Tesla’s Profit Tumbles as Costs Undermine Record EV Sales | Bloomberg Intelligence
Summary
Tesla Earnings: Tesla reported a record quarter for vehicle sales, but operating profit plunged by 40%, marking the fourth consecutive quarter of declining earnings due to increased costs and tariffs.
Elon Musk's Pay Package: Elon Musk's proposed $1 trillion pay package is under scrutiny, with proxy advisers recommending investors reject it, highlighting the tension between control and performance expectations.
Market Sentiment on Tesla: Despite weak earnings, investor sentiment remains divided with long-term believers focusing on Tesla's potential in autonomous vehicles and AI, while short-term investors are concerned about current profitability.
T-Mobile Performance: T-Mobile experienced strong subscriber growth but faced pricing pressure, reflecting a competitive promotional environment in the telecom industry, with potential M&A in fiber broadband as a strategic focus.
Airline Industry Trends: American Airlines shows optimism for Q4 with balanced capacity growth, while Southwest is transitioning its business model to include more premium services, facing pressure from activist investors.
Cloud Gaming Evolution: The gaming industry is gradually shifting towards cloud-based gaming, with advancements in 5G and mobile technology potentially reducing the need for traditional gaming consoles over the next decade.
Transcript
[Music] Bloomberg Audio Studios podcasts radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's bring in Steve Man, Bloomberg Intelligence, Global Autos, and Industrials research analyst to recap Tesla earnings. help us look ahead for this company, Steve. Uh, record quarter vehicle sales, which we knew, but operating profit plunged 40% and we're now looking at a fourth straight quarters of falling earnings and no real sign that that's going to turn around anytime soon either. >> Yeah. Uh, it was quite a surprise given the volume of production. Uh, you would think that uh, you know, the fixed cost absorption would be higher this quarter than in the past, but it didn't happen. Looks like you know our uh looks like uh uh the appreciation cost uh increased for them looks like the tariff cost impact is is greater than expected and then even below the gross margin line uh the R&D cost uh went up quite a bit that you know that could be viewed as a good thing because that's the you know that's a sign they're pivoting to you know the robo taxi the FSD and you know the Optimus robots >> and Elon Musk uh I guess towards the end the call made a plea for uh investors to approve his $1 trillion pay package. Quote, this is from Elon. There needs to be enough voting control to give a strong influence, but not so much that I can't be fired if I go insane, Mr. Musk said. Um, how did that go over on the call here? And what's the thinking among investor community about what may be a $1 trillion pay package? >> Yeah, I I'm not sure if money is important to him. He does have a lot already. So uh I do believe that it's more about the control of the company. Look, Tesla doesn't have the dual class shares like some of the tech companies have. Uh so uh there is he he does have that fear of getting uh pushed out and you know he had that experience right with open AI you know he's one of the initial investors uh in open AI and he he got pushed out. Um so he he does have the concern. Uh it is his baby. Look, the stocks, you know, uh the other thing is the stock hasn't reacted, you know, too negatively to the weak earnings that we saw in the last quarter. I there's there's a battle happening between the the the bulls and the bears, the long the long guys versus the near-term uh uh uh investors. And you know there are a lot of people believe who believes that the you know he can achieve um you know the the the opt getting the optimism robot up and running uh you know getting uh art physical AI uh going. So uh there's a lot of believers out there. There's a lot of believers and um you know what the company actually reports especially when it comes to his vehicle sales almost doesn't matter based on this idea that Elon Musk will steer the company in the right direction eventually maybe because uh you know the robo taxis which are you know in operation but these self-driving vehicles the humanoid robots those are going to take a couple of years to pan out if that we don't have any details on it. So in the meantime what what is the growth driver for this company? Well, it you know he definitely in the call he you know he doesn't talk about cars a lot anymore other than robo taxi and FSD. He's very focused on physical AI but at the end of the day right and I think that's why the stock is still down a little bit is that you know they he needs to sell cars. He needs to continue to sell cars to actually generate the cash to support his endeavors. Now he has launched cheaper vehicles. It would be better. It would have been better if he uh is offering even a cheaper model like something under 30,000 that you know he we talked about in the past. uh he is expanding overseas right he had you know record sales in countries like Japan and South Korea now he's going into India big market big market so um you know you know cars is still going to be important I think a lot of you know the other half of investor knows and that's why the stock is down today >> one could argue that they should produce less cars fewer cars I mean why produce something if you're not making money on it when in the end of the day This is effectively one could say just a holding company for R&D for the other businesses. >> That's an interesting question. I think you know if we step back and think about Tesla, it's almost when you listen to Elon Musk, it's almost like he's resetting the company to make it look like a startup, right? But the big difference is >> uh the big difference between now and 10 years ago is that he has a huge cash generator which is selling cars, right? So I think that's something and also on the bull the investor investor's mind on the bull side that hey you know we're investing on this company for the long term this physical AI that nobody's really doing >> uh to the extent they are uh and now the big difference is is that you know there's very low risk of of it going bankrupt uh like it did you know when he was starting the car business. >> Yeah it's far from a startup now. Um you mentioned how Elon Musk um you know spent some time talking about his pay package his $1 trillion pay package which is over the long term and involves him meeting a lot of ambitious targets. Um ISS institutional shareholder services as well as Glass Lewis these proxy advisers have recommended that investors reject this payout. Does that matter? I mean are their votes um are binding in any way or is this going to end up in the courts and Musk is going to get his way? It it does it does matter because uh you know a lot of the the funds out there are are index funds. So uh so it does matter what they say and that's why he he needed to address that uh in in the call. Um but it it's going to be tight. I mean it's going to be up in the air tight uh because there are a lot of individual investors as well, retail investors as well. uh and you know those people are focused on you know the hope three or five years from now uh they he will able to kind of meet those targets uh have a a viable optimist robot and a lot of robo taxis you know running around on its own across the country. >> What is a what is Elon and the company saying about uh China both as an end market and as a competitor globally? Yeah, China is uh is a challenging market. Uh I think a lot of the policy over there do favor the local automakers. But look uh the Tesla brand is still uh uh highly regarded over there, not just by the consumer uh but the you know their competitors, the BYDs, the Xpunk, right? uh a lot of those companies, you know, when they're looking at autonomous vehicles, autonomous technology, they are benchmarking Tesla. So, uh and Tesla, you know, I think is is being nimble as well. They've launched the longer version of Model Y that works over there. Um because if you look at you know the other foreign linkages like BMW, Mercedes, GM and and the likes they have uh introduced extended version of their vehicles that they s uh that they sell over there uh and it resonates with the consumer there. So you know it's they're they're still kind of work in progress >> uh over there. They're watching the market is changing very rapidly. uh they're still and they're still waiting for official approval of the FSD which you know I think the it will resonate well with the consumers and and it has so far from beta testers. >> Stay with us more from Bloomberg Intelligence coming up after this. >> You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Broadband, thank you. Internet broadband company to report is T-Mobile. So, we got to bring in our own John Butler who covers telecom companies for us uh to get us his analysis. John, what's the verdict here on T-Mobile? >> So, the verdict here, Scarlet, is it was a little bit of a mixed quarter for them. Um, if you look at what AT&T reported yesterday, the trends at T-Mobile really mirrored what we saw out of uh, AT&T, which is subscriber growth was up. That was strong, pardon me, but pricing was a little bit weak. And so that tells everyone it's a promotional environment right now. Um, I think probably the iPhone 17 had something to do with it. It's actually turning out to be a pretty strong cycle for that upgrade. And of course, when you go out to buy a new phone, people always think about switching carriers. So, it boosts switching activity. The carriers all promote to protect their base. And Verizon hasn't reported yet. Well, we can talk about that a little bit more, but they have a new CEO. And so the grand concern in telecom land right now is that the new CEO of Verizon if they lose share to AT&T and and um T-Mobile, they're going to get their dukes up and start to promote for the first time in a while. And that's bad overall for the industry. >> So what's the T-Mobile U marketing positioning right now for within a very competitive wireless business, John? So, uh, good question, Paul. They are, you know, for years they sort of leaned into this consumerfriendly brand. You know, we're the guys that were the uncarrier. That is their tagline. And, um, you know, they've done a very good job promoting a very strong brand image. They're now a lot larger and I think what they're doing is starting to lean a lot more on their network quality. They've done a great job over the past 3 to 5 years of really upgrading that network since they bought Sprint. They got a ton of mid-band spectrum, which is terrific for download speeds. Um, and so they're laying in coverage with that and they're getting as that coverage expands, they're getting a great high capacity footprint. And so network performance has improved a lot. And I think they're leaning heavily into that now to promote the brand. >> You mentioned Verizon has a new CEO. T-Mobile also has a new CEO uh coming up soon. CEO Mike Severt is stepping down on November 1st. Uh so in a week and the COO Shiny Gopalan will take over. How is he going to put his mark on this company? >> I'll tell you Mike is a tough act to follow. People were all listening for any sort of a change in strategy this morning because um ran the call which I think was wise. Mike Siver was on the call as well because he's still in that seat until November 1st as you said but um ran the call and I really didn't hear anything different from him. I think they're they've got a winning formula going right now and I think they're going to lean into that. One thing, Scarlet, that you mentioned at the beginning in the intro is broadband. And I think that's an area where T-Mobile has been lacking a little bit specifically on the fiber side. And on the call, they mentioned the potential for further M&A. And I think if they were to buy any companies going forward, it would be in the realm of fiber broadband. So if if Shriny does anything different, it'll be to step up M&A on the fiber front. >> Stay with us. More from Bloomberg Intelligence coming up after this. >> You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's talk about airlines uh because two more airlines just reported results. American Airlines flying high. Um and then LUV Southwest. >> Do you know why the ticker is LUV? >> No, I don't. >> Uh because they initially they're flew out of Love Field in Dallas. >> Ah, makes sense. Yes, they are based there. Well, let's bring in our own George Ferguson. He is Bloomberg intelligence uh aviation analyst uh and of course uh he also covers the defense sector and the aerospace sector to give us a little more insight onto what he sees. Um, American is different from Delta and United in that it is much more domestically focused. So, we get a better read of how much people are spending to fly inside the US, whether it's for leisure travel or business travel. >> Yeah. And so, uh, from American, you know, what we saw actually in the third quarter was pretty similar to be honest to what United showed us. Uh, and I'm talking about sort of yields, price paid per mile flown uh, by their customers. Americans a very important domestic uh you know provider of travel. Um >> so you know I would say that um I wasn't super impressed with what I saw in 3Q. I think the flying high is about all about what what American is guiding to in 4Q a sizable a sizable bump. You know, when we look at some of the domestic capacity trends uh for 4Q, we see a market that's probably going to see SE growth of around 1 and a.5% or so, which seems for the first time in a while roughly in balance with where the economy is growing. So, something like that should support Americans earnings in 4Q. I mean, it's still some of their guidance seems a little aggressive to me, but uh I guess sort of given the backdrop of supply uh and maybe some of Americans initiatives as they try to retake some of the market share that they had previously, uh maybe seems more feasible than other other guidance we've seen. >> How about Southwest Georgia? Um they're starting to charge for lots of stuff like bags and different seats and all that kind of stuff which um they had not done previously. that had kind of been their core marketing strategy were the kind of the bare bones guys. What are they just seeing in their business? >> Yeah. You know, I just got off the Southwest call and my head hurts. Um, so there's a lot of initiatives going on here, right? And like you said, we're, you know, we're going from an airline here that was bare bones, bags fly free, blah blah blah. uh you know you keep uh you know there's no breakage in your I think you know frequent flyer miles and if you buy a ticket you can't use it there's no expiration of your credit now we're going to change everything right and so the call's full of a lot of discussion about how the initiatives in 2026 are going to add a billion here you know from uh premium seating and 700 million there so there's a lot of big numbers being thrown around uh you know, I I think the I think the marketplace is a bit challenged to get its its head around, you know, whether or not all of these really roll through the bottom line for Southwest. Um, but what I will say is I think there's some pretty strong opportunity uh out southwest given I think they have a a pretty loyal brand following and as they roll out some of the initiatives you're seeing at the full service carriers like United American and Delta as they roll out initiatives like branded credit cards uh improving the loyalty program. And they're even talking on this call a little bit about um hub cities and uh and lounges which you know just kind of again threw my blew my mind. Um there is I think an opportunity for them to monetize all of that as they turn into something that looks a lot more like a full service carrier. The question is on timeline. Uh my guess is there's a there's a a decent timeline as they sort of retrain their customers. Uh but but I think you know in Fork they have some pretty aggressive uh uh bounce back uh inside their guidance as well. And I think the streets just kind of trying to get its head around really how much of these initiatives are going to come to fruition in 4Q. So, when it comes to Southwest, the activist investors really pushed it to change its business model from this one-sizefits-all kind of uh offering. There was no checked bag fees, no uh prepaid seat assignments. Does this set of results kind of get that that pressure off its back? >> Uh no. So, I would say 3Q results would not. I thought 3Q they did uh okay. Uh you know, their their expenses came in a bit better than we expected. Their revenue was pretty similar. I think nothing impressive. 3Q is generally kind of I think blah across most of the airlines. It wasn't that exciting. There's a lot more sort of built into 4Q and beyond. Um so no, I don't I don't know that this necessarily gets uh Elliot sort of off their back, right? I think they've got a lot of initiatives to perform on to keep to keep Elliot uh happy, shall we say. >> Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. >> We'll take a look at what's happening uh in the cloud. Uh we get some more cloud/te news coming. Uh AI adoption in video games can push Microsoft, Sony, Nvidia to kill the console. How about a headline like that? Nathan Nadu uh joins us here. He is the Bloomberg Intelligence Technology research analyst. Uh talk to us about the cloud and what that means for the gaming business. I'm not going to have to go out and buy any more gaming consoles. >> Well, not not for the long term. Thanks for that uh uh lead, Paul. Like I I feel like I owe everybody an explanation when I use word like kill because uh really in the 10 years that could actually happens like what I meant uh if I were to unpack that comment a little bit that headline consoles will decline gradually and that's what I mean and you know kind of remaining over the long term as a niche device for loyal fans the really hardcore gamers as advancement in cloud infrastructure and and we see what's happening with data centers as well as a wider spread of mobile gaming playing games for more mobile devices, whether smartphones or tablets as that gain wider spread and people become less interested, you know, in playing games at an unportable gaming hardware that's stuck at home or living room. If they can do so and have the same experience on a mobile device, why not, right? So where are we in kind of that evolution in terms of really putting more and more of the content of the technology of the capabilities in the cloud? How is that changing the the the gaming experience the gaming business? >> Yeah. So the key pain point to cloud gaming is network latency because that literally depends on the distance between the users hardware whether a mobile device or a console to the nearest cell tower. And we know that 5G network coverage are improving not just in emerging markets but also becoming better in even developed markets including China and the US. And so as as that infrastructure and and also cloud improve uh because the proximity to data centers also is a factor in in determining the experience of cloud. So far you know in emerging market there is a pain point but we're seeing really huge uptick in coverage uh footprint whether 5G or or 4G LTE in markets like India and and Middle East and Latin America. So that just support our conclusion that you know in the next 10 years that experience that painoint would become better and also let's not forget that you know mobile phones mobile screens capture you know a lot of our attention economy actually there's a study uh according to harmony harmony healthcare it captures more than 5 hours of our time averaged every day and about 20% of that those time uh actually go to gaming among generation alpha and generation Z and they are the bulk of the gamers and also these gamers don't really care uh about playing games at home anymore if they can play play on mobile because what they care about is access and also uh being able to do things on their mobile devices. So I feel like with this generation coming up um and and entering into the workforce and they're the one who would see uh spending power increasing and I I feel like there's a lot less inclination to actually play games on a console if down 10 years down the line you can have the same experience playing games on a mobile on a on a mobile device. >> This is the Bloomberg Intelligence Podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday 10:00 a.m. to noon Eastern on Bloomberg.com, the iHeart Radio app, TuneIn, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Tesla’s Profit Tumbles as Costs Undermine Record EV Sales | Bloomberg Intelligence
Summary
Transcript
[Music] Bloomberg Audio Studios podcasts radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's bring in Steve Man, Bloomberg Intelligence, Global Autos, and Industrials research analyst to recap Tesla earnings. help us look ahead for this company, Steve. Uh, record quarter vehicle sales, which we knew, but operating profit plunged 40% and we're now looking at a fourth straight quarters of falling earnings and no real sign that that's going to turn around anytime soon either. >> Yeah. Uh, it was quite a surprise given the volume of production. Uh, you would think that uh, you know, the fixed cost absorption would be higher this quarter than in the past, but it didn't happen. Looks like you know our uh looks like uh uh the appreciation cost uh increased for them looks like the tariff cost impact is is greater than expected and then even below the gross margin line uh the R&D cost uh went up quite a bit that you know that could be viewed as a good thing because that's the you know that's a sign they're pivoting to you know the robo taxi the FSD and you know the Optimus robots >> and Elon Musk uh I guess towards the end the call made a plea for uh investors to approve his $1 trillion pay package. Quote, this is from Elon. There needs to be enough voting control to give a strong influence, but not so much that I can't be fired if I go insane, Mr. Musk said. Um, how did that go over on the call here? And what's the thinking among investor community about what may be a $1 trillion pay package? >> Yeah, I I'm not sure if money is important to him. He does have a lot already. So uh I do believe that it's more about the control of the company. Look, Tesla doesn't have the dual class shares like some of the tech companies have. Uh so uh there is he he does have that fear of getting uh pushed out and you know he had that experience right with open AI you know he's one of the initial investors uh in open AI and he he got pushed out. Um so he he does have the concern. Uh it is his baby. Look, the stocks, you know, uh the other thing is the stock hasn't reacted, you know, too negatively to the weak earnings that we saw in the last quarter. I there's there's a battle happening between the the the bulls and the bears, the long the long guys versus the near-term uh uh uh investors. And you know there are a lot of people believe who believes that the you know he can achieve um you know the the the opt getting the optimism robot up and running uh you know getting uh art physical AI uh going. So uh there's a lot of believers out there. There's a lot of believers and um you know what the company actually reports especially when it comes to his vehicle sales almost doesn't matter based on this idea that Elon Musk will steer the company in the right direction eventually maybe because uh you know the robo taxis which are you know in operation but these self-driving vehicles the humanoid robots those are going to take a couple of years to pan out if that we don't have any details on it. So in the meantime what what is the growth driver for this company? Well, it you know he definitely in the call he you know he doesn't talk about cars a lot anymore other than robo taxi and FSD. He's very focused on physical AI but at the end of the day right and I think that's why the stock is still down a little bit is that you know they he needs to sell cars. He needs to continue to sell cars to actually generate the cash to support his endeavors. Now he has launched cheaper vehicles. It would be better. It would have been better if he uh is offering even a cheaper model like something under 30,000 that you know he we talked about in the past. uh he is expanding overseas right he had you know record sales in countries like Japan and South Korea now he's going into India big market big market so um you know you know cars is still going to be important I think a lot of you know the other half of investor knows and that's why the stock is down today >> one could argue that they should produce less cars fewer cars I mean why produce something if you're not making money on it when in the end of the day This is effectively one could say just a holding company for R&D for the other businesses. >> That's an interesting question. I think you know if we step back and think about Tesla, it's almost when you listen to Elon Musk, it's almost like he's resetting the company to make it look like a startup, right? But the big difference is >> uh the big difference between now and 10 years ago is that he has a huge cash generator which is selling cars, right? So I think that's something and also on the bull the investor investor's mind on the bull side that hey you know we're investing on this company for the long term this physical AI that nobody's really doing >> uh to the extent they are uh and now the big difference is is that you know there's very low risk of of it going bankrupt uh like it did you know when he was starting the car business. >> Yeah it's far from a startup now. Um you mentioned how Elon Musk um you know spent some time talking about his pay package his $1 trillion pay package which is over the long term and involves him meeting a lot of ambitious targets. Um ISS institutional shareholder services as well as Glass Lewis these proxy advisers have recommended that investors reject this payout. Does that matter? I mean are their votes um are binding in any way or is this going to end up in the courts and Musk is going to get his way? It it does it does matter because uh you know a lot of the the funds out there are are index funds. So uh so it does matter what they say and that's why he he needed to address that uh in in the call. Um but it it's going to be tight. I mean it's going to be up in the air tight uh because there are a lot of individual investors as well, retail investors as well. uh and you know those people are focused on you know the hope three or five years from now uh they he will able to kind of meet those targets uh have a a viable optimist robot and a lot of robo taxis you know running around on its own across the country. >> What is a what is Elon and the company saying about uh China both as an end market and as a competitor globally? Yeah, China is uh is a challenging market. Uh I think a lot of the policy over there do favor the local automakers. But look uh the Tesla brand is still uh uh highly regarded over there, not just by the consumer uh but the you know their competitors, the BYDs, the Xpunk, right? uh a lot of those companies, you know, when they're looking at autonomous vehicles, autonomous technology, they are benchmarking Tesla. So, uh and Tesla, you know, I think is is being nimble as well. They've launched the longer version of Model Y that works over there. Um because if you look at you know the other foreign linkages like BMW, Mercedes, GM and and the likes they have uh introduced extended version of their vehicles that they s uh that they sell over there uh and it resonates with the consumer there. So you know it's they're they're still kind of work in progress >> uh over there. They're watching the market is changing very rapidly. uh they're still and they're still waiting for official approval of the FSD which you know I think the it will resonate well with the consumers and and it has so far from beta testers. >> Stay with us more from Bloomberg Intelligence coming up after this. >> You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Broadband, thank you. Internet broadband company to report is T-Mobile. So, we got to bring in our own John Butler who covers telecom companies for us uh to get us his analysis. John, what's the verdict here on T-Mobile? >> So, the verdict here, Scarlet, is it was a little bit of a mixed quarter for them. Um, if you look at what AT&T reported yesterday, the trends at T-Mobile really mirrored what we saw out of uh, AT&T, which is subscriber growth was up. That was strong, pardon me, but pricing was a little bit weak. And so that tells everyone it's a promotional environment right now. Um, I think probably the iPhone 17 had something to do with it. It's actually turning out to be a pretty strong cycle for that upgrade. And of course, when you go out to buy a new phone, people always think about switching carriers. So, it boosts switching activity. The carriers all promote to protect their base. And Verizon hasn't reported yet. Well, we can talk about that a little bit more, but they have a new CEO. And so the grand concern in telecom land right now is that the new CEO of Verizon if they lose share to AT&T and and um T-Mobile, they're going to get their dukes up and start to promote for the first time in a while. And that's bad overall for the industry. >> So what's the T-Mobile U marketing positioning right now for within a very competitive wireless business, John? So, uh, good question, Paul. They are, you know, for years they sort of leaned into this consumerfriendly brand. You know, we're the guys that were the uncarrier. That is their tagline. And, um, you know, they've done a very good job promoting a very strong brand image. They're now a lot larger and I think what they're doing is starting to lean a lot more on their network quality. They've done a great job over the past 3 to 5 years of really upgrading that network since they bought Sprint. They got a ton of mid-band spectrum, which is terrific for download speeds. Um, and so they're laying in coverage with that and they're getting as that coverage expands, they're getting a great high capacity footprint. And so network performance has improved a lot. And I think they're leaning heavily into that now to promote the brand. >> You mentioned Verizon has a new CEO. T-Mobile also has a new CEO uh coming up soon. CEO Mike Severt is stepping down on November 1st. Uh so in a week and the COO Shiny Gopalan will take over. How is he going to put his mark on this company? >> I'll tell you Mike is a tough act to follow. People were all listening for any sort of a change in strategy this morning because um ran the call which I think was wise. Mike Siver was on the call as well because he's still in that seat until November 1st as you said but um ran the call and I really didn't hear anything different from him. I think they're they've got a winning formula going right now and I think they're going to lean into that. One thing, Scarlet, that you mentioned at the beginning in the intro is broadband. And I think that's an area where T-Mobile has been lacking a little bit specifically on the fiber side. And on the call, they mentioned the potential for further M&A. And I think if they were to buy any companies going forward, it would be in the realm of fiber broadband. So if if Shriny does anything different, it'll be to step up M&A on the fiber front. >> Stay with us. More from Bloomberg Intelligence coming up after this. >> You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's talk about airlines uh because two more airlines just reported results. American Airlines flying high. Um and then LUV Southwest. >> Do you know why the ticker is LUV? >> No, I don't. >> Uh because they initially they're flew out of Love Field in Dallas. >> Ah, makes sense. Yes, they are based there. Well, let's bring in our own George Ferguson. He is Bloomberg intelligence uh aviation analyst uh and of course uh he also covers the defense sector and the aerospace sector to give us a little more insight onto what he sees. Um, American is different from Delta and United in that it is much more domestically focused. So, we get a better read of how much people are spending to fly inside the US, whether it's for leisure travel or business travel. >> Yeah. And so, uh, from American, you know, what we saw actually in the third quarter was pretty similar to be honest to what United showed us. Uh, and I'm talking about sort of yields, price paid per mile flown uh, by their customers. Americans a very important domestic uh you know provider of travel. Um >> so you know I would say that um I wasn't super impressed with what I saw in 3Q. I think the flying high is about all about what what American is guiding to in 4Q a sizable a sizable bump. You know, when we look at some of the domestic capacity trends uh for 4Q, we see a market that's probably going to see SE growth of around 1 and a.5% or so, which seems for the first time in a while roughly in balance with where the economy is growing. So, something like that should support Americans earnings in 4Q. I mean, it's still some of their guidance seems a little aggressive to me, but uh I guess sort of given the backdrop of supply uh and maybe some of Americans initiatives as they try to retake some of the market share that they had previously, uh maybe seems more feasible than other other guidance we've seen. >> How about Southwest Georgia? Um they're starting to charge for lots of stuff like bags and different seats and all that kind of stuff which um they had not done previously. that had kind of been their core marketing strategy were the kind of the bare bones guys. What are they just seeing in their business? >> Yeah. You know, I just got off the Southwest call and my head hurts. Um, so there's a lot of initiatives going on here, right? And like you said, we're, you know, we're going from an airline here that was bare bones, bags fly free, blah blah blah. uh you know you keep uh you know there's no breakage in your I think you know frequent flyer miles and if you buy a ticket you can't use it there's no expiration of your credit now we're going to change everything right and so the call's full of a lot of discussion about how the initiatives in 2026 are going to add a billion here you know from uh premium seating and 700 million there so there's a lot of big numbers being thrown around uh you know, I I think the I think the marketplace is a bit challenged to get its its head around, you know, whether or not all of these really roll through the bottom line for Southwest. Um, but what I will say is I think there's some pretty strong opportunity uh out southwest given I think they have a a pretty loyal brand following and as they roll out some of the initiatives you're seeing at the full service carriers like United American and Delta as they roll out initiatives like branded credit cards uh improving the loyalty program. And they're even talking on this call a little bit about um hub cities and uh and lounges which you know just kind of again threw my blew my mind. Um there is I think an opportunity for them to monetize all of that as they turn into something that looks a lot more like a full service carrier. The question is on timeline. Uh my guess is there's a there's a a decent timeline as they sort of retrain their customers. Uh but but I think you know in Fork they have some pretty aggressive uh uh bounce back uh inside their guidance as well. And I think the streets just kind of trying to get its head around really how much of these initiatives are going to come to fruition in 4Q. So, when it comes to Southwest, the activist investors really pushed it to change its business model from this one-sizefits-all kind of uh offering. There was no checked bag fees, no uh prepaid seat assignments. Does this set of results kind of get that that pressure off its back? >> Uh no. So, I would say 3Q results would not. I thought 3Q they did uh okay. Uh you know, their their expenses came in a bit better than we expected. Their revenue was pretty similar. I think nothing impressive. 3Q is generally kind of I think blah across most of the airlines. It wasn't that exciting. There's a lot more sort of built into 4Q and beyond. Um so no, I don't I don't know that this necessarily gets uh Elliot sort of off their back, right? I think they've got a lot of initiatives to perform on to keep to keep Elliot uh happy, shall we say. >> Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. >> We'll take a look at what's happening uh in the cloud. Uh we get some more cloud/te news coming. Uh AI adoption in video games can push Microsoft, Sony, Nvidia to kill the console. How about a headline like that? Nathan Nadu uh joins us here. He is the Bloomberg Intelligence Technology research analyst. Uh talk to us about the cloud and what that means for the gaming business. I'm not going to have to go out and buy any more gaming consoles. >> Well, not not for the long term. Thanks for that uh uh lead, Paul. Like I I feel like I owe everybody an explanation when I use word like kill because uh really in the 10 years that could actually happens like what I meant uh if I were to unpack that comment a little bit that headline consoles will decline gradually and that's what I mean and you know kind of remaining over the long term as a niche device for loyal fans the really hardcore gamers as advancement in cloud infrastructure and and we see what's happening with data centers as well as a wider spread of mobile gaming playing games for more mobile devices, whether smartphones or tablets as that gain wider spread and people become less interested, you know, in playing games at an unportable gaming hardware that's stuck at home or living room. If they can do so and have the same experience on a mobile device, why not, right? So where are we in kind of that evolution in terms of really putting more and more of the content of the technology of the capabilities in the cloud? How is that changing the the the gaming experience the gaming business? >> Yeah. So the key pain point to cloud gaming is network latency because that literally depends on the distance between the users hardware whether a mobile device or a console to the nearest cell tower. And we know that 5G network coverage are improving not just in emerging markets but also becoming better in even developed markets including China and the US. And so as as that infrastructure and and also cloud improve uh because the proximity to data centers also is a factor in in determining the experience of cloud. So far you know in emerging market there is a pain point but we're seeing really huge uptick in coverage uh footprint whether 5G or or 4G LTE in markets like India and and Middle East and Latin America. So that just support our conclusion that you know in the next 10 years that experience that painoint would become better and also let's not forget that you know mobile phones mobile screens capture you know a lot of our attention economy actually there's a study uh according to harmony harmony healthcare it captures more than 5 hours of our time averaged every day and about 20% of that those time uh actually go to gaming among generation alpha and generation Z and they are the bulk of the gamers and also these gamers don't really care uh about playing games at home anymore if they can play play on mobile because what they care about is access and also uh being able to do things on their mobile devices. So I feel like with this generation coming up um and and entering into the workforce and they're the one who would see uh spending power increasing and I I feel like there's a lot less inclination to actually play games on a console if down 10 years down the line you can have the same experience playing games on a mobile on a on a mobile device. >> This is the Bloomberg Intelligence Podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday 10:00 a.m. to noon Eastern on Bloomberg.com, the iHeart Radio app, TuneIn, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.