline. The back and forth you had with the analysts was yes churn is up um and ARPUs are down but you you you seem not to be concerned about that. Why why is that not the metrics by which we should should look to progress? Yeah, part of it I think Ed as well is we've got a little bit of churn going on in the industry from CEO change outs and there's a little uncertainty around what the competitive posture is going to be and then you look at the data points you just referenced and we're the first to report and people are asking you know what what's going to happen when we hear from everybody else and my answer to your question is we're going to talk about the fact that we're focused on putting customers together with wireless and broadband and part of that dynamic is go penetrate segments that we've not been successful at penetrating or as successful. So when we go to value segments that we're maybe a little undershared in, you're going to naturally have a little bit less arpoo or average revenue per user when you pick that customer up. And when you combine wireless and broadband together, you may be giving initially a little bit better deal to do that. But that's designed into the plan. We want to grow in aggregate service revenues which we've demonstrated that we can do that. We indicated we're going to see some strengthening of that as we move through the year from where we were this quarter. And I'm okay with a little bit lower arpoo if we actually execute on this consolidated customer strategy and are more successful at penetrating some of these segments that we haven't been as active in. >> John Stany, AT&T CEO. It's great to have you back here on Bloomberg Tech. Thank you very much. Okay, coming up, ARM could be on the way to providing full chips as customers demand faster paths to market. We have more on that next. This is Bloomberg Tech. ARM is exploring an expansion into producing full complete chips as AI customers seek faster routes to market. CFO Jason Child discussed the plans with Bloomberg Tech's Tom McKenzie in London. We're actually exploring building full chips. Uh and the reason why is we are actually having customers in this AI cycle basically asking us can you help us be able to get products to market faster? Uh which means instead of us just taking the IP from you, can you actually just really help us design the chip? So it's something we're exploring. Coming up, Netflix drops as a tax dispute with Brazil cuts into its earnings which on the whole were pretty good. But that is quite a drop on track in fact for its biggest drop in a couple of years. We will have more on that story with a key analyst and some of the sound from the earnings call coming up next. What a day. What a show. Stay with us. This is Bloomberg Tech. Welcome back to Bloomberg Tech. One of our top earning stories is Netflix. The stock down significantly, 10%, putting it on track for its biggest drop since April of 2022. The story isn't the one we were expecting necessarily. A tax dispute with Brazil hit the company in the quarter. But Netflix, the streamer, has been saying for quite a long time, judge us by traditional financial metrics, please, Wall Street. Look beyond the content. Look beyond the subscriber count, which they don't disclose in the same way anymore. There's still a lot to talk about when it comes to Netflix. So, let's get to Alicia Reese Wedbush, senior VP of equity research. Um, and let's start with what is the headline, the Brazil tax dispute. Um, idiosyncratic to the quarter. Um, and and Netflix itself, let alone the sort of broader streaming landscape. What did you make of that? >> Well, they took the tax um, from 2022 to present. And so, if you look at it on a holistic basis, uh, it was over 300 basis points uh, impact to operating margin in the quarter. So that's why there was such a huge miss, but if you look forward, if you extrapolate that, it's only going to be about 20 basis points hit annually um going forward. So there's a pretty big difference um having had to take that over that long period of time. Um the legislation in Brazil um you know, just it was it was unclear and made them you know think and many other companies, not just Netflix, think that they didn't need to pay that up until recently. So they had to kind of back um back pay that or at least set aside the money for that. um you know again idiosyncratic as you say um there are a lot of other interesting highlights and um maybe some disappointments on the on the revenue line given the K-pop demon hunters phenom. >> Okay. So so dig into some of those disappointments. You know is that you disappointed wi with in the sense you had higher expectations? >> Um slightly higher expectations. I the thing is that Netflix is um trading at such a high or it was trading at such a high multiple Netflix has to continually knock it out of the park and revenue was in line um roughly and uh the fourth quarter guidance didn't impress you know extravagantly as Netflix typically does and that's one of the big reasons I think the stock's trading down. That being said, I think there's still plenty that you could pick out of the earnings call and the shareholder letter. They're very exciting for the future, >> you know, like I I've been super fixated on programming. I've been watching Black Rabbit, which is interesting piece of television. Despite the kind of spend and commitment to the slate, the free cash flow figures were really interesting. Like what do you make of the balance between like committing to content but also those traditional financial metrics? >> Yeah. Yeah. The free cash flow is so impressive. um they pulled back on the content spend just a little bit. Um I think they didn't need to spend quite as much and they don't need to in the fourth quarter just given the slate that they already have and how sticky it already is. Um I I think the most important thing though is to really dig into the advertising opportunity right now in the third quarter. I think the thing that um made the UKAN region not quite as um exciting as it typically would be is that Netflix while they're getting a lot of advertisers and they're getting all the bookings and their CPMs have probably leveled off from all the data we've gathered, what it looks like is that their ad delivery rates are just so incredibly low that they're not booking all of it. You have a lot of people on the ad tier. You just need to give them a little bit more ads um to really get that revenue to ramp up. in the fourth quarter, you have more live events and they can issue ads across all tiers and so they'll start to pick up on that um in the fourth quarter and certainly through 2026. >> You know, I'm the generation, the last generation where you had to have ads when you watch shows on television. So, you know, trying to process that. Look, um Bloomberg and others reported that Netflix is one of the companies circling for a part of Warner Brothers Discovery. Ted Sarandos addressed this idea of M&A on the call. Listen to what he said. >> We've been very clear in the past that we have no interest in owning legacy media networks. So there is no change there. Uh but in general, we believe that we can be and we will be choosy. Um we we have a great business. We're predominantly focused on growing organically, investing aggressively and responsibly into the growth and returning excess cash flow to shareholders through our sh to our share of repurchase. your interpretation of what Ted Sarandos was saying. >> Look, 10 years ago, HBO was the the top content that everyone wanted and Netflix was did not shy away. Reed Hastings did not shy away from saying that that was what they were shooting for. Netflix was shooting to be like HBO Max or HBO at the time. Um, they've since surpassed them. Um, they're leagues ahead. Now, that being said, you know, Warner Brothers still has some really excellent content, and if Netflix has an opportunity to kick the tires and see if they can get a piece of that and not the legacy media piece, um, sure, of course they're going to look at it, and if they can get it for a good price, of course they will. However, they're they're not the only ones looking at it, and they're certainly the only one who's looking at it just um, peace meal and trying to take the the best bits and and not the rest of it. So, I don't think they're going to be as competitive as the other um biders in, you know, looking at this. Ultimately, you know, what Ted also said that was really important is that they don't need to um use M&A to reach their targets. They don't need to um do that to reach all of their, you know, their growth goals. And so, you know, it would be a nice it's a nice to have, not a must have for Netflix. Alicia Ree Webbush. Thank you very much. Okay, let's stick with the earnings story. Tesla will report its results after the closing bell. Let's get the preview. Bloomberg's Craig Trudeell, our global autosar joins us. The quarter gone was recordbreaking. A number that I don't think many of us saw coming in terms of delivering EVs to customers. But as you know, it came with the asterisk that it was against the expiry of a federal tax credit in the United States. Is that the story tonight with Tesla or is there something much bigger here that we're bracing for? Yeah, I I I think uh there may be some possibility that we get some surprise about, you know, maybe some of the the costs that it took to achieve those results and and uh because I think, you know, we we heard uh Tesla itself executives on on the call uh a quarter ago kind of saying contradictory things, right, of of uh you know, we've we've got uh a fair amount of demand and and yet uh we do have some incentives on offer on top of of the $7,500 tax credit and you know sort of go out and buy your Tesla now before before it's too late. Uh you know the the big question though I think and the big point of emphasis for everybody is going to be do we hear Elon you know say again uh you know what yes we we may be in for a few rough quarters uh because of these credits going away and just how tough the sledding is going to be particularly in the US market. Uh and and also I think you know outside of the US we are just seeing uh Chinese manufacturers just really give Tesla a run for its money and how how concerning is that? >> Really quick Craig is tonight's earnings call a precursor for the compensation package vote on November 6th. It it does feel like a topic that uh will be difficult to completely ignore even if uh if if with any other CEO they would shy away from uh addressing the issue of of their own uh you know payday and uh yet I I would expect it absolutely to come up. There's so much anticipation for this next month. We're going to be running the blog on the Bloomberg terminal I think online as well. Either way you know where to find us. Bloomberg's critell. Thank you very much. Meta is set to seal an almost $30 billion financing package for its data center site in rural Louisiana, marking the final step for the largest private capital deal on record. Blue hour Capital and Meta will split ownership of the data center site with the tech giant retaining just 20% of it. That's according to sources. Blue O co-CEO Mark Libert sat down with Bloomberg's Danny Burgerer to discuss the challenges of getting this deal done. It was difficult to I'd say innovate together with Meta. That is to say it's new. It's groundbreaking as as you observe. It's a scale no one has dealt with. But Meta is an incredibly innovative company. Right. So this is this is a beautiful marriage of a deeply innovative company meets you know the the this sort of need for innovative capital solutions which certainly we think of as our calling card in Blue Owl. And so together we're able to craft something really bespoke at a scale that nobody has seen before. And that is exciting. And you know they they have a great team there. You know the CFO Susan Lee and the team to Todd Hessie and Michael Hart. I mean they're they're really good at what they do. Uh and working together we're able to do something that really worked for them and creates a great investment for us. There's a lot of excitement around AI and I think a lot of players would also look at Meta as a counterparty and also be excited by that. How competitive was this deal? >> So I do think at the end of the day partnerships will define this industry for the foreseeable future. And you know that's because it isn't just about capital. I mean yes capital is a necessary and important component and in quantum that people are not used to. But it isn't just capital. It's capital married with knowledge. capital married with skills to be able to craft a solution. It's not just a generic building. You have to picture the magnitude of what we're all talking about, right? This is a 2 gawatt complex. So, just to frame that, you know, that's that's more than a big city in America consumes in power in one site. You know, this is the largest data center complex being built, you know, as far as we know, in the world today. But remember, it's bigger than the one we announced three weeks ago, the Border Plex project. That's $22 billion, which is bigger than the one we had before that, which is Abalene, Texas, which is 15 billion through phases 1 and two. All of those are Blue Owl Solutions. All of them are different because in the case of say Abene, you have Crusoe who's a fantastic developer partner. So there we're partnered to a developer in putting together that massive and successful project for Oracle in Borderlex. We're building it internally. We have our own uh business called stack thousand people captive that does the development very complex projects. So stack is developing blue owl as a capital partner the borderlex project. Here meta is going to build and going to operate the data centers themselves. So it's three different flavors all of them require a different customized solution. All of which require really deep knowledge on the one hand and really deep access to capital and we have uniquely brought those two together. And so I think people know if they come to us we can deliver all the capital one-stop shop with the knowledge you need to do it right. >> So as the deals get bigger and bigger again this one $27 billion. How do you make sure just given the sheer size of it that Blue Owl as a whole isn't overly dependent and exposed to be it just this individual deal or these AI deal deals you're making? >> Yeah. Well, so people that um you know if you're a blue owl like our business is built on risk management, diversification. In fact, our whole business is about downside protection. So actually comes natural for us to be thinking about you know where are all the different pockets of risk and how do we manage them? Now very importantly in this space different from most others you got to remember we're dealing with companies that are the biggest companies in the world with the best credit ratings in the world. So there is a different question when it comes to concentration you know that is to say having a lot of exposure to Microsoft a lot of exposure to Meta a lot of exposure to Amazon those are pretty darn good exposures blue coe along with Bloomberg's Danny Burger in other Meta news the tech giant is cutting roughly 600 positions from its AI unit to move more quickly in the AI race the cuts won't affect Meta's newly formed lab unit. Though the company says it will continue to hire for AI efforts and some of those hires in the hundreds of millions of dollars when it comes to comp. Okay, coming up, Apple faces a few wrinkles in it plans for a giant foldable iPad. Got more on the Bloomberg exclusive next. This is Bloomberg Tech. Samsung and Google have launched a new mixed reality headset. It's a precursor to smart glasses that the companies say are coming pretty soon. Bloomber's consumer tech reporter Sam Kelly joins us now. Tell me about this project. It's a first step, right? But you've been able to get an insight into Samsung and Google's mixed reality capabilities. >> That's right. Yeah. So, Samsung's been working on this for quite a while. It'll directly compete with Apple's Vision Pro headset. Um, you know, it works very similarly. You put it on, there are two different um main areas, ways to sort of engage with the device. One is sort of a pass through experience where you kind of see your home screen apps in front of you using gestures to point and touch your um pin uh fingers together almost like pinching to open up apps and experience uh things that way. You can also have a more immersive experience such as, you know, watching Netflix or watching an NBA game where you feel like you're immersed. They're also, you know, because Google is involved too, um, you can experience Google Maps in a certain way where you're on street view and kind of go into different restaurants. And of course, the big thing here is AI. AI hasn't really had a major place on headsets before. And now you can communicate with Gemini, ask it questions. If you're watching a movie, you could circle an actor's face and say, "Who who is this actor? where do I know him from? So, that adds um a new layer to headsets in general. >> Let's turn our attentions to Apple. Bloomberg has some reporting around Apple's plans for a foldable iPad. Quickly, it's hit some snags. What do we know? >> Yes. So, Apple's been working on this for a while. Was projected to come out in 2028. Now, um Bloomberg is hearing that'll be pushed back to 2029 or even beyond. Uh so the concept is just an iPad that will um it opens up it folds uh kind of look more like a MacBook when folded. Uh but some challenges around the engineering related to the display um also related to the weight um you know to keep these things light is a a big challenge. Now Apple's trying to make it lighter. It also comes at a time when Apple's trying to uh you know drum up sales around iPad and also just bring new innovation into its product lines in general. We're seeing it experiment. The iPhone Air just came out recently, too. So, new form factors, but we might have to wait a little bit longer. >> Bloomberg, Sam Kelly, thank you very much. Let's get some more news in talking tech. First up, China's demanding some US chip firms submit sensitive data about their sales as part of a probe of American suppliers. Companies have been asked to provide further details, including costs, profits, customer names, and transaction details. Plus, SpaceX CEO Elon Musk took aim at NASA's interim administrator, Shawn Duffy. Musk took to X to insult Duffy, criticizing his proposal of folding NASA into the Department of Transportation and potentially staying on as the administrator instead of fintech billionaire Jared Isaacman. And Only Fan CEO Kylie Blair says the platform has paid out more than $25 billion to its content creators since it was founded. She spoke with Bloomberg's Caroline Hyde at the Bloomberg Tech Conference in London. >> We've paid out 25 billion to creators since 2016. So there's not very many tech companies that can talk about creating wealth for others um rather than just profiteering essentially. Um, and so for us as a company, that makes us very proud when we talk to our content creators and we understand the difference that it's made to their lives, the way that they can continue to challenge themselves or build their fan base or try something new, be a bit disruptive, be a bit, you know, reinvent themselves in some way. Um, and so for us as a business, providing a platform and enabling creators to have the tools to do that and to connect with their global fan base is is really the thing that makes us very proud. Coming up, more on Google and anthropos anthropics talks that could be worth tens of billions. This is Bloomberg Tech. Open AAI unveiled its first AI powered web browser, trying to take on Google in that new front. The browser called Chat GPT Atlas is designed to be a more personalized web experience and also field tasks such as booking flights or editing documents on a user's behalf. Back to our top story, sources saying anthropic and Google in discussions for a potential deal that would have Google providing cloud computing services to Anthropic high tens of billions of dollars. Mandep Sing of Bloomberg Intelligence wrote, "Google's expanded anthropic deal may speed TPU commercialization and cloud growth, echoing Oracle's multi-year open AI partnership that's driving its infrastructure revenue toward 106 billion by 2030." Let's get to BI's Anaragana who's joining us from Chicago. What is your take here in your thesis on what what this reporting about Anthropic and Google represents? >> See, there are two aspects of it. Anthropic has been working closely with Amazon Web Services. It also has investment from Google. So it is logical that they will be using some cloud capacity from Google as well. But the big question is whether this you know talks a little bit about AWS's infrastructure or this is just a matter of you looking for capacity at this point because everybody is constrained. Um Microsoft recently signed some new deals with a couple of neoclouds which gives us some insight that there may be more of an issue of they are not being able to build uh infrastructure as the demand is coming in and that's no different than what's happening with you know open AI also. So this could be just a capacity issue. Um longer term we anticipate all large language model to work with almost every hypers scale cloud provider that's out there uh because of the size of um you know the expectations once this gets to the enterprise level. >> So that let's linger on that last point. We we'd reported just last week that anthropic executives are doing this tour of the Middle East to secure money but also just like more capacity as a case study. Like a lot of people react to our reporting with with a a lack of understanding of how anthropic can need that much capacity like is it justified? >> Yeah, I mean if you look at the economic projections or the growth projections for both these vendors whether it's OpenAI or Anthropic I mean we are just in a very early innings of enterprise applications being built using some of these models. So we have this is a multi-year trend. The big question obviously is whether the GPUs that they are getting from AWS are they good enough or not that we'll find out over time. I I can't make that prediction today whether you know going to Google only for tech reasons but if you look at what even Microsoft is doing you know they have allowed open AI to go out and sign deals with Oracle with um you know other neoclouds core being one of them. So, you know, everybody is going and trying to find capacity right now and and that's the state we're in at this point. >> One source did tell me that the talks are about TPUs, but we'll keep reporting and we'll get the analysis from Blooming Intelligence and Anaragana. Thank you very much indeed. That does it for this edition of Bloomberg Tech. A lot of breaking news, a lot of it originating from Bloomberg's newsroom, but we are like right in the thick of earning season. So, recap on the podcast. You know where to find it on the Bloomberg terminal as well as online on Apple, Spotify, and iHeart. I appreciate all of you that tune in live every single day, but I know so many of you listen to this show in the form of a podcast, whether it's here in Silicon Valley or beyond. Have a great week. This is Bloomberg Tech.